Most every business eventually has to, or should, fire some customers at some point. It’s counter intuitive to most businesses and entrepreneurs that some customers may just be customers that they cannot afford. It may be your oldest or highest volume customer, or a friend of a friend that you do business with, it doesn’t matter sometimes it just can no longer be justified or make sense.
Is there a customer that is just never satisfied and continually drains your resources just because that’s the way they are? Do you have customers that beat your price down so low and never come through with the “big” order they constantly have used to get pricing concessions far beyond what is reasonable for their level of business?
Examples are great teachers. I bankrolled (he used my equipment) my son in a lawn mowing business a number of years back. He was a bit shy and unsure of himself in approaching people for business and did not like to turn down any customer that had paid him at least once. It took a while and a number of different circumstances for him to realize that some customers were not worth having.
My son was very flexible, required no contracts, and did extra services and responded as quickly as he could to demands for immediate service without charging a premium.
A few examples of the lessons and customers he had to either fire or re-sell with a value proposition;
The artful dodger
One customer hired him and arrived to his rental unit to inspect the job after his first servicing. All was well for a few servicing until the owner “forgot” to call him and declined my son’s call for service until the lawn got a bit out of hand. After serving this time my son did not charge more, nor did he at least communicate the additional servicing and time required to reinforce his investment of additional time.
Thereafter the owner always made sure that the grass and weeds were a bit overgrown. This lasted for months until my son demanded more for his services if the lawn was overgrown.
This is when payments started to lag and receivables increased dramatically. Calls and notes were ignored, promised made and never kept for payment, and frustrations grew. About this time collections had to be brought in and initial discussions began about being a probationary customer. He was fired at the end of the season. I have no doubt that the next service provider was not as economical, flexible or patient.
The “throw in the extras”
My favorite “extras” clients were those that started requesting bagging of their grass clippings. This was a great learning experience as multiple lessons were learned.
After a few mow’s the customer’s request that the grass clippings be bagged. STOP: This is where a “change in scope of the project” needs to be addressed.
Never considering the cost of the effort he agreed and this became the new deliverable. Eventually, once dad’s bags ran out had they became an expense, he started to realize he had taken a cash pay cut at these customers. The cost of the bags, purchasing, and inventorying the bags were never considered when he made the concession. The lesson here, charge for what you are delivering and any extras cost a premium.
Later the lesson of “extra work” “extra pay” arrived once more customers demanded bagging and the realization that if you provide 25% more labor for free you can only complete 75% of the jobs you formerly completed in the same time.
The lesson here, if you are paid for the deliverable get paid for what you are delivering. He later just started adding a “filling” charge into the per bag price.
Don’t mix fixed price deliverables with labor if you cannot charge when the specifications change.
The “I am always right because I am the customer”/”The threatener”
Liable is punishable by law or dad.
I actually witnesses a prospective new customer try to force my son into mowing a 3 foot tall overgrown lawn for 1/3 of the asking price. After a number of iterations, cajoling and outright threats my son walked away from a job under a barrage of harassments, threats and liable.
The “customer is always right” adult was berating my son for his “disrespect” for declining to work for close to nothing due to the owners neglect, threatening to “tell all the neighbors, prospects and current customers that my son was bad and did not provide good services”, and actually grabbed his equipment and did not allow him to leave.
It was not until my son waved to me and told the homeowner that he could continue his conversations and threats with me did he relent and beat a hasty retreat into his home.
Some customers are bullies; you are better off knowing them as former customers or not customers at all. And for management, the customer us not always right sometime you have to trust in your staff, stand up for them and take their side.
Periodic evaluation of your customers and qualification of your prospects are critical to maintaining profitability and cash flow.