When stepping into a business, don't forget about its clients

While perhaps obvious, the truth is that you will never uncover the full picture of a business from inside the boardroom, but instead in conversation with its clients.

In my last edition, I spoke about how asking questions internally should always be one of the first steps when stepping into a new business. Consider this edition a part two to the importance of asking questions, and perhaps a more revealing one.

Why clients tell you more than CEOs

Ultimately, the most obvious way to learn the true position of a company is to test what its executive team says against the testimonies and experiences of its clients.

CEOs are unreliable narrators, especially when it comes to speaking truthfully about the state of the company, product or service quality, or client sentiment. Clients, by contrast, have no internal politics to protect. The only thing they are protecting is themselves -- and rightly so.

For a business's clients, it is in their interests and capital that your efforts succeed. As such, and if you approach them proactively, you can trust they will be upfront when asked about where improvement is needed.

Visit long-standing, new and lost clients

So, what's the next step in the early stages of a new investment?

Stepping out of the office and visiting as many clients as possible.

Now, it's tempting to assume that visiting the largest client alone will suffice, but that doesn't cut it. To truly understand what has led a business to its current position, you need a broad range of perspectives. That means visiting long-standing clients, new clients, and better yet, clients who have decided to walk away.

Of course, it is these 'lost' clients that will often give you the most honest, unfiltered takes -- and when I do speak to them, I will centre my visit around understanding several key factors behind their drop-off, including the point at which the relationship broke down and how many interactions passed before remedies were attempted.

In any case, to present and past clients, my questions will remain fairly similar: what are these clients actually experiencing, or what was their experience with the business like? Where are the frustrations? What do they value? What do they think of the teams and individuals they have dealt with? And if they walked away, what was the final straw? Equally, I want to know what would have changed the outcome of their engagement, if anything.

Test feedback against KPIs and service credits

Alongside these conversations, I also look for more formal indicators of client sentiment. Are Customer Satisfaction Reports (CSRs) being conducted regularly? Are monthly service quality reviews taking place, and if so, are they properly minuted and approved by both sides? These mechanisms should, in theory, provide a consistent pulse check on the health of client relationships -- but in practice, they're often inconsistent or overlooked.

With this feedback in hand, I will scrutinise what I've heard against account plans and the business's reported KPIs. The latter is especially important here -- there have been many moments in my career when I've been reassured that the performance in a business is strong because KPIs are being met, only to discover that they were poorly defined in the first place.

Reports show that 72% of businesses fail to properly track their KPIs, and many businesses will have as many as 10 KPIs in different departments, often leading to 40, 50, 60 in the overall firm. It's an issue I've seen particularly in the less robust processes of the lower mid-market, and reviewing these will allow you to cross-reference client testimony with material evidence.

Another critical, and perhaps the most important, data point is the presence of service credits. If credits have been issued to clients, this is often the clearest and most tangible evidence of service failure and dissatisfaction -- yet it is frequently under-analysed in internal reporting.

With any business I go into, I will often 'deep dive' into account plans to see whether any credits such as these are present, often also analysing the documented growth initiatives, key deliverables, and service levels, cross-referencing everything with the direct client feedback.

Reading the relationship beyond the reports

Of course, beyond the formal data, there is also the softer, but equally important, consideration of the client relationship itself. This is not something that will necessarily appear in reports, but is observed in meetings, in tone, or in body language, for example. Just from speaking to them, you can often tell very quickly whether a client has confidence in the individual managing their account, or whether that relationship is beginning to or has already eroded.

As I said in the previous edition, the early days of stepping into a business are all about forming a full, accurate picture. Internal and external perspectives are certainly imperative here, but that picture needs to be painted with an impartial brush.

And clients are the only ones who have everything to gain by telling you the truth.