Do you find yourself overextending yourself with some of your legacy clients?
Are you losing money on any of them?
If so, you’re not alone, because we were there a few years back.
We had a bunch of amazing clients that were on our original plans and offerings and over time we got smarter and upgraded our rates and packaging.
But the Legacy clients?
Well, they kept the rates they had when they started.
Have you ever approached your legacy clients and tried to transition them onto your new plans?
If I had known what I’m going to share in this video back then…
I would have saved at least 6 months, hundreds of thousands of dollars and been way less stressed.
Transcript / MP3
What’s good, everybody.Greg Hickman here and in this episode I want to talk about how you should approach trying to transition some of your existing legacy clients that you pretty much give everything to into a new, more leveraged model.Ready?Let’s get it going. …For three years, my agency built funnels and automation systems for the biggest names in marketing today since then have transformed that agency into a hyper profitable training and consulting business. While everyone is out there talking about scale, like it’s some sort of destination, we’ll be asking the real question. How do you transform your business into a more scalable model using the knowledge, skills, and expertise that you already have? This podcast is here to give you the answer. Join me in, follow along as I learn, apply and share the strategies I’m using to build my multimillion-dollar business. My name is Greg Hickman and welcome to scalable. All right guys. SoIn this episode, I want to kind of share a little bit of a story that I shared with some clients that were in town not too long ago at one of our, our monthly intensives or sorry, quarterly intensives. And it’s this notion of uh, you know, as an, as an agency owner or service provider, you probably are, have a handful of clients that call them legacy clients or whatever you want to call them that have kind of like the best deal in the world, like their pain, maybe decent money, but at the end of the day you’re really overextending yourself, you, um, in some cases if you did the math, you probably wouldn’t even in money on some of them, right? They kind of came in early, they got the sweetheart deal, so to say. And over time you maybe got a little bit smarter and you added new things and you have other clients that were more profitable.So for us, how that kind of played out as kind of a done for you funnel building automation agency. We had a bunch of clients on retainer that were paying us varying rates based on really like at the time, the amount of work that we were doing. We didn’t break it down into hourly. We didn’t sell blocks of time. We were basically trying to do as much as we could, um, in relative terms for how much they were paying us. And we kind of worked out a really great arrangement. Most of our clients at the time were paying us anywhere from, you know, 1500 to two grand, three grand a month. And we sort of designed the service a lot like design tickle, if you’re familiar with design pickle where it’s like unlimited requests, but we’re doing one at a time. It kind of evolved outside of our control of that as you could possibly imagine.But here’s, here’s the scenario. We had a bunch of clients that we had, um, you know, we were averaging around 60 grand a month, rain revenue, which was great. The problem was we had, you know, five or six clients that if you, when we ran the numbers, we were z money. Um, and that’s our, honestly, we were giving too much for how much we were charging and we never really positioned ourselves well in the beginning. Some of these clients where some of our early clients having those conversations where, you know, we didn’t go back like we should have, there’s rates, Yada, Yada, Yada. Anyway, so we hit the point where we started introducing new packages, new offers that were way more leveraged, right? Cause our goal was, hey, we want to, we want to start moving from done for you custom everything into predictable packages and programs.And so we had the new offer, right? And we had clients coming in, no issues with them paying the new rates where we were profitable, the margins were good. Uh, but we had this clients on the other side that kind of had the world, right? They were our legacy. And so, um, we had to figure out, because we weren’t really necessarily tracking hours, we had to look at, um, you know, how much money are we actually losing with each of these clients? And so, you know, if you’re, if you’re listening on iTunes, I’m going to, I’m going to draw a little bit here on the iPad, but um, you’ll be able to follow along. So, you know, we had over here kind of legacy clients, right? And we’ll say a bunch of them were paying us two k a month and you know, the list of things that we did for them was really endless and the amount of access that they had and all of that great stuff.Um, you know, really went deep and they kind of had the world, right? So we’re going to say this is legacy over here and you know, we were doing about 60 grand a month. And so if you look at like, okay, we have all of these clients, um, and if you look at this kind of like picture a jar, right? Um, which is your capacity, like how much of our capacity is it to serve each of these clients? And so we basically looked at our entire client roster and we realized that there were like, I think it was like five or seven clients that we were, when we did the math, we were actually losing money on, right? So