In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that
have shaped their business philosophy.



Founder, Mantality Health


Background:  

Mantality Health is a network of five medical clinics focused on treating low testosterone in men. In addition to offering treatments including hormone replacement therapy, Mantality’s board-certified physicians address underlying conditions that can cause testosterone deficiency, including obesity, Type 2 diabetes and sleep apnea. Kevin Meuret also founded ReVital Women’s Clinic, which treats women with hormone-related health issues, and the consulting firm Strategy Systems.

The Mistake:

Not identifying the ideal client.

With my medical consulting business, Strategy Systems, I was going after anyone who may want the services I was offering. What I didn’t do was first profile who my ideal client would be. So I had a certain percentage of customers who were high maintenance that we couldn’t make as much profit on and they were referring like-type individuals. Our staff was busy taking care of customers who were not our ideal clientele. That was eating up resources – time, money and personnel – that could be dedicated toward our ideal clients.

We would take any medical practice that was billing insurance companies. We found there were some that had a lot of revenue, but that revenue was made up of a lot of small transactions. We were paid a percentage of the collections total regardless of the number of transactions. Early on, we ended up taking on a lot of clients who had a lot of revenue, but it was made up of small transactions. So we needed to keep adding staff to maintain and sustain these clients. We found they were revenue neutral for us or even cost us money because they had so many transactions we needed to babysit from start to finish.

Instead, we should have been naming our ideal client as the client who has a certain ticket average and a certain number of transactions. That way, we could staff it with the appropriate number of people and we had enough resources left to be able to have a profit at the end of the day.

Somebody needs to step up and say, ‘We need to break up. This is not working for either one of us.’

The Lesson:

What we did was create three tiers of clients. We asked, “What is their specialty? What is their average ticket price? What is their average revenue? How much time does it take us to service this client?” Tier one is our ideal client. Tier two clients took more time. We made a little bit of money on them, but they could grow in to a tier one client over time. And tier three clients: those were people we were losing money on. The transactions were so small that they were actually eating up a lot of our resources. They were the hardest to deal with as well.

We changed our model by going after only tier one clients. We immediately fired all the tier three clients. We gave six months to our tier two clients to grow and become tier one clients or we would release them. And all new marketing efforts went after tier one clients and we only took on tier one clients going forward.

These were very easy conversations to have because, not only were we frustrated because we barely had the resources to service tier three clients, they felt like their accounts were being under-serviced. So it was the wrong fit for both. Most of the time, when there is a client that is troublesome for the business, that’s creating friction within the business, we’re creating equal friction in the client’s business. Somebody needs to step up and say, “We need to break up. This is not working for either one of us.”

For the tier two clients we talked to, many of them thought, “This is great. We can partner with you on this to grow to the next level.” Those who didn’t want to grow, we helped find somewhere else to go, which opened up our resources. After we cleared the deck, we had our best people taking care of our best clients and we were able to right-size our company for maximum profit.

Mantality Health is on Twitter at @MantalityHealth.

Photo courtesy of Mantality Health.

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