When is it time to fire a customer or client?

An accountant told me about a seminar he attended for accounting firm owners owners. The leader suggested that firms periodically “fire” the bottom 20% of their client base. These are clients that produce little revenue, are not profitable, or are just not pleasant to deal with.

He got me to thinking that this excellent advice may well apply to almost any business. The conventional wisdom is that 80% of sales derive from 20% of a firm’s customers. Why not, then, evaluate the lowest performing customers? So often these customers are not only producing marginal sales and profit, but too often they require an inordinate amount of support and “hand holding” further eroding any profits they might produce. Should you be spending time with these customers, or fostering even better relationships with better and more profitable customers?

When you encounter an unprofitable or unpleasant customer, and you will, raise your prices so high that you will be unreasonable to work with, or simply tell the customer that it no longer fits the profile for the direction of your business.

Some business owners are afraid to let customers go for fear that sales will decrease. But, take a careful look at each poor performing customer. If customers are not profitable, “fire” them and let them be someone else’s problem.

Surprisingly, sometimes a fired customer will return begging to do business with you and will turn his/her attitude around and they will end up as good customers.