Why Firing Bad Customers Is Good for Your Business: Tips and Strategies

After your sales team has worked hard to acquire each account, it is easy to fall into the trap of keeping all customers, even if they are not profitable or cause unnecessary hassle. However, not every customer is worth the time and resources. In this article, we discuss how to differentiate “good” and “bad” customers, contemplate alternatives before firing them, break the bad news gracefully, and prevent future issues by identifying warning signs and improving customer onboarding.

Differentiating “good” and “bad” customers

Before deciding to fire a customer, it is essential to determine whether they are genuinely bad for your business. The following questions can help you evaluate your customer base:

– Do you make money from the account? If you are losing money due to frequent returns, unreasonable demands, or slow payments, it might be time to cut ties.
– What is the opportunity cost of servicing them? Consider whether you are spending too much time on low-profit customers, which could be better spent on higher-potential accounts.
– Does the customer hurt morale? Some customers might be profitable, but they treat your account managers or sales representatives abusively, causing low morale or turnover.
– What else do they bring to the table? Even if a customer is not profitable or is hard to deal with, they might provide other benefits, such as referrals or positive reviews.

Contemplating alternatives

Once you have identified problem customers, do not rush to fire them immediately. Instead, consider if there are alternatives available, such as hiring a junior salesperson to handle lower-value accounts while experienced reps focus on more important ones. Another option is to address the issues with the customer by laying out the facts in a polite manner, giving them a chance to lower their demands or find a more suitable vendor.

Breaking the bad news

If there are no alternatives available, and firing the customer is the best decision, it is crucial to do it gracefully to minimize the negative impact on your business. Here are some tips for a smooth separation:

– Keep it short and professional. Do not engage in arguments or bring your emotions into the conversation. Simply inform your former client that you will no longer do business with them.
– Offer a referral. If appropriate, provide the customer with the name of a competitor who might be a better fit for them. This way, you can minimize the disruption to their operations and prevent ill will towards your company.
– Try to leave the door open. Even though you are firing the customer, it is essential to do it on the best terms possible. The business landscape can change rapidly, and leaving on good terms can keep your options open in the future.

Nipping the problem in the bud

As you weed out your problem customers, it is essential to look for patterns and identify any early warning signs. You might notice that businesses of a certain size or industry tend to cause more problems for your company, or that certain behaviors can predict account issues. By identifying these customers and providing better training and customer onboarding, you can preemptively avoid future problems.

Conclusion