As an Entrepreneur, You Don’t Need Clients, You Need the RIGHT Clients

The following is adapted from Courage to Lose Sight of Shore.

Many new entrepreneurs fall into one of two mistakes with their clients: lack of profitability or lack of focus.

“My business has x number of clients,” a new founder will tell me, “but we are not yet bringing in any revenue.” If that’s the case, you don’t have a business yet. You have a hobby…or community service at best.

Especially when you are starting out, it’s tempting to go after every opportunity and do whatever it takes to build your client base, even if that means sacrificing revenue or accepting clients outside of your niche. But clients alone do not make a business. Only the right clients do. 

Any client who is distracting you from the core focus of your business or who is not generating revenue in some way is using up valuable time, energy, and resources that should be directed to your right clients. By focusing on the right clients, you can better work toward your long-term goals.

Be Invested Enough for Tough Conversations

If the clients you are taking on are not connected to the core focus of your business, either (1) you are in the wrong business or (2) the revenue you are bringing in is coming at the cost of distraction. Are you invested enough in your business and in your clients to have tough conversations? Have you asked yourself if you should be in that other business? Are you prepared to say “no” to revenue that distracts?

What if the right expectations are not set upfront? It is a hard thing to say to a client, “This is no longer a mutually beneficial relationship,” but it is sometimes necessary for everyone’s benefit. One of two things will happen when you have that conversation. The best outcome is that you adjust the relationship and get back on track for a right-fit partnership. An equally good outcome is you free yourself from a distraction to your business, and the client finds their right-fit partner. You are then able to focus energy on your right-fit clients and mutually beneficial relationships.

Be Sure They Are Profitable

Getting the right client and setting the right expectations from the start is key for successful growth. 

If you are reading this and you have not yet started your own company, you are probably thinking, “This sounds obvious.” But when you are a founder, and you have put your own money—and possibly your friends’ and family’s money—on the line, you are terrified of failing. Having an unhappy client leave because they did not get what they paid for sounds a lot like failure. Novice founders will do anything they can to minimize the risk for potential clients, including offering services for free.

Further, frankly, a lot of founders are not “traditional” salespeople. They are good at selling their vision and why they are creating the company. But that does not mean they are good at pipeline, cold calling, and following up. If you are not comfortable telling potential clients that you need them to pay you, then find an advisor or someone on your team who can. You must be certain you are delivering value in a way that people are willing to pay.

That is not to say that your first clients should not have the benefit of an agreed-upon beta discount or initial-partner discount. Or maybe you let them delay their payment by tying it to a deliverable, taking the risk out of it for them. 

Move Toward Your Goals

You undoubtedly have a vision for your business. You know your mission and your goals. So ask yourself, “Are my clients leading me toward my goals?”

Clients who are not the right-fit may bring in temporary revenue, but they’ll lead you down a different path than you’ve identified for your business. 

Likewise, it is a big mistake to think that you can build a market just by taking on non paying clients. All you will prove by doing that is that people like free stuff. A market is a collection of people who have a need great enough to compel them to pay you. Full stop.

I know it’s difficult to turn down clients, especially in the early days, but you have to think about your business in the long term. Focusing on the right clients—the ones who value your services and are willing to pay a fair price for it—is how you’ll achieve long-term success. 

For more advice on the right clients, you can find Courage to Lose Sight of Shore on Amazon.

Kelley W. Powell is CEO and partner of MacLaurin Group, a company providing technology operating partner services to portfolios of private equity companies. Supporting companies in growth and M&A activities, Kelley brings a unique experience from founder-led organization to multiple private equity-led cycles. Kelley is an avid mentor, angel investor, and chairwoman for the da Vinci Center for Innovation Angels Advisory Board at VCU. She’s also a board member of the Richmond chapter of the Association for Corporate Growth.