Regular readers will notice that I haven’t posted here in a while… More on that in a post later on today. However, I’ve remedied that situation by doing something that a lot of small businesses don’t think to do, but often should: I fired one of my customers.
I had a customer that represented about 90% of my personal stress, 75% of my actual work, and about 10% of my revenues… so, after much thought and deliberation, I finally had to show them the door. I was spending so much time working on this one customer’s demands that I didn’t have time to devote to more profitable clients and projects. They truly were holding back my business. “Firing a customer” is never an easy decision, and it isn’t one that should be taken lightly, but sometimes it’s the right thing to do. In this case, it was a fairly easy decision (they were my lowest-paying customer by a fairly wide margin in terms of hourly rate, had the most one-sided terms, and were often–nay–always really late paying invoices.)
I have a renewed sense of freedom, calm, and enthusiasm since I cut them loose, and the impact on my bottom line in the short term is negligible, and in the long term I think it will allow me to generate MORE money.
I read an article in the Seattle Times recently in which some companies, including Best Buy, were talking about unprofitable customers (called “Demon customers” or “customers from hell”) and how to deal with them. The article looks at the issue from a more retail-centric point of view– in a service-oriented business it is even more important to keep any eye on this kind of stuff.
Your business needs to analyze the profitability of every deal you make, and continue to monitor its profitability over time. Are you making money on all your current customers? What is the cost of that money? You can’t always just blindly assume that all business is a good thing. It goes without saying that you can’t do this kind of thing cavalierly, but sometimes cutting a customer loose is the best thing you can do for your business.