Your Smallest 30% of Clients Are Costing You Money
Cost to serve varies enormously by client and almost nobody measures it, so most firms run a loss-making tier subsidised by their best accounts and call it market coverage.
Fabien DarollesOperations ExpertAllocating the real inputs
Support hours. Onboarding hours. Account management time. Custom work and rework. Collection effort. Payment delay. Allocate these per account rather than assuming an average and the picture changes fast.
Four hundred clients, €10M of revenue. The bottom tier is 200 clients at a €6k average — €1.2M, or 12% of revenue. Each consumes around twenty-five support hours at €60 fully loaded, so €1,500, plus onboarding, plus roughly €1,200 of acquisition cost. Gross margin after delivery is about €900 and contribution is negative.
What exiting that tier does
Revenue falls €1.2M. EBITDA rises about €400k. And roughly 5,000 support hours are released back into the accounts that actually pay you.
The typical shape across mid-market firms: the bottom 30% of clients by revenue consume more than half of support capacity.
Three options, in order
Reprice. Move to self-serve or productised delivery. Exit. In that sequence — and do not automate a segment before deciding whether it should exist at all.
"They might grow into a big account" is testable. In most firms fewer than 5% of small accounts move up a tier within three years. Owners resist losing clients because the top line shrinks, forgetting that buyers pay for margin and quality of revenue, not for the number of logos on a slide.
Rank every client by revenue and by support hours consumed, then plot it as a scatter. The bottom-right quadrant is next quarter's strategy, already written for you.
Has run organisations above €100 million in revenue with teams exceeding 10,000 people.
Meet the team →Questions we get asked
How do I calculate cost to serve per client?
Allocate support hours, onboarding hours, account management time, custom work and rework, collection effort and payment delay to each account rather than assuming an average.
Is it worth firing unprofitable clients?
Often. In our worked example, exiting a 200-client tier cut €1.2M of revenue, added roughly €400k of EBITDA and released about 5,000 support hours back to accounts that pay.
Do small clients grow into large ones?
Rarely. In most firms fewer than 5% of small accounts move up a tier within three years — measure it in your own base before using it as a justification.
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