When and How to Fire a Customer Without Hurting Your Brand
Some customers aren’t meant to be customers for life. Here are the 7 clues it’s time to move on, and how to do it with minimal damage.
PHOTO CREDIT: Getty Images
Almost 25 years ago when I started my first company Information Experts, my first task was to create our core values, which make up the moral compass of any organization. One core value was "Quality of Life Inside and Outside the Company."
I previously worked for a company that didn't value life inside the company. Employees were over-worked, there was a constant state of chaos, and our owner valued money over people.
I knew that one of my highest priorities in my own company was to create an environment where employees felt valued and safe. Back then, I was inspired to achieve this because of my own experiences. Today, research proves that retention, productivity, and profitability skyrocket when employees feel safe, relevant, and part of something bigger than themselves.
Choosing and keeping the right customers must be a top priority for businesses that want to grow. It's not uncommon in any business to discover that occasionally a customer is a poor fit.
Well-established companies often have clearly defined criteria for selecting their customers, as well as which customers should be terminated when they no longer fit. For newer companies that are prioritizing as much revenue as possible and may go after "low hanging fruit" to pay the bills, they may benefit from an intentional approach to determining who they should not work with on a long-term basis.
Here are 7 clues that a customer no longer fits your company:
They change or expand the scope but expect you to eat the costs. Every project evolves. However, it's unreasonable for a customer to expect a service provider to absorb additional costs due to a new direction or a scope change.
They ask you to engage in unethical business practices. If a client asks you to engage in any unethical business practices, it's time to run. By accommodating such requests, you create a liability for your entire company. Paul Manafort asked his accountant (Cynthia Laporta of the accounting firm KWC) to falsify tax returns, and she has now exposed her firm to potential prosecution.
They don't pay you. If customers are delinquent in paying your invoices, they are using your money to finance their business, and are likely in financial trouble.
They infuse chaos into your company with toxic treatment of your people. A signed contract doesn't give customers unlimited access to employees around the clock, and it doesn't grant them permission to ever be abusive. A CEO's first responsibility is to protect the welfare of the company's employees.
They don't respect or honor your company processes. If your deliverables depend on customer input and collaboration, it's essential that they understand their role in the success of their projects.
They are a one-and-done customer, with limited potential to grow. Single-project customers require just as much effort and time as customers that have strong growth potential. When I'm asked about building a company over $1 million, I stress that it's much less stress to cultivate and service 10 $100,000 clients than it is to service 100 $10,000 clients.
They aren't profitable. To quote entrepreneurial icon, best-selling author, and EO Founder Verne Harnish, "Revenue is Vanity. Profit is Sanity. Cash will always be King." It's senseless to give 110% to a customer that generates no profit.
These are reasons to "fire" a customer, without referring them to another source. These customers are not good customers for you, and they won't be for another company either.
However, there are times when it makes sense to refer good customers to another company, simply because you've outgrown them or they no longer align with your mission or vision. In these cases, it's great to have a source of company referrals which enable you to warmly transition good customers to other companies that can continue to serve them.
In either scenario, it's important that you as the vendor follow these rules:
- Always take the high road. Do not engage in personal attacks or lower your standards for service.
- Document everything. Paper trails with difficult clients are mandatory to protect against any misunderstandings.
- Deliver. Bring the contract to fruition by delivering everything you promised. Don't give the client any reason to claim non-performance.
- Keep quiet. Once the engagement concludes, don't bad-mouth the company. Professional circles are small and trash talk spreads quickly.
- Be grateful for the teachable moment. Finally, remember that the entrepreneurial journey is one long teachable moment. Every experience makes you a stronger and wiser leader.