At first blush, the thought of firing a customer might seem contrary to good business. After all, your company is built around winning customers and keeping them happy, so why would you give a customer the boot? Because he has become a drain on your resources, and ultimately unprofitable. As you grow and acquire bigger clients, some smaller clients may require too much effort to service when you consider the profits (or lack thereof) they generate. In addition, as your business evolves, your products or services may change and no longer be suitable for certain customers. Often your customers’ own behavior makes them a resource-drainer. For example:
1. You tell them in writing that your invoices are payable in 30 days but they consistently wait 90 days.
2. They routinely expect you to provide more services than you agreed to.
3. You have kept their fees below the market rate for years, and they balk at your plans to raise their fee to the going rate.
4. They are verbally abusive to you or your employees.
The best contacts and resources to help you get it done
Determine the financial ramifications
It may seem crazy to drop a customer who supplies your business with a steady stream of income. But if you take a closer look at the time and effort you devote to the customer, you may find that it’s costing you more than you think. Dealing with a difficult customer can also take a toll on employee morale and productivity.
I recommend: Financial Metrics Pro offers spreadsheet templates for use with
Microsoft Excel, that help you calculate your return-on-investment for each customer.
ZeroMillion.com has a downloadable Excel spreadsheet for figuring out the average lifetime value and profit from your customers.
Stick to your contract
Make sure that you sever the relationship with the client in accordance with the terms of any applicable contracts or agreements. Your contracts should specify a period of notice (30 days, for instance) for termination of the agreement and indicate if the notice must be in writing.
I recommend: Download standard contract forms that you can customize at
FindLaw For Small Business. To find a lawyer in your area who can help you draw up a contract with specific provisions for termination, go to
Small Business Law Firms.com.
Say good-bye tactfully
If you aren’t sure how to tell a problem customer that you no longer want his business, you might need a few lessons in how to conduct difficult conversations.
I recommend: If you can’t find an appropriate business communications course at a local college, check out
The American Marketing Association’s seminar schedule. You can also participate in teleseminars, such as those presented by
Tim Ursiny, author of “The Coward’s Guide to Conflict.”
Make it their idea
You can get rid of a customer without insulting them. Tell him that you’re raising your prices (and hope that they choose to go elsewhere). You can also inform him that your business is going in a new direction and will no longer be able to meet their needs. Always offer recommendations to other suppliers or service providers who can meet your customer’s needs.
I recommend: Come up with new pricing strategies using a
profit-margin calculator from Bankrate.com.
Keep employees in the loop
Once you’ve severed your relationship with a customer, inform your employees provide instructions about what to do if the customer returns to your store or calls your office.
I recommend: A contact management program such as
ACT, lets you keep all of the nitty-gritty details about each customer in one place, and make those details accessible to employees who need the information.
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