Not Every Client Is Good Revenue

I'm currently working on a large project for a mid-sized law firm with a substantial portfolio of institutional clients.

The firm has been around for years.

It has significant revenue.

It has longstanding client relationships.

And like many established firms, it had accumulated a large client portfolio over time without really stepping back to evaluate that portfolio as a whole.

So we did.

The results were striking.

The firm's top 50 clients generated approximately 90% of its total revenue.

That's significant concentration, but it wasn't the finding that surprised me most.

The remaining 10% of revenue wasn't generated by another 50 clients.

It was spread across hundreds of clients.

Hundreds of individual client relationships.

Hundreds of matters.

Hundreds of billing relationships.

Hundreds of accounts requiring some combination of attorney time, administrative support, conflicts work, matter management, invoicing, collections, technology, communication, and overhead.

All combining to generate roughly 10% of the firm's revenue.

Then we looked at profitability.

That's where things got really interesting.

That bottom portion of the client portfolio wasn't merely less profitable than the top.

It was actually costing the firm money.

Based on our analysis, the estimated annual economic loss associated with servicing that portion of the portfolio exceeded $1 million per year.

Let that sink in.

The firm was generating revenue from these clients.

Money was coming in.

And the firm would potentially have been economically better off without a meaningful portion of it.

That's why I tell law firms:

Not every client is good revenue.

Revenue Can Be Positive While Economic Value Is Negative

This is one of the hardest concepts for growing law firms to internalize.

We naturally think of revenue as good.

New client?

Good.

New matter?

Good.

Big invoice?

Good.

More revenue?

Definitely good.

Except revenue is only one side of the equation.

What did it cost you to generate that revenue?

How much attorney time did the client consume?

At what level was the work performed?

How much administrative support did the relationship require?

How much did you write off?

How long did it take to collect?

How much partner attention was required?

How many exceptions did you make?

How much organizational capacity did the client consume?

A client can pay every invoice you send them and still be economically unattractive.

Law Firms Rarely Manage Their Client Portfolio Like a Portfolio

Most established firms didn't intentionally choose every client they have today.

They accumulated them.

A client hired the firm ten years ago.

Someone referred another.

A partner brought one over from a previous firm.

A small matter became an ongoing relationship.

An institutional client sent additional matters.

A former attorney originated someone who's still around.

Years pass.

Nobody really asks:

Does this client still make sense for the firm we're building today?

The relationship simply continues.

That's understandable.

But as a firm grows, I think client portfolio management needs to become more intentional.

You shouldn't necessarily have the same client strategy at $20 million in revenue that you had at $2 million.

The Long Tail of Clients Can Be Expensive

The current project I'm working on illustrates this perfectly.

Imagine 50 clients producing 90% of your revenue.

Then imagine hundreds of other clients producing the final 10%.

The operational burden doesn't decline proportionally with revenue.

A small client may still require:

a conflict check.

a matter opening process.

an engagement agreement.

billing setup.

attorney communication.

document management.

monthly invoices.

A/R follow-up.

client questions.

matter closing.

technology records.

administrative support.

The client may generate substantially less revenue than a major institutional relationship.

But that doesn't mean it requires substantially less infrastructure.

Multiply that across hundreds of clients.

Now the economics start to look very different.

Complexity Has a Cost

This is something law firms frequently underestimate.

Every additional client adds some degree of organizational complexity.

More billing arrangements.

More contacts.

More rates.

More matters.

More invoices.

More collections.

More conflicts.

More communication.

More exceptions.

More institutional knowledge.

Individually, each one may seem insignificant.

Collectively, they can create enormous operational drag.

That's one reason looking only at direct revenue can be misleading.

The true cost of servicing a client isn't always sitting neatly beside their name on a report.

A $100,000 Client and a $100,000 Client Are Not Necessarily Worth the Same Amount

Consider two hypothetical clients.

Both generate $100,000 in annual revenue.

Client A pays quickly.

The work is appropriately staffed.

Associates and other timekeepers perform work at the right levels.

Partner involvement is strategic rather than constant.

The client respects scope.

Billing is straightforward.

Communication is efficient.

The relationship has growth potential.

Now consider Client B.

Same $100,000.

But the client negotiates rates aggressively.

Requires disproportionate partner attention.

Generates significant write-offs.

Pays slowly.

Frequently expands scope.

Requires constant billing adjustments.

Creates administrative headaches.

And has limited strategic value.

Same revenue.

