Sense Check Your Client’s Business Plan

Written by Dan Richards on January 31, 2017

You don’t need me to tell you that making sure a new client’s expectations of what you’re going to deliver are reasonable. Failing to do so leads to unhappy clients, overruns, frustration on both sides and can have a knock on effect on other clients’ work.

Your responsibility to sense check expectations goes beyond just ensuring you and your client are on the same page about what exactly you’re going to build for them. You also need to make sure that their overall business expectations of the project are reasonable. You don’t want to work on projects that are going to be a commercial failure. (My experience of this comes from the ecommerce sector.I’ll discuss it in that context but the principal holds elsewhere.)

So you’ve built a fantastic ecommerce site, on budget and on time – happy days. Except your client’s products suck and they’re over priced. You know it, the visitors know it but the client can’t see it. “£380 is a perfectly reasonable price for soya bean sandals. Yes, they’re ugly and they rot if you get them wet but they’re fair trade and organic!”

Or, they’ve ignored your SEO advice in favour of aesthetic advice from their 8 year old who’s “really creative” and the site gets no organic traffic. Or their PPC budget of £0.28 a month isn’t driving enough traffic. And their entire marketing strategy is to post cat pictures on Instagram.

The business is failing and they’re looking for reasons why. So they start faffing about with the logo, redesigning the checkout, changing fonts and generally rearranging deckchairs on the Titanic. They’ll also end up running up a bill with you that they can’t pay because their business is losing money. Everybody loses.

They probably think the whole fiasco is your fault too, and in a way they’re right. From a completely selfish point of view, you need to avoid this kind of situation. Not just because of all the reasons I’ve already mentioned, but because you want your portfolio to be a showcase of success stories. It doesn’t matter how good you are. If every link on your portfolio page goes to a site that’s out of business it looks you have the reverse midas touch.

 

The Sniff Test

So what do you do? First of all, give all prospective projects the sniff test: if the concept smells of BS, it probably is. I once had a prospective client ask the company I worked for to build a site that was like Groupon, with bits of Facebook duct taped onto it. But it would cost users money and would only cover the town it was based in. The figures didn’t stack up. They were offering nothing you couldn’t already get for free elsewhere. They were charging a premium price, and were also reducing their potential market by going hyper local. Most worryingly, they also wanted us to build it for free in exchange for a share. If you think that’s a good idea, well, I have some magic beans you may be interested in.

 

Check the figures

Once you’ve given it the sniff test, have a look at the figures. If the client will share their business plan with you – great. But if not, run a few basic numbers in a spreadsheet yourself.

Take their product price and margin (if you don’t know it, Google the margins in the sector, ask around, or just take a guess). Then, work out roughly what you think the average profit per sale will be. You’ll need to make an educated guess at the conversion rate as it can vary massively between industries, and it’s hugely dependent on the product and price. Finally, multiply this by the conversion rate to get a profit per visitor.

The business will only work if they can drive traffic at a cost per click lower than the profit per click, and do so in sufficient numbers for it add up. Tools like Semrush rush are your friends here. You’ll get a feel for the size of the market, how competitive it is and what PPC costs are like.

Make sure they’ve got a marketing plan and budget that aligns with your numbers. I’ve been in a situation with a client where the business model, product, pricing and marketing strategy were all winners. But they had massively underestimated marketing costs. They were savvy enough to see what had happened. We then helped them put together a convincing investment proposal to secure funds and make it work.

 

Be honest with your clients

Some bad ideas are obvious. Others aren’t necessarily bad ideas but they just need development and tweaks to make them viable. If that’s the case, you need to tell them and take the risk of upsetting the client and maybe not getting the job. In my experience, the ones that take offence aren’t worth working with, and the ones that say thanks for the advice can turn into great long term clients.

What if it’s too late and a client’s site isn’t performing? This is a tough situation. The temptation is to nod and smile and do what they ask for the sake of the relationship, but that just delays the inevitable. You owe it to your clients to be honest with them. But you can reduce the chance of them taking offence by framing what you say as insights that will help them succeed, rather than pointing to their shortcomings.

Involving yourself with the commercial aspects of a project may seem like a lot of hassle. If they’ve got the money to pay for the work, why should you care if they fail? Plenty of agencies make a living by parting fools with their money and if you don’t take the work, one of them will. That’s your call and I wouldn’t judge anyone who does.

If you’re reading this as a prospective client planning a project, look for an agency who want to understand your business plan. If they tell you there’s a problem then you don’t have to agree, but don’t take offence. Or if you’ve got a great idea but you’re not sure how to do the numbers or work out if it’s feasible, find someone who can do so, and pay them. Better waste a small amount now than remortgage your house to back a bad idea.

 

Business plan checklist

I’ve been told I have to add a list to this. So here goes, a list of things to do before you commit to a project.

  • Give it the sniff test – does it smell like fail?
  • Check their numbers – ask to see the business plan.
  • Do your own numbers – would you put your own money into it?
  • Be honest with your clients – the good ones will thank you.

 

PS. In case you didn’t know it, we can help you with all of the above, and would be delighted to hear your ideas and thoughts. Get in touch today.