Client health score: how to tell which agency clients are at risk
A client health score is a simple monthly check on each of your clients that tells you which ones are in good shape and which ones might be about to leave. I use it with agency owners because most of them have a sense for how their clients are doing, but they're usually going on revenue, and I don't think revenue on its own tells you enough.
When an agency needs this
This usually first comes up whenever the topic of client retention comes up. A lot of owners will have a feel for how things are going across their clients, but they're often looking at things that don't give them a true reflection of how healthy those clients are.
These are the signs I listen out for:
- Churn is higher than ever, and you don't really know why.
- You have a team, but it feels like you're having to get more involved with clients, not less.
- The team is under a lot of pressure and stress, and it's a consequence of who they're working with.
- Profitability per client is quite low, and you can't say why.
- A lot of your clients feel like a poor fit, but you can't let go of them because you're worried about losing the revenue.
- You're missing chances to grow your good accounts, because your time is going on keeping the wrong type of client.
The 2 questions to ask about every client
When I look at a client list with an owner, there are 2 things I want to know about each client.
How valuable is the client? Value is things like revenue, profitability and long-term growth potential, combined.
How healthy is the client? Health is things like performance, relationship and growth potential. Ultimately it's your measure of how you're doing for them as a partner.
When you put those 2 together, you get a sense for which clients are your highest priority to keep and to grow, and which ones might be at risk of leaving. This page covers the health side.
Step 1: pull everything you know into one tracker
First of all, pull everything you know about your clients into one place. It can be a spreadsheet, and it doesn't need to be clever. Then review and reflect on what you've got as of today: which clients you have, what you're doing for them, and which of the things you know about them are important to you.
Step 2: score how healthy each client is
I score each client out of 100 across 6 things. You fill in the fee, the hours and 4 judgements, and the rest is arithmetic.
| What's scored | How | Points |
|---|---|---|
| Margin | Your effective hourly rate (monthly fee divided by hours delivered) against your floor rate, which is the rate below which an hour of delivery loses you money. Full marks at 1.5 times the floor, nothing below 0.8 times. | 25 |
| Results | 1 to 5. Are you delivering what you said you would, against what they bought? | 20 |
| Scope | Hours delivered against hours quoted. Full marks at 0% over, nothing above 33% over. | 15 |
| Relationship | 1 to 5. How warm, honest and two-way is it right now? | 15 |
| Strategic contact | Months since you had a real conversation about where their business is going, as opposed to a status update. Full marks within a month, nothing at 4 months or more. | 15 |
| Contact risk | How many people at the client would take your call if your main contact left. 3 or more is full marks, and 1 scores nothing. | 10 |
You'll notice that the size of the client isn't part of the score. I keep revenue in its own column, because if size drives the score then your biggest client will always look healthy, and your biggest client going quiet is probably the most expensive thing that can happen to an agency.
Step 3: look at each band and ask the right questions
| Score | Band | The questions I'd ask |
|---|---|---|
| 75 and above | Green | Can we grow the account? Have we got our best people on it? |
| 55 to 74 | Amber | Is the partnership trending upwards or downwards, and do we know why? |
| Below 55 | Red | Can we prevent them leaving? What's the core issue? Should we let go of the client, and are they likely to let go of us? |
A client in red could be about to leave, but another client in red might only have dropped into that band recently and could quite easily be brought back. That's why I'd look at each one and not treat the band as the answer.
Step 4: give every client that isn't green 1 action
Every amber and red client gets 1 action, 1 owner and 1 date. I'd keep it to 1 action per client, because the point is to know which account to spend your time on this week.
In the tracker that's 1 row per client, with the fee, the health score, the band, the action, the owner and the date.
I'd encourage you to review this at least once a month. Ideally you'd have a pulse on where you are with clients on a weekly or fortnightly basis, but monthly is a good place to start.
Back it up with a quarterly review
The score tells you where to look, and the quarterly review is where you find out what's going on. Where you can, I'd have more than 1 level of their business in the room: your day-to-day contact, their manager and the person who signs.
A simple agenda:
- Past results, against the outcomes they wanted.
- Risks and opportunities coming up in their business.
- The plan for the next quarter.
- Candid feedback, asked for directly. What are we doing well, and where are we not moving your wider business?
Where owners get this wrong
The first one is focusing too much on existing revenue. Existing revenue as a number is great, but it isn't the be-all and end-all, and it's more of a lagging indicator. A client on low revenue can still be a valuable long-term partner, and a client on high revenue won't necessarily be your ideal client.
The second is not paying enough attention to time and inputs. If you don't understand what's really going into each of your clients, it's very difficult to make good decisions about what you should do with that client long term. If you don't track hours yet, I'd estimate them for a month. A rough number is a lot more useful than no number.
Questions owners ask about this
What's a good client health score?
On this scoring, 75 or above is healthy, 55 to 74 is one to watch, and below 55 needs an owner and an action this month. I'd pay more attention to which way a client is moving than to the number itself.
How often should I score my clients?
Once a month is enough for most agencies. It takes around 20 minutes for 20 clients once the tracker is set up.
Should a client's revenue be part of their health score?
I'd keep it separate. Revenue tells you how valuable a client is, and health tells you how you're doing for them, and I think you make better decisions when you can see both.
If you'd like a hand with it
If you're stuck on a particular client, or you'd like a second opinion on your list, drop me a note or, by all means, book a call and we can go through it. The Agency Health Check will also tell you whether clients are the area to start with.