Grief to Earnings Ratio

I can remember a time not long ago when the term "grief to earnings ratio" was met with confused looks and very rarely mediocre curiosity. Now it seems that it is as common as P&L or Revenue.


Interestingly enough, the term "Grief to Earnings" has now become an actual metric within our company.

We have created an online calculator that is accessible to all in the company (but mostly used just by me) that helps me to determine whether a potential target, new or existing client is worth targeting, engaging with or walking away from.

The calculator works as follows:

• Enter in the average project budget.
• Enter in the average project cost to our company.
• Enter in a rating of difficulty to manage (1-10 based on the primary project manager's assessment of time, project overruns, client difficulty, etc.)
• Results: a G to E rating from 1 to 5
• Scale: 1=High earnings with little to no grief, 2=High earnings ration with some but reasonable grief, 3= Equal earnings to grief (i.e. we really earn our money), 4= High grief to little earnings, 5= High grief to no earnings

This proved most valuable when I was discussing our most current problem client with my business partner. The conversation went something like this:

Alex: Ann, we need to talk our "Current Client", our contract is nearing the end, we have more work that needs to be completed but they will not agree to an increase in scope. After the last year with this client, I think it might be time to walk-away.

Ann: Well they have given us quite a bit of business and really the issue is with the team and not the client in general.

Alex: Yes agreed, but we have to look at the cost and grief to earnings (g to E) ratio before agreeing to do any additional work with them.

Ann: So what is the G to E ratio for this client?

Alex: 5= High grief and no earnings.

Ann: What is considered no earnings on this client account?

Alex: We are over-run by approximately 35K dollars that they either have no agreed to pay, have yet to approve and is potential additional amount needed to finish the current project.

Ann: Let's get out!

The moral to this story is that regardless of how you calculate or evaluate your business it all comes back to Profit and Loss, no client is worth keeping if it is costing you to do business with them which in the above case it was. Sometimes for personal or ethical reasons we need more than the bottom line to make our case in our own heads but really in convincing others it is all about the money.

If I had had a different conversation with Ann that did not involve the ethics, feelings or grief aspects that the G to E tries to calculate then the conversation would have happened as such:

Alex: Ann Client X is costing us money to do business with them I think we should end our relationship as soon as the current project ends.

Ann: How much is it costing?

Alex: $35K this year alone.

Ann: No more work with Client X after this project!