The end of the first quarter offers you an important opportunity to take stock of what is happening with the accounts that matter the most: Your Key Accounts.
Your Key Accounts are the customers that ended up in the top 25% of your list of billing accounts at the end of the last calendar year. Because they represent such a huge percentage of your total annual revenue, you and your team must make sure that same group of accounts spend that same money with you this year.
To help keep track of how your most valuable clients are performing against last year, we developed a tool we call the Key Account Portfolio. When you lock your Key Accounts into a Key Account Portfolio, you do not exclude any Key Accounts, even the ones you already know are not coming back. Your goal is to preserve as much of the total revenue as possible, even if you don’t preserve every single account.
The Key Account Portfolio is a powerful tool because it can provide you with valuable data and insights into your most valuable clients. For instance, it can tell you how much of your Key Account revenue you have been able to preserve at any given point during the year. Reducing the attrition of your Key Account Portfolio is the single most accurate predictor of whether your business will grow year over year. In fact, what we’ve learned is that if your Key Account Portfolio shrinks by more than 9% this year, you are going to find it almost impossible to grow your business over last year.
Think of yourself as the manager of a mutual fund comprised of all of your Key Accounts. You need to make sure that mutual fund does not shrink by more than 9% this year.
Here are steps you can take to make sure that doesn’t happen.
Identify your Key Accounts
Pull an un-duplicated list of all your billing accounts for last year and rank them from largest to smallest by spending.
The accounts in the top 25% of the list are your Key Accounts. (For example, if you had 400 billing accounts last year, the top 100 are your Key Accounts for this year.)
Calculate the Performance of your Key Account Portfolio
The difference between what your Key Accounts spent in Q1 of last year versus their spending in Q1 of this year is the growth or attrition your Key Account Portfolio has already experienced this year.
If the attrition is smaller than -9%, you are off to a great start. If the attrition is larger, like -10% or more, you need to devise a plan to mitigate the attrition so it will drop to single digits by the end of the year.
Manage your Key Accounts for Growth
Start by going through your Key Accounts to identify the ones that are growing and the ones that are shrinking.
Next, sit with each of your sellers and review the Key Accounts that each of them manages.
One seller at a time, start with the accounts that are already growing. What can that seller do – with your help – to accelerate that account’s growth?
Next, talk about the accounts that are already shrinking. What can the seller do – with your help – to either save the account or slow the bleeding?
For each Key Account, set a revenue goal. Even if the number you expect the account to spend is zero, write it down. Now you can add up all those goals and project how you are likely to finish the year.
If the projected attrition is more than 9% for the year, you’re not done.
I recommend you sit with each of your sellers again to identify opportunities to push for more growth or find places where you can reduce attrition even more.
If you discover in this exercise that single-digit attrition isn’t in the cards for your team this year, you need to embark on a really aggressive Target Account effort, which is a topic for another day.
There simply is no getting around it. In order to create growth, the single most important number for you to pay attention to is the performance of your Key Accounts.
And that’s our best advice.