Regardless of what you've heard, all customers are not created equaly. Some are simply more valuable to your business, than others... while even others are literally a drain on your resources.
Yet, most small business owners have never fired a customer. They’re usually more intent on getting and keeping customers… not getting rid of them. And we’ve learned that the "customer is always right" and we should do whatever it takes to hang onto them regardless of their behavior. This couldn’t be further from the truth. Rather, it is your obligation and responsibility to "fire" customers you’d be better off without.
When is it Okay to Fire a Customer?
Simply put: Whenever he / she behaves badly. And since we all know that past behavior is the best predictor of future behavior you should do it sooner rather than later. But the good news is that it’s generally 1percent of your clients that are causing 95percent of the pain. And although there are a myriad of possible grounds - objective and subjective – you really need just one major reason.
You should consider firing your customer if they…
1. Regularly make outrageous demands - complain unnecessarily; change requirements mid-stream; use up precious time on frivolous matters and stress over minute details.
2. Rude to you and / or your staff – no one, not even a customer, should be allowed to insult your employees; use demeaning language; or belittle anyone in your business.
3. Unresponsive or No-Shows - this is particularly important for service providers who depend upon their clients to provide critical information; timely feedback and / or review or show up for scheduled appointments on time, or at all.
We recently "fired" a new client, Larry Jones, the owner and president of a small , local company, for this reason alone.
Larry was not the typical awful customer. He was pleasant. He paid our invoices – sometimes a little late, but not overly. He was able to give and receive constructive feedback in a positive way. He never called to complain about anything. In fact, he never called, or emailed, at all… not even when he promised to do so. As a matter of fact, Larry regularly postponed or cancelled scheduled meetings and conference calls at the last minute; "forgot" to return phone calls and emails until sometime after the fifth message and consistently failed to send us promised information.
After dealing with this for several months, it became increasingly clear that Larry’s behavior was not going to change and therefore, we could not provide him the help he needed and deserved. We moved on and he understood completely and vowed to call us again if / when he got "it" together.
4. Consistently Slow or Non-Payers
These are the customers who plan on paying you late – for as long as they can get by with it - or deliberately ignore repeated invoices. They are not the folks who are experiencing a financial crisis (we advise you to continue to work with these people). It doesn’t matter how much business someone does with you on paper, if you don’t get paid or have to waste time and money badgering them.
5. Prove to be unprofitable
When the costs associated with serving a customer are more than the profits you receive, it’s time to fire them. Additionally, if you’re not spending enough time with important customers because of excessive handholding; rework and the like, you’re likely to keep them and lose valuable clients!
This concept is illustrated perfectly using Pareto's 80 / 20 rule.
How the 80/20 Rule Can Help You
The Pareto Principle, commonly known as the 80/20 rule, is one of the most effective tools in helping manage businesses effectively. It is a "formula" that applies to almost anything and correctly identifies that 20 percent (or the minority) of anything is vital and as much as 80percent (or the majority) is trivial.
For example, in most businesses 80 percent of the profits come from 20 percent of its customers. Alternatively 20 percent of customers cause 80 percent of the problems. It works both ways.
Use this principle is as a reminder. Focus on the 20 percent of customers and tasks that really matter. If you have a customer database there is no better reason than this for spending some time reviewing and analyzing what you find. If not, it’s time to begin gathering as much information as possible about your customers. Consider:
- First, identify the customers who are contributing 80 percent of your revenues and profits. Then ...
- Look for other things, such as the 20 percent of your customers who account for 80 percent of unnecessary complaints or rework.
- Once identified, begin each day with a commitment to focus on who (and what) is most important and refuse to let others sap your time and energy.
However, use this rule wisely. Don’t just work smart, work smart on the right things.