Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

With all the marketing focus on getting clients, let us not ignore the clients you should get rid of.

“You’re crazy!” you say, “Why would I want to fire a customer?”

Here’s why:

The client is unprofitable or distracting to the rest of your business. They may have been good in the past, or perhaps you should never have taken them on.

Here’s the thing – it’s possible you’re putting way too much attention and effort into a small a number of customers that are never satisfied. This is at the expense of other customers who are happy and complementary of your work.

When your company is small, you take in any business to build it up. When times are good, perhaps you take on any customer. But as you grow, it’s prudent and profitable to become more selective. And as business slows, you should be less tolerant of marginal or unprofitable customers. They can actually threaten your business.

When to fire a customer:

• The job is too small, and the cost of serving them takes most of the potential profit.
• They are too large, and keep insisting that you lower your price — until the work is unprofitable.
• They are too different. They buy something that you have been selling but you no longer want to sell. For example, a print shop wants to close its graphics department, or a landscape contractor wants to close its maintenance section.
• The job is too distant. When you had a lot of customers in their area, it was worth serving them; but now that you only have a couple, you actually lose money on them.
• They are more trouble than they are worth. These customers argue with you, are never satisfied, are slow to pay, or all the above.

Now, obviously it’s not easy to fire a customer. Here are some suggestions to soften the blow:

• Refer them to someone else that you know would be more appropriate for them. Sending business to someone else may entice that person to send a good referral back to you. However, don’t send problem customers to your good referral sources!
• Give them some warning. “After this next project, we won’t be able to work with you any more.” Tell them why.
• Instead of getting rid of a customer, ask yourself how you can turn an undesirable one into a good one?
• Then when you tell them why you can no longer work with them, they may be able to change something that will make them a good customer.
• Raise your price. They will either leave, or it becomes profitable and more enjoyable.
• Change the way you work with them. Instead of 1 on 1, get them into group workshops, or steer them to online programs.
• Change the terms of your work. Instead of fixed price, charge for your time and materials. Make sure you get change orders for extra work they request. Overcome your timidity and be polite but firm: “Yes! We’d be delighted to do that for you, and it will only cost you an additional…$$.”
• Require pre-pay or payment by credit card, to cure slow payers.
• Be the squeaky wheel. Stay on them. Oftentimes we don’t hold clients to the agreements they make with us. We let them slide and then we moan about it. Remind them what the agreement is, and request firmly that they abide by it.

You have nothing to lose by doing any of these things. Bad clients lower profits and distract your business. Since you were going to fire them anyway, they just might work.