How to find out which clients are worth having

The client who pays most is not always the one who pays best. Unbilled time is what separates them.

Judging clients by revenue ignores what they cost to serve. Once unbilled time is counted, the ranking frequently reverses.

Step-by-step

1. Enter revenue per client for a period.
2. Enter billed hours.
3. Enter unbilled hours — meetings, emails, chasing, rework.
4. Read the effective rate for each.

Where unbilled time goes

• Meetings that could have been a message.
• Email and chasing, especially for approvals.
• Rework from unclear briefs or changed minds.
• Chasing payment, which is pure cost.
• Scope absorbed to keep things pleasant.

A client billing £20,000 who consumes 400 unbilled hours may be earning you less per hour than one billing £6,000 who sends a clear brief and pays on time.

Late payment is a real cost

A client who pays at 90 days is borrowing from you, interest-free, and you fund the gap. Include the chasing time and consider whether their rate should reflect it.

What to do with the answer

Rarely to fire anyone immediately. Usually to raise prices for the demanding client, tighten the terms that cause the unbilled time, and — most usefully — to recognise which client resembles the profitable ones so you can find more of them.

Frequently asked questions

How do I track unbilled time?

Record it as you would billable time, against the client. It feels bureaucratic for a fortnight and then becomes the most useful data you have about your own business.

Should I fire an unprofitable client?

Usually raise prices or tighten terms first. Many unprofitable clients are unprofitable because of arrangements you can change rather than because of who they are.

What is a healthy client concentration?

No client much above a third of revenue if you can help it. A single client at 60% is a business risk regardless of how well they pay.