Very different economics.

If you're only looking at the top line, they look identical.

They're not.

Your Biggest Client Isn't Automatically Your Best Client Either

The reverse can also happen.

Large clients sometimes receive less scrutiny precisely because they're large.

"They're one of our biggest clients."

Okay.

Are they one of your best clients?

Those aren't necessarily the same question.

Large clients can sometimes negotiate significant discounts.

Demand exceptions.

Require custom billing.

Push payment terms.

Consume substantial partner attention.

Expect immediate responsiveness.

Generate significant advanced costs.

Because the revenue number is large, the relationship becomes protected.

Nobody wants to push back.

Nobody wants to increase rates.

Nobody wants to enforce scope.

Nobody wants to risk upsetting the client.

The bigger the relationship gets, the harder it becomes to objectively evaluate.

That's dangerous.

No client should become economically invisible simply because their revenue is impressive.

Not All Revenue Deserves to Be Protected

This is where the conversation gets uncomfortable.

Law firm leaders are understandably reluctant to turn away business.

There's a psychological difference between cutting an expense and intentionally walking away from revenue.

Cutting $100,000 of unnecessary expense feels responsible.

Walking away from $100,000 of revenue feels terrifying.

Even if servicing that revenue costs $125,000.

That's why client profitability analysis matters.

It changes the question from:

How much revenue will we lose?

to:

How much economic value will we gain?

Those are very different conversations.

But Profitability Alone Shouldn't Decide Who Stays

This was important in the project I'm working on now.

Once we understood the financial picture, I didn't simply produce a list of low-profit clients and recommend that the firm disengage from all of them.

That would be too simplistic.

Client relationships have value beyond a single profitability calculation.

A client may currently be less profitable but strategically important.

They may have significant growth potential.

They may have strong relationships with other important clients.

They may be an important referral source.

They may give the firm access to a particular industry.

They may be exceptionally easy to service.

They may be part of a broader institutional relationship that matters considerably to the firm.

Numbers matter.

So does judgment.

That's why we needed both.

We Built a Client Evaluation Scorecard

To help the firm evaluate the portfolio intelligently, I built a client evaluation scorecard.

Each billing attorney can evaluate the clients in their portfolio across several dimensions rather than relying on revenue alone.

The specific criteria reflect the firm's business, but broadly we look at factors such as:

Financial Value

How economically valuable is this relationship?

What revenue does it generate?

What does profitability look like?

How reliable are collections?

Does the pricing make sense?

Does the relationship support the firm's financial objectives?

Strategic Value

Does this client fit where the firm is trying to go?

Does the relationship support an important practice area or industry?

Is there meaningful potential to expand the relationship?

Does the client strengthen the firm's market position?

Relationship Value

How important is the broader relationship?

Does the client generate referrals?

Are there important institutional connections?

Is there meaningful cross-selling potential?

Is this a relationship the firm strategically wants to protect?

Ease of Engagement

What is the client actually like to serve?

Are they responsive?

Reasonable?

Organized?

Do they respect scope?

Do they pay according to agreed terms?

Do they require constant exceptions?

How much unnecessary friction does the relationship create?

Those qualitative factors matter.

Profitability Tells You What a Client Costs. A Scorecard Helps You Understand What the Relationship Is Worth.

You need both.

Financial analysis without context can lead to shortsighted decisions.

Relationship judgment without financial analysis can allow economically destructive relationships to continue indefinitely.

Put them together and leadership can make much more intelligent decisions.

That's exactly what we're doing.

We now have the quantitative analysis:

Revenue.

Profitability.

Concentration.

Economic impact.

And we're layering in the attorneys' qualitative knowledge of the relationships.

That creates a much better picture of the client portfolio.

The Attorneys Closest to the Client Need to Be Part of the Evaluation

This is another reason I like the scorecard approach.

The financials may tell me a particular client isn't attractive economically.

But the billing attorney may know something the spreadsheet doesn't.

"This relationship has grown 30% every year."

"The general counsel just moved into a larger organization and is already discussing bringing us with her."

"They've referred three of our largest clients."

"This client is part of a broader relationship with the parent company."

That's useful information.

But the opposite is useful too.

"This client is incredibly difficult."

"They challenge every bill."

"They consume an enormous amount of partner time."

"They haven't grown in five years."

"We keep them because we've always had them."

Now we're having a real business conversation.

Institutional History Is Not a Client Strategy

"We've represented them forever."

That's information.

