3 Ways to Grow Your Multiple: Part 1

Oct 8, 2019
 Minute Read

How to Grow Your Multiple: Part 1

When a business is first starting out, often the mindset is to get anybody and everybody who could use your services in some capacity. This is great when first starting out because of course you need to begin generating revenue. Once you've accumulated a solid client list, it's likely that you have a wide range of the Revenue per Client.

Eventually, without careful attention and analysis of your client base, it is likely that on one end, you have many small clients (maybe some that are so small, you are actually losing money on them when you factor in the overhead). And on the other end, you've got just a handful of big whales that are essentially carrying your business. Without those few...well, we don't want to think about what it would be like without them.

What you've ended up with is a classic case of "all your eggs in one basket." So how do you alleviate this? That brings us to our first tip...

Likely you've heard of the Pareto Principle or more commonly referred to as the 80/20 Rule. Well it applies to your client base too. It says that the top 20% of your clients are bringing 80% of your revenue.

When you've got all your eggs in one basket, that means your top 20% is bringing more than 80% of your revenue. That's a risky way to run a business. This metric is called Customer Concentration and tracking it and improving it is a great way to improve your multiple.

Here are a couple things you can try to diversify your client base:

  • Set a minimum amount of revenue (or raise it if you've already got one) at a level that ensure you're making money on each client
  • Talk with your clients to share opportunities for cross-selling or up-selling services they may not have known they needed
  • Review your focus for sales and maybe alter it to focus on selling higher-revenue packages or products

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