After your sales team scratches and claws for each account, it is often easy to forget about purposefully curbing your client list. No matter how important your customers are to you, some aren’t worth the time.
Below, we discuss determining if a customer is bad enough to fire and what you can do about it.
Differentiating “good” and “bad” customers
The first step is determining whether or not you have any terrible customers. One thing you do not want to do is pick the customers that complain the most and get rid of them. These customers are precious. A recent survey found that if 27 people experience a problem, only one reports it. Without those people alerting you to your shortcomings, you may never know how to improve for the rest of your customers.
Here are some essential questions you should ask yourself when deciding whether a customer is worth firing or not:
- Do you make money from the account? If you lose money on a customer due to frequent returns, outrageous demands, or slow payments, you can eliminate them without thinking twice.
- What is the opportunity cost of servicing them? Consider whether or not you are spending too much time on low-profit customers. Usually, this time can be better spent focusing on growing higher potential accounts.
- Does the customer hurt morale? Some customers will be profitable but treat their account managers or sales representatives abusively. If their behavior is severe enough, cutting ties could be warranted.
- What else do they bring to the table? Think carefully about any other benefits a customer might bring to the table for you. For example, if they have offered referrals or positive reviews in the past, even if they are not profitable or are hard to deal with, the ancillary benefits could be worth keeping them around.
Contemplating your alternatives
After identifying your problem customers, avoid cutting them loose immediately. Take the time to see if there are any alternatives available to you. You might consider hiring a junior salesperson to handle lower-value accounts while the experienced reps take care of the most important ones.
Another good strategy is simply laying out the facts instead of cutting ties with them. Explain the problems that you are politely having with them. Let the customer decide if they are willing to make fewer demands or would prefer to find another vendor. They might be unaware they have been complex or ready to lower their needs to save the business relationship.
Breaking the bad news
If you have determined that a customer is no longer worth your time and there aren’t any alternatives available, you must figure out how to fire them gracefully. This is a unique business proposition and can be pretty awkward. However, you can take the following steps to ensure that the separation goes as smoothly as possible:
- Keep it short and professional. Do not bring emotion into the conversation or engage in any arguments. Let your former client know you will no longer be doing business with them.
- Offer a referral. If you are comfortable doing so, provide the customer with the name of a competitor who might be a better fit for them. Doing so will minimize the impact on their operations and lower the chance they will spread ill will towards your company.
- Try to leave the door open. The only consistent thing in business is change. A company’s budget could increase exponentially, or its purchasing manager may change. Leave on the best terms you can to keep your options together open in the future.
Nipping the problem in the bud
As you weed your problem customers out, identify any patterns between them. You might notice that businesses of a specific size or in a particular industry tend to cause more problems. Look for any early warning signs that raised a red flag early in your business relationship. Identify these customers and try to train them better from the very start. You can often preemptively avoid account issues with strategic customer onboarding. The better you become at nullifying problem customers from the beginning, the less time you will waste handling and firing them in the future.
Getting rid of a customer is never an easy proposition. However, having the chance to develop more profitable relationships and relieve your account managers of unnecessary hassle is well worth the effort. Following the steps outlined above will drive more revenue and make life easier for your employees.