not only were we over our capacity, like we were, we were overflowing from the jar. Like how much work we were doing was not, we weren’t profitable, right?We weren’t making enough money as it would have cost us if we were billing even hourly. And not only that, those five to seven clients from like the amount of bandwidth that we had, um, we’re taking up like 80%. So 80% of our bandwidth was tied to clients that we were losing money on. And again, this is my fault as the owner, we should have figured this out a lot sooner. Um, but we were growing really quickly and you know, revenue numbers looked good. So I want you to, to avoid this mistake. And this is years ago now. So we looked, we learned our lesson, but the, the, the reality was we were transitioning over here to a new type of client, right? So this is the new client and the new client was paying us just in this example, let’s say the same amount, but how we delivered it was much more streamlined.And when we look at our capacity here, like we weren’t at full capacity to make sure they got the results they want and, or, um, you know, collect the amount of money that we were collecting. So if you look at this, you’re like, well, Greg, like Doug, just keep getting more new clients. Right? And this is where the conversation, the transition went in, right? Because we were very reliant on the legacy clients for our cash flow and all of that great stuff. Uh, so that we could, you know, pay the bills. We had a team of about eight or eight or so people, um, most of which were, were full time and hours, like 30 to 40, 40 hours a week. Uh, and we were kind of at this position where I’m like, all right, well we spent no joke, I’ll show off a hop to a different color here.We on the legacy clients, we spent probably about six months trying to craft and create custom plans to keep our legacy clients around. Now we love these clients. Many of them were, many of them encouraged us to raise our rates. Um, many of them, uh, you know, became mentors and were encouraging me to transition out of this model. Even know that they knew that that meant that they would lose us at some point. So even some of our clients, some of our best clients that we were losing money on were telling us to not do the model that we had. So after hearing that a bunch of times, you know, we started planning, but we, we kept, because we didn’t want to lose those people because we were so reliant on that revenue, we were spending a lot of our time coming up with, hey, you know, each of those five to seven clients, here’s like custom plan a for you to stick around, be for you to stick around and see if you just stick around d for you to stick around and so on and so forth.Right? So we’re spending all this time and energy and effort trying to keep these clients when really with way less effort. We were adding, you know, one, we’ll say one to three of these clients a month. Now there was a difference in that the legacy clients, um, actually in this case, the legacy clients, um, they were both retainers in the plan that I’m specifically, so we had on the new stuff, we had a retainer packages around two k a month. And we also had packages that went from, uh, basically five times 15 k. Right? And so one of my other mentors who was not a client said, hey Greg. Okay, well it seems like you’re trying to keep these clients around. How many new clients do you need to get on the new plan a month to, to wipe out the revenue from the five to seven that are, um, kind of the, the culprits, so to speak.And so when I, the math, I was like, wow, well if we have two new clients a month that we would actually, well, like erase the revenue that we were getting from like the five biggest culprit right? Now in some of these cases, those two new, we’re not, um, recurring revenue clients, right? They were these larger packages. And so we looked at it as like, okay, well let’s look at the last three months. How many of the clients did we add in this new plan? And we’re like, oh crap. We were basically averaging, you know, two to three clients a month on these new plans. And we had been doing so for about three months without our energy. Well actually while our energy and effort all over here, you know, oh battery life, 100% of our effort was on these five people yet we were still collecting new clients at these higher price points.So at that point it all clicked for me and I said, Oh man, we need to have this, have the conversation with these legacy clients. And so if this is your situation, first of all, my tip to you is one like if you’re not really sure how profitable you are on each client, you need to start measuring that. How much time are you spending there? Um, you know, if you are charging hourly for all of the members touching that client’s business, what does that look like? What are you charging them? Also then look at the bandwidth, right? Like if we were to add a new client in our situation, if we added one new client, I would need to hire another person cause we were already over our capacity for each individual on the team. In most situations you would have, each team member would have a little bit of flexibility so that when you want to grow, you scale up and flex up each individual.So they’re kind of on the edge and then you offload those people to the new person, right? That’s not how, we didn’t know that at that time. So we would definitely have done it differently. And so here’s the, the reality. We went back one by one and we looked at the top, you know, say there’s five clients and every time we got a new client, so