A few accounts carry the firm. Do you know which?
In services, profit is not spread across the client base; it is concentrated in a handful of well-run accounts, and quietly drained by the demanding ones. Ranked by revenue, your client list looks balanced. Ranked by true profit after cost-to-serve, it forms a steep whale curve, and the names at the wrong end are rarely the ones the room expects.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
Ranked by true profit, a services firm's clients form a steep whale curve: the top accounts build cumulative profit past 100 percent of the firm's total, and the tail gives a large share of it back. Revenue ranking hides it, because the biggest accounts are often the most expensive to serve. The fix is rarely to fire a client; it is to reprice or re-serve the tail.
Concentrated at the top, given back at the tail.
Plot every client by cumulative profit, best to worst, and the curve climbs fast, peaks well above the firm's total profit, then slides back down as the loss-makers are added in. The peak is the prize: a small group of disciplined, well-scoped accounts that fund the whole business. The slope back down is the cost of the rest, demanding clients whose true margin a blended rate kept invisible.
The danger is that the tail often shares a sales owner, a sector or a service line with the peak, so it survives every review on the strength of its revenue. Only true profit separates the account that carries the firm from the one that looks just like it on the invoice.
CUMULATIVE PROFIT, CLIENTS RANKED BEST TO WORST
Illustrative. The top fifth of accounts build profit past 100 percent of the firm's total; the demanding tail gives roughly 45 percent of it back before you act.
You rarely fire the client. You change the deal.
Process pricing
Change how the work is delivered so it costs less: tighter scoping, self-serve support tiers, fewer escalations. Same client, lighter cost-to-serve.
Relationship pricing
Reprice the account to match what it really takes. The number is defensible because it comes from the cost the relationship actually drives, not a feeling that they are hard work.
Menu pricing
Put a price on the extras that used to be absorbed: rush turnarounds, out-of-scope advice, extra environments. The client chooses, and the firm stops giving margin away.
Then, rarely, exit
If none of the three works, a planned, graceful exit frees the capacity for accounts that pay. By then it is a decision with a number, not a grudge.
Frequently asked questions
- What does the whale curve show in IT services?
- Ranked by true profit, a services firm's clients form a steep curve: the top accounts build cumulative profit well past 100 percent of the firm's total, and the demanding, scope-changing tail gives a large share of it back. Revenue ranking hides this entirely, because the biggest accounts are often among the most expensive to serve.
- How can a big client be unprofitable?
- Size and profit are not the same thing. A large account with constant scope changes, heavy account management, low rate realisation and frequent escalations can cost more to serve than it pays, even on a healthy headline rate. You only see it once serving cost is attributed to the client.
- What do you do with an unprofitable client?
- Three levers, in order: change the process so the work costs less to deliver, reprice the relationship to match what it really takes, or move to menu pricing so extras are paid for rather than absorbed. Dropping the account is the last resort, not the first.
Find the accounts that quietly carry the firm.
The Profit Check needs no data upload. It shows where your client base is most likely concentrated, and what the tail is costing you.
- Duration
- 12 to 15 minutes
- You receive
- Score, 7 dimensions, sector benchmark
- Price
- Free, no email needed
Proof
A distributor in New Zealand. €1.335M of cost-to-serve made visible, then halved, and 830 loss-making customers brought down to 295.
Read the case study →Who you would be talking to
Miguel Guimarães, Founding Partner
Cost and profitability practitioner for 25+ years. Lectured alongside Professor Robert S. Kaplan at the CFO conference in Amsterdam (2009).
Call +351 910 313 731
