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How to Fire Bad Customers: A Simple Framework for Small Business Owners

How to Fire Bad Customers: A Simple Framework for Small Business Owners

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 of them just aren’t worth the time.

Below, we discuss how to figure out if a customer is bad enough to fire, and what you can do about it.

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Differentiating “good” and “bad” customers

The first step is determining whether or not you actually have any bad customers. One thing you do not want to do is simply pick the customers that complain the most and get rid of them. These customers are actually extremely valuable. A recent survey found that if 27 people experience a problem, only one actually 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 important questions you should ask yourself when deciding whether a customer is worth firing or not:

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  • Do you make money from the account? If you are actually losing money on a customer due to frequent returns, outrageous demands, or slow payments, you can get rid of 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 having with them in a polite manner. Let the customer decide if they are willing to make fewer demands or would prefer to find another vendor. They might be unaware that they have been difficult, or quite willing to lower their demands in order to save the business relationship.

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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 an uncommon business proposition and can be quite 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. Simply let your former client know that 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 that 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 their purchasing manager may change. Leave on the best terms you can in order to keep your options together open in the future.

Nipping the problem in the bud

As you weed your problem customers out, take care to identify any patterns between them. You might notice that businesses of a certain size or in a certain industry tend to cause more problems. Take a 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. In many cases, you can 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.

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Getting rid a customer is never an easy proposition. Having the chance to develop more profitable relationships and relieve your account managers of unnecessary hassle, however, is well worth the effort. By following the steps outlined above, you will drive more revenue and make life easier on your employees.

Featured photo credit: VIKTOR HANACEK via picjumbo.com

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Published on September 8, 2019

The Lifehack Show Episode 7: Following Your Calling

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Joseph believes everyone has a calling, or several callings, where their passions and strengths can merge to create a successful life of contribution and significance.

 

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