It can be tempting, to accept any kind of business that comes our way – especially during a tough economy or when sales are flat. However, this is often a bad idea, as some new clients or customers can have a toxic effect on your business.
For example, I was listening to the owner of a pub / bar yesterday, as he described how his trade increased, after a particular customer stopped coming in for lunch each day. Although this customer spent money with him on a regular basis, it seems he was such a disagreeable character that his presence stopped other customers coming in. They would apparently see this person’s car parked outside and decide to go somewhere else.
It’s easy to see what a client pays you – but sometimes harder to see what they cost you!
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Hi Jim,
Something similar happen to my wife. She has a small fast-food business. The sales increased after we hire a new sales person. It seemed that the old one was happy to make a minimum amount of sales/day and after that she wouldn’t care about it.
So, if you hire the wrong people it can also be bad business.
Thanks
It’s important to hire great people – but it’s also important to only work with the right mix of clients / customers for your business.
I totally agree. Sometimes, we are blinded by hefty cash pays that we forget that we are losing other customers as well. Employees makes a company, so choosing the right people is the best thing to have a good business
Hi Ray. I’ve even seen small businesses go broke, after taking on too many clients that cost them more to service than they were paid.
In September we fired a customer as they couldn’t be honest about their requirements and we could not service the reality at the price based on their fantasy. If we had ‘just got on with it’ as they told us when we tried to establish their needs, we would have been bankrupt within 6 weeks!
We are quite brutal with toxic clients, we are a business not a charity and our employees depend on us getting the right business at the right price.
That’s a good point Sarah.
Too many businesses end up in trouble, by trying to meet the unreasonable demands of clients who ’scope creep.’
Amen Jim! Sometimes it’s hard to let a client go, or not take on that project (especially when there are big $$ involved), but you have to evaluate the long term cost of that client.
In the hosting business, we are often sent RFPs that are “over the top” in terms of what the client wants or expects. It can be tempting when sales are slow to try and tackle a few of these, but then you end up wasting more resources than you have available, and the client ends up costing us money due to lost man hours, hiring outside help to do the work, etc…
It’s often said that 20% of your clients account for 80% of your support, and sometimes it’s just 1-2% that cause the bulk of your daily work. Find these problem clients, figure out how to make them more profitable, or work to move them away from your company to free up time, money and resources that can be put to work elsewhere.
Rob – LexiConn
Thanks for such a well made point Rob.
I agree. It’s hard in today’s economy to turn business away, but if a client’s unwilling to pay for what they get, you end up picking up the tab. That makes no sense.
Thanks Rob! Your last para says it all. I guess we sometimes get too greedy and try to take up every deal as it presents itself… so much so we undervalue our own time and lose out on the better opportunities.
I recently wrote a post on my blog called, “In Bad Economic Times, Should You Fire Clients?” It talks about when to sever ties with clients. You can read it here. http://bit.ly/2KtY2g
I would be happy to here any comments.
Rob
Heres a comment. Why spam up this guys blog to get traffic to your post if you want peoiple to take you serious?!?
Geoff:
No intention to be spam. I just wrote a post on the same topic and felt I could add to the conversation. Sorry if you did not take it that way. Would you suggest a better way that I could have handled it?
Rob
Right on!
I’ve been telling my clients this for years. 60% of yur problems come from 20% of your customers. Eliminate those, and your profit rises right now. You can also devote more time and effort into finding more profitable customers. It really does have a snowball effect in whatever direction you take.
Fear and greed are our biggest stumbling blocks in Business. Few clients are willing to give up 20% of their clientele, even if it means greater profitablity. The cleints that have done this are actually amazed at how well it works, like in your example.