Filtering prospects when you’re just getting started

Jventino Gaytan wrote in with a reply to a yesterday’s message (shared with permission, and lightly edited for length and clarity):

What about when you’re first starting out and are building your own practice? It’s easy to niche down once your four walls are taken care of and you’re consistently flush with cash so you can afford the extra help. But many professionals starting out will choose to take in whatever comes their way in order to build as they discover what kind of clients they really want to serve.
There are lots of gurus out there promising to help you figure out how to establish that business with the right kind of clients minus the undesirables, but for a price that many new entrepreneurs may not be able to pay.

It’s a combination of what you sent out in your newsletter as well as personal experience with discovery. There’s only so much you can learn from reading, but when you actually start doing is when the real learning starts to occur.

I really enjoy your newsletters, and I learn a lot from them.
-Juventino Gaytan

There is always a step before allowing a prospect to work with you, which is to decide first if you can and want to help the prospect.

That decision comes down to your opportunity cost (OC). OC is the value of the option you decided against in favor of relative to your value of the option you actually chose. It can be a powerful tool for filtering based on your own preferences.

Think about having a $20 bill in your pocket. You could spend it on pizza, eat a meal, and then not have the $20 anymore. Or you could invest it and watch it grow over the years, but you missed out on possibly the best pizza you’ve ever eaten.

The important thing to remember about OC is that there is no right or wrong answer beyond your own preference. If you’re happier with the pizza than the returns on that $20 investment, that’s entirely up to you and no one else.

But you also can’t complain in retirement about not having enough money, because you spent it all on delicious pizzas.

OC isn’t just about money. Choosing to work a few extra hours on a Friday evening might mean clearing tasks off your list before the weekend, but also might mean missing a fun event with friends or family. Or going to the fun event might mean falling behind on some work and having an upset boss or customer to deal with Monday morning.

When you’re building your business, each prospective customer is an OC exercise.

Remember: OC is your value of the option not chosen relative to your value of the option you actually chose.

So to agree to work with a prospective customer implies you valued not working with that customer less than actually working with her.

And in the early stages of a business, that’s usually a given. Most of the time, when we don’t have many customers yet, working with each new one is preferable to not working them. We need the revenue, and our opportunity cost is relatively low.

Until we reach a point where it isn’t such an easy answer anymore. This is usually driven by capacity (or a lack thereof).

Or, it kicks in when, as Juventino pointed out, experience begins to show us that not all prospective customers are the same. Some come with baggage, complexity, or an unreasonable personality that makes us want to avoid working with that person, even when that means forgoing additional revenue.

Over time, after dealing with enough customers, some good fits and other bad fits, we learn the “red flags” that indicate potential future problems.

We also learn that ignoring red flags usually doesn’t work out well for us.

As marketing expert Sean McCabe once told me, “Red flags are like cockroaches. When you see one, there are 10,000 more you don’t see.”

And yes, no amount of blog posts, newsletters, coaching sessions, or paid courses will teach you which prospects to work with and which ones to avoid, or what the red flags actually are.

You just have to learn that for yourself.

Thanks to Juventino for writing in!

So let me know…

Have you gotten to a point where you’re turning down prospects over red flags?

What’s a red flag you know now but didn’t when you were starting out?

Have you ever ignored a red flag and still had a successful customer relationship?

Hit REPLY and tell me about it!