Don’t Count on One Big Fish

Published September 29, 2015

A fishermen who spends hours trying to reel in one big fish wins big if he ends up pulling that fish into his boat. But if the line breaks or if the fish disengages itself from the hook, then the fisherman has lost in a big way, and he has no other smaller fish to compensate for the loss.

Similarly, what if you lost your largest client? What impact would that have on your practice? That depends on how large your practice is and how large the volume of revenue is that you receive from a given client.

You always have to balance the size of the book of business versus the size of the revenue in the firm. The bottom line is that at no point should any single client represent more than 10 percent of your total revenue. If you lost 10 percent of your revenue, it would hurt but it wouldn’t cripple you or force you to close your business. You could go on and build other areas of your practice or bring in other lateral partners and associates as a replacement of that 10 percent. That 10 percent magic number is sacrosanct. I learned that in industry, and I carried it forward in professional practice as well as now in coaching and consulting.

I’m not suggesting that you get rid of the client. I’m not suggesting that you do less work for the client. I am suggesting, however, that you put greater emphasis on increasing your revenue so that you make that client less significant in the totality of your revenue consideration.

I am also suggesting that you be careful on the capital decisions you make unless you have an even flow of revenue spread out among a variety of clients. Do not make capital decisions based on the continuation of revenue from any client who represents more than 10 percent of your revenue.

Categorized in: Financial and Cash Flow Management, Management

Audience type: Small Law Firms, Sole Practitioners