Who is your ideal client?

Many small business owners take clients that they don't like - or that are not a good fit - simply because they need the money and want to grow the business. This strategy can work in the short term - especially if you need the money. It's hard to say no to a potential cash paying customer if you really really need the money.

One thing I learned from my own business is that taking clients that are not a good fit - that are not ideal clients - can hurt you in the long run. Many times you will find that:

1. They take a lot of time
2. They cause a lot of aggravation (and perhaps you aggravate them as well)
3. They sap your energy and the energy of your staff

I once read that every business owner should know who their ideal customer is, and spend their resources looking for them - and only them. This applies to us as well, of course. On the purchase order financing side, we have a set criteria of who we consider our ideal client/prospect. I'll share a few with you:

1. The must need business financing
2. They must re-sell products from suppliers
3. They must not manufacture or assemble the products that they sell (3rd party mfg is ok)
4. They must have gross margins of 30% or more
5. They must have a minimum of 50K in monthly sales (or 150K in quarterly sales)
6. Must sell to commercial entities of the US government

This seems like a nice all-encompassing list - but it isn't. It actually rules out a lot of prospects that would not be a good fit for us. I should note that we are NOT a good fit for them either :-)

When speaking with a prospect, I usually ask a series of short questions to determine if we are a good fit for them or not. Basically, they help me determine where they stand on items 1 through 6. I will talk about the criteria for factoring in my other blog.


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Learn about business loan options and factoring.