Have you ever done business with someone who was more of a problem than it was worth? Don’t you want to tell some customers to buy from your competition?
Some customers are never happy no matter what you do for them. Fortunately, this is usually a rare occurrence and you probably love most of your customers, as I do.
My dentist, a lifelong friend since we were 5 years old, told me that he tells patients who repeatedly ignore his dental advice that they should consider going elsewhere because he can no longer help them. Is that too hard You decide.
I’ve turned down deals I thought wouldn’t be worth it. I refer to these as “the best customers I’ve never had”. Unfortunately, I’ve also accepted deals that turned out to be big losers.
Some customers take too much time, are never happy, and always complain about something.
With all of the variables in mind, you can definitely lose time and money doing bad business. If time is lost, you can never get it back thinking, “If only I had known this wasn’t going to be a beneficial relationship, I could have nipped it in the bud.”
Live and learn, that is the key
Learn from your experiences and, in this case, your mistakes. Taking this newfound knowledge into the next step can produce promising results.
Here are some thoughts and strategies to consider for your business.
Do you know which business from the customer is profitable and which is not? Here’s how to find out, and what to do about it. Rank your customers from most profitable to least profitable (quarterly or annually). This should prove to be an eye-opening exercise. It may be best to use percentages instead of dollars. To do this, you need to know your costs. (If you read my column regularly, you already know how to do it.) Perhaps you should draw a line in the sand or in your ledger or Excel spreadsheet.
When black ink turns blood red, here are some things you should do:
- Investigate why certain customers are not profitable and try to find a solution. You may need to increase prices or sell additional products or services. If return and restocking are an issue, consider charging a restocking fee. Does the customer pay their invoice on time and within the agreed terms? Maybe you should ask for cheaper payment terms, maybe 15 days or cash on delivery.
- Talk to your customers and be honest. Tell unprofitable or low-income customers that there is no money to be made from their account and there is no further money to be lost. Take emotions out of the equation. If the relationship is valued and how badly your customer needs you, they can agree. This is especially true if your customer cannot get a better deal elsewhere.
- Often it is not about the money. The customer can just be a pain and you can wait for them unduly.
- Try to save the business if you can, but be prepared to lose a loser. Of course, professionally inform the client that you no longer want to do business with them because they are costing you (or that the deterioration is affecting your health). Shed this business. That may sound strange at first. It will be uncomfortable for sure. However, if you lose your worst customer or two, you can potentially add several new and profitable ones.
- Think what to do with the extra time when you don’t have to waste it on problematic customers. Could you sell to new, profitable accounts instead? Maybe all you need to do is take some time off to relieve some stress.
- If you have weak product lines or services, check them out as well. If wearing the product or service isn’t critical to other important business transactions, consider throwing them away and adding something that will make your business stronger. Now is the time – just do it!
Bottom line: ask yourself if this should have been the best customer you never had. Go with your belly.
Don’t be afraid to say no. Don’t drop the price to the point where it just doesn’t pay off. Look for ways to replace unprofitable or problematic customers and marginal products and services.
Your business should always improve. No loss leaders here. The only exception would be influencer-type accounts or products and services that help you get other, more profitable businesses.
Dennis Zink is an exit strategist, business analyst and consultant. A Certified Value Builder and SCORE Mentor as well as the chairman of the final chapter of SCORE Manasota. Dennis created and hosted “Been There, Done That! mit Dennis Zink ”, a nationally syndicated business podcast series and“ SCORE Business TV ”, available at www.Time4Exit.com. He moderates CEO roundtables for the Manatee and Venice Chambers of Commerce. Dennis led a SCORE team to create the Exit Strategy Canvas and Exit Strategy Roadmap program, which provides a real-world methodology for realizing corporate capital. Email to [email protected]
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