When to say ‘you’re fired’ to a customer

In the decade-and-a-half that I’ve been involved in entrepreneurship, I’ve come to recognize that most entrepreneurs fall on a continuum of beliefs about gaining and retaining customers:

It’s also been my experience, although I’m cautious about speaking in generalities, that entrepreneurs who come from technical backgrounds tend to be left of center on this continuum and entrepreneurs from sales and marketing are wired toward the right.

On the left of this continuum is the somewhat arrogant feeling –belief — that there is NO customer that a company can’t do without.

While we might wish that was true and we might do our best to spread our sales risk and minimize the impact of any one deal, in every business at any point in time, there is likely to be at least one customer that IS indispensible to the company’s survival.

On the right-hand end of the continuum are entrepreneurs who believe that ALL customers — regardless of their needs, what they pay, or how they behave — are too valuable to lose.

Like with most business issues, the practical reality lies between the extremes.

However, and this might surprise you, sometimes there are customers that, for the health of your business or theirs or both, must be fired. Reaching that conclusion is a three-step process and a scenario for which every entrepreneur should plan.

Reasons Your Team May Choose to Fire a Customer

  1. The customer is unethical or breaks the law or the intent of the law. You may have a legal responsibility. Even if you don’t, do you really want to create a company culture where it is okay to look the other way. It may not be your job to report or correct the customer. It is your choice to participate or not.
  2. The customer exhibits a pattern of treating your employees or theirs with disrespect. Some behavior is black and white; other behavior not so much. It’s a matter of judgment, but if you choose to place your employees in environments where reasonable people are made uncomfortable, they may choose to go work for someone else.
  3. The customer seeks price above value. Few entrepreneurs go to the trouble of founding a company based on the commodity game. Fewer still new companies based on commodity pricing succeed these days.
  4. The customer is an accounts receivables headache every month. Can your start-up business really afford a company that doesn’t pay on time?

Before you decide to fire a customer, gather everyone at the company who deals directly or indirectly with customer and ask these very serious questions of yourself and the other members of your team:

•   Is this a customer relationship we want to keep?

  • For a month or less
  • Until we can replace the revenue
  • For as long as we can
  • It depends

•  What do we have to do to be able to afford to terminate the relationship?

  • Find replacement customer(s)
  • Reduce expenses
  • Wait out a contract
  • Change marketing plans
  • Notify our Board
  • Nothing — we can’t afford to continue as we are

• If we can’t or don’t want to terminate the relationship, how do we improve it?

  • Discuss the situation with the customer
  • Change personnel
  • Change terms/services
  • Reset expectations

When the conversation begins, you may find that sales, finance, engineering and customer service each have different opinions.

Sometimes just discussing a difficult customer will help you and the team recognize how you are contributing to creating the very situation you want to change.

At the end of the day, if the right thing is to end the relationship with a particular customer, handle it respectfully and as timely as possible.

 

 

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