learn where you stand in 8 simple steps.
by sandi leyva
in order to find out whether client retention is improving, you need to compute a baseline rate.
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you can easily do this by starting out with the sales by customer summary in quickbooks or a similar report in your accounting system.
- generate the report twice, once for your last full year and once for the year before.
- drop the numbers into an excel spreadsheet so that the dollar figures are on the correct row for the customer and side by side in two columns.
- fill in all the blanks with zeros.
- delete all the rows that have zeros in the earliest year; these are new clients you didn’t have the first year, so they won’t count in your baseline rate.
- count the number of remaining clients; this will be the number of clients you have in the earliest year.
- count the number of zeroes in the second column.
- compute: the number you got in #6 / the number you got in #7. this is your attrition rate.
- subtract from 100 percent and this is your client retention
each year, calculate your retention ratio to see whether you are improving or declining. you may want to analyze the reason why you are losing clients; you will be able to see exactly who you lost by seeing the zeros.
the lower your client retention ratio is, the more you need to implement touch plans and surveys.
you might be asking what a good client retention ratio is. it is different depending on the services you offer. a bookkeeper should have a very high retention ratio, followed by a tax preparer, and last, a quickbooks consultant who does installs or conversions.
it’s also different depending on how many clients you have. having fewer clients, then having just one leave, can impact your numbers quite a bit more than if you have many clients with several leaving.
the best thing to do is keep score against yourself. unless your service mix changes, your ratio should improve from year to year.