It isn't necessarily a reason to represent them forever.

Longstanding relationships can be incredibly valuable.

They deserve respect.

But tenure alone shouldn't make a client immune from evaluation.

The firm itself has changed.

Its attorneys have changed.

Its cost structure has changed.

Its rates have changed.

Its strategy may have changed.

The market has changed.

A client relationship that made perfect economic sense ten years ago may not make sense today.

That's not disloyalty.

That's running a business.

Sometimes a Bad Client Is Really a Badly Managed Client Relationship

This is a distinction I want firms to understand.

Finding an unprofitable client doesn't automatically mean the answer is:

Fire the client.

First ask why the relationship is unprofitable.

Maybe rates haven't been increased in six years.

Fix the rates.

Maybe too much work is being performed by partners.

Fix the staffing model.

Maybe the client constantly expands scope without being charged appropriately.

Fix the scope.

Maybe write-offs are excessive.

Understand why.

Maybe billing arrangements no longer match the work.

Change them.

Maybe the client pays slowly because nobody actively manages collections.

Address collections.

Maybe the work can be standardized or automated.

Improve the process.

Sometimes a bad client is really a badly managed client relationship.

Fix the economics and you may have a very good client.

The Client Scorecard Gives You More Than Two Options

This is why I don't think client portfolio management should be framed as:

Keep them.

Or fire them.

There are many possible actions.

Protect and grow.

These are highly valuable clients the firm should actively deepen.

Maintain.

The relationship is healthy and appropriate.

Improve the economics.

Raise rates, change staffing, adjust scope, improve collections, or change the service model.

Monitor.

There may be strategic reasons to maintain the relationship despite weaker economics, but leadership should keep an eye on it.

Transition over time.

The relationship no longer makes sense for the firm's future.

That's much more strategic than simply sorting clients by revenue.

We Aren't Firing Hundreds of Clients Tomorrow

That's important.

After identifying the bottom portion of this firm's portfolio, the recommendation wasn't:

"Send hundreds of disengagement letters."

We're approaching it intentionally.

We're combining profitability and revenue analysis with the client scorecards.

Then the firm can identify the lowest-tier relationships.

Some will be fixable.

Some may deserve to stay for strategic reasons.

Some may naturally wind down.

And some may be appropriate to transition away from over time.

The goal is not disruption for the sake of disruption.

The goal is to gradually improve the quality and economics of the client portfolio.

The $1 Million Loss May Not Even Be the Biggest Opportunity

Here's the part I find especially interesting.

Our analysis estimates that the bottom portion of the portfolio is costing the firm more than $1 million annually.

That's already meaningful.

But there's another cost that's harder to see.

Opportunity cost.

Those hundreds of clients consume attorney and staff capacity.

What could the firm do with that capacity instead?

Could attorneys spend more time deepening relationships with the top 50 clients?

Could the firm pursue more clients that look like its most profitable relationships?

Could partners spend more time originating?

Could associates take on more strategically valuable work?

Could staff support fewer, higher-value relationships more effectively?

Could the firm grow without adding as much headcount?

That's where portfolio management becomes a growth strategy—not simply a cost-cutting strategy.

Your Worst Client May Be Expensive Even When They Pay Every Invoice

This is why collections alone don't tell you whether a client is good.

A client can:

pay on time.

never complain.

generate consistent revenue.

And still consume resources that could generate significantly more value elsewhere.

That's not necessarily a reason to terminate the relationship.

But leadership should at least know the economics.

You can't make an intentional decision about information you've never examined.

Capacity Is Finite

Every law firm has finite resources.

There are only so many attorney hours.

Only so much partner attention.

Only so much staff capacity.

Only so many matters the firm can effectively manage.

When capacity is finite, deciding what work to accept becomes an allocation decision.

Which clients deserve those resources?

Which matters?

Which practice areas?

Which opportunities?

If your highest-value attorneys are consumed by low-value work, you don't necessarily have a staffing problem.

You may have a client portfolio problem.

Stop Automatically Solving Capacity Problems With Headcount

This is another implication.

Suppose attorneys are overloaded.

The instinct is often:

"We need another attorney."

Maybe.

But what if 15% of their capacity is being consumed by clients the firm shouldn't be servicing?

Now you're considering adding hundreds of thousands of dollars in payroll so you can continue servicing economically unattractive work.

That makes very little sense.

Before hiring your way out of a capacity problem, look at what is consuming the capacity.

Sometimes the best capacity strategy is subtraction.

