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Home » Random

20 Days to a Better Business: Day 13 Fire Bad Customers

20 Days To A Better Business

Each Monday we focus on one activity you can do today or over the next week to build yourself a better business. These short, actionable posts will show you what steps you need to take to take your business to the next level.

In case you’ve missed the previous posts, you can catch up here: 20 Days to Build A Better Business.

This is Day 13: Fire Bad Customers

This may seem odd, given that this whole series is talking about growing business, yet here we are talking about firing customers.

~ There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. ~ Sam Walton

There is so much written about serving customers, but the assumption is that all customers are of equal value to your business. This is not the case.  Some customers will place regular orders month after month, they will pay their bills on time, others on the other hand place irregular orders, demand special treatment, pay their bills late and generally mess you about.
Which customers would you sooner have?
In our post How To Get Big Results 80:20 we talked about the 80:20 Principle – which can be summarised as:
80% of the outcome is derived from 20% of the inputs. Sometimes, the ratio is skewed to 90/10, 95/5 or even 99/1, but the minimum ratio to seek is 80/20.
If you look at your own business, chances are you will find that you’ll find evience of Pareto’s law in your customer files. Once you start looking you’ll find that 20% of your customers will account for 80% of your profits.  If you spent more time developing relationships with customers that contributed the most to your business, what do you think that impact would be?
Therefore it follows that 80% of your customers will account for the remaining 20% of your profits. Within this group you’ll find the late payers, the complainers, the customers that demand customised products then change their minds.
Some customers will stand out above all others as the ones that you hate doing business with. These are the obvious candidates to fire.  Sometimes you might find that a “big name” customer is in this list. The one you fought hard to win. But they treat you like dirt, firing them could be the smartest thing you’ve done for your business.
Life is too short to be a doormat.
What do you think? Do you have any experience of “firing” customers? How did it work out?

3 Comments »

  • BizSugar.com said:

    Firing Customers…

    Are all customers equal? Try firing your worst customers and see your business grow. Each Monday we focus on one activity you can do today or over the next week to build yourself a better business. These short, actionable posts will show you what steps…

  • Dave Doolin said:

    Matthew, I won’t even take on a customer if I think they are going to be a big pain. I’ve dropped at least three prospects this year already, including prospects I’ve done exploratory work for… and not been paid for. The long term hassle of trying to extract relatively small amounts of money from people isn’t worth it in the long term.

  • Matthew Needham said:

    Dave, I think that’s a sensible approach. I spoke to a supplier on behalf of a client recently who quite surprised me by saying you realise our product is going to be in the £70k/$100k – the purpose of course is to get rid of any timewasters up front. Sounds like you’ve done a similar thing.