one new client, I hopped over here and had the conversation with one of the clients that we were losing money on. And what I learned in this experience, uh, that I want to share with you is two things depending upon how you’re transitioning. So for us, um, we were transitioning more into, uh, like high level engine building. In one of my previous videos, I’ve talked about the, the engine builder versus the pit crew and a lot of cases for these clients.We became the pit crew and we wanted to get back to just being engine builders, right? So over here we were building engines and on this side we were doing engines plus pit crew. Right? Um, so the reality was there was literally no agreement for the most part that I would be able to take back to the legacy clients where they didn’t feel like I was just pulling the carpet out from underneath them. In many ways that just like even when you put it on paper, it looked like they were getting less and they were paying more, right? Which in reality they kind of were because we were eliminating a piece of what we were offering them, which was the pit crew stuff. Right. And so that, um, once we had that reality, it was like, all right, well we just need to focus on getting these new clients and then not burn any bridges.So a lot of the existing clients over here, we designed transition plans. Hey over the next three or six months, let’s teach someone on your team some of the pit crew stuff and hand over some of these things. And that conversation actually went really well because we were then able to um, not burn any bridges and enable our legacy clients to kind of take this stuff in house. And honestly, many of them needed to take on the pit crew stuff in house anyway for their business to run and smoothly. And we got to build some engines for some of those people for a little bit longer. Um, but when we made the decision to transition, it was focused all on getting those new clients. Right. And so here’s kind of the, the thing I want you to take away from this video is, and his podcast is that like don’t be like us and spend all of your time, energy and effort trying to keep around the clients that in the long run are in a part of the vision right now.Many of them are still my friends. I love and respect many of them. I would do anything I can to support them. Right? But like our business model was shifting and that was okay. And that meant that some of them needed to go in a different direction and I spent way too much time focused on trying to keep those people out of fear of not having money when I could have just moved a lot faster if I focused on bringing in more of the new clients. Right. And so that, that’s really the game that we had to play is systematically one by one, add new, add a new client that’s profitable, have a conversation with one of the clients that wasn’t, you know, going well and start that transition plan. I didn’t just go tell all of those clients all at once, hey, peace out because we would have, you know, we would have been in a lot more pain.Um, although that is an option too, depending upon what your numbers play out to be. So look, if you’re trying to make this transition, the reality is that the way that you’re offering some of these new things, if it’s more done with you, if some more leverage, if it’s more productized, um, and it’s not this complete full service agency, there is really no in no scenario where your old clients are going to be like, oh yeah, let’s totally pay more and get less because you’ve been giving them the world. So there’s no way that they’re not gonna feel like you’re pulling the carpet out from underneath them. And the sooner you realize that, the more that you can do the right thing and transition them out while bringing in new clients. And it’s a balancing act, right? Because depending upon your specific situation, how much revenue is tied to each of these clients and the numbers, you got to make that game work and it’s a juggle, right?That’s what we actually help a lot of our clients do as they’re transitioning out of this full service done for you custom project game into something that’s more leveraged. It’s, you have to run your business while bringing in, you know, this new leverage revenue stream. And that takes a little bit of finesse, a little bit of math, um, and then just a whole lot of commitment to moving forward. So if you’re trying to make that transition from, you know, full-service agency into productizing leverage, uh, this is something that I think you need to start thinking about sooner rather than later. Hopefully, if you’re watching this, I caught you at the right time versus you know, where I was at, where it hurt a lot more and we had been losing a lot of money and we lost about six months of time.If you’ve been looking to grow and scale your agency, but you’re tired of trading time for money, custom projects, and relying on referrals alone, it can be hard. That’s probably why if I gave you five, 10, or 20 new clients right now, you or your business would break. I struggle with the same thing for a while until I figured out a better way. So I created a special experience called foundations to help you package up your knowledge. And experience into a profitable online program. Launch Your automated sales system and systemize your fulfillment. You’ll work directly with me, my team, and a group of entrepreneurs just like you to implement the systems and get the help you need to learn more and see if it’s a fit. Just hop on over to my scalable business.com and schedule a call with us today.
Read more
