How to Know If You Should Fire a Customer
As you start and grow your business, especially in a service based model, you may find that you have one or a few customers that aren't a good fit. It could be because you are increasing your price points and a few of your customers are resistant to a price increase OR it could be because you have a a few very demanding customers who take up a greater amount of your time and attention, without bringing you more money. There comes a time in every business where you have to consider firing a customer.
You've probably heard this before but 80% of your sales comes from 20% of your customers. It's called the Pareto Principle and it's true in almost every business. If you're wondering whether it's time to fire a customer, take a look at what percent of your total sales each customer accounts for, you'll probably find that your business is no exception to the Pareto Principle. If you have customers resisting higher pricing or are taking up too much of your time, it's time to let them go.
I know it's tough to walk away from money, especially if you're still growing your business. But it will be worth it! Think about the time you could spend creating new products or services once you fire that high maintenance client. In the end, those will be more valuable activities that will further grow your business, and it will probably be a lot less annoying. And by firing those customers that don't want to pay your higher prices, you can step away from them and focus on signing new clients at that higher price point, which could bring you more revenue with the same amount of work. If you focus on the long term benefits of firing those customers who don't align with your business goals, you will increase your revenue. Put your focus on the 20% of your customers who are bring you 80% of your sales.
But how do you go about firing customers?Assuming you have already explained to them that you are increasing your prices and they are not interested in paying the higher cost, help them find a solution elsewhere. By referring them somewhere else, you help ensure they'll have a smoothie transition from yours company to their new provider. You don't want them leaving your company with a bad experience, no one likes to be fired and that former customer could be a great source of referrals to your business in the future! Try whenever possible to leave a customer with good feelings about your company.
Be realistic about why a customer isn't a good fit for your company. If you have a customer who is causing issues or is unreasonably demanding on your company, try talking to them and walking through ways you think the relationship could be more mutually beneficial. Sometimes, a high maintenance client is just the result of too little communication or a miscommunication, make sure you're on the same page about expectations before you decide to part ways with the customer. But if you just can't get on the same page and things have not improved with that customer, let them know that the partnership isn't a good fit. Then of course, refer them to someone else and help with their transition, you still want them to leave with a good overall experience with your company.It's never easy to decide to fire a customer, even if you don't like working with them. But be mindful when the relationship is no longer working and work to graciously refer them elsewhere. Then move on to targeting your ideal customer!
Have you ever had to fire a customer or client?