Client Portfolio Management Should Influence Business Development

Once you know what your best clients look like, something else becomes possible.

You can intentionally go find more of them.

What industries are they in?

What practice areas do they use?

How large are they?

How did they find the firm?

What services do they buy?

What makes the relationship profitable?

What characteristics do your best relationships share?

Now marketing and business development can become more targeted.

Instead of:

"We want more clients."

The firm can say:

"We want more clients like these."

That's a much better growth strategy.

Your Best Clients Deserve Attention Too

There's another danger in carrying hundreds of low-value relationships.

They consume attention that could be directed toward the clients you most want to retain.

Law firms sometimes devote enormous energy to difficult, low-value clients because those clients demand it.

Meanwhile, the firm's best clients are easy.

They don't complain.

They pay.

They trust the firm.

So everyone assumes they're fine.

Don't make your best clients compete for attention with your worst ones.

Client portfolio management should also identify the relationships the firm needs to actively protect and grow.

Concentration Risk Still Matters

There's an important nuance in our current project.

If 50 clients generate approximately 90% of revenue, that's information leadership should understand from a risk perspective too.

A concentrated portfolio can be extremely profitable.

It can also create exposure if too much revenue depends on a small number of relationships.

So the answer isn't:

"Get rid of everything outside the top 50."

The answer is to intentionally understand the portfolio.

Which relationships are profitable?

Which are strategically important?

Where is concentration too high?

Where should the firm diversify?

Which client types should it pursue?

Which relationships should it gradually exit?

Again, portfolio management requires judgment.

Don't Confuse More Clients With a Better Firm

A firm with 1,000 clients is not inherently stronger than a firm with 300.

A firm with $20 million in revenue is not inherently better than a firm with $15 million.

A large client list can look impressive.

So can top-line revenue.

Neither tells me what I really want to know.

How much value does the firm create from the work it accepts?

How efficiently does it create that value?

How much does it keep?

How strategically aligned is the portfolio?

How much capacity is being consumed by work that doesn't belong there?

Those questions tell me much more about the quality of the business.

Sometimes Growth Means Doing Less

This connects to something I believe strongly about law firm growth.

Growth doesn't always mean:

More clients.

More matters.

More attorneys.

More offices.

More revenue.

Sometimes the most profitable growth decision is to stop doing work that no longer makes sense.

If a firm can eliminate economically destructive work, redeploy that capacity, deepen better relationships, and pursue higher-value clients, it may become a stronger business even before revenue increases.

That's real growth.

This Firm Didn't Have a Client Problem. It Had a Portfolio Management Problem.

The hundreds of clients in the bottom portion of this firm's portfolio didn't suddenly become bad clients.

They accumulated.

The firm grew.

Relationships continued.

Nobody had really stepped back and evaluated the portfolio through both an economic and strategic lens.

That's incredibly common.

And it's exactly why established law firms periodically need to ask:

Who are our clients today?

Which ones create the most value?

Which ones consume the most resources?

Which relationships have strategic importance?

Which ones should we grow?

Which ones need different economics?

Which ones would we not take today if they came through the door as a new prospect?

And which ones are we keeping simply because we've always kept them?

Those aren't comfortable questions.

They're important ones.

Your Client List Should Reflect the Firm You're Building

The goal isn't to maximize the number of clients your law firm serves.

It isn't even to maximize revenue from every possible source.

The goal is to build the right portfolio for the business you're trying to create.

That means understanding both numbers and relationships.

Revenue.

Profitability.

Strategic value.

Relationship value.

Ease of engagement.

Growth potential.

Capacity demands.

Concentration risk.

Then making intentional decisions.

Some clients should be protected.

Some should be grown.

Some need better economics.

Some need to be monitored.

And some probably shouldn't be clients forever.

Because not every client is good revenue.

And sometimes the most expensive revenue in your law firm is hiding at the bottom of your client list.

If your law firm has accumulated clients over many years but has never stepped back to evaluate which relationships are actually creating economic and strategic value, your client portfolio may deserve a closer look.

At ING Collaborations, I help law firms move beyond top-line revenue by analyzing profitability, capacity, client economics, and operational data—and then turning those findings into practical decisions.

Sometimes that means growing.

Sometimes it means changing pricing or staffing.

And sometimes it means intentionally trimming work that no longer makes sense.

Because the goal isn't simply to generate more revenue.

It's to build a more profitable, intentional, and sustainable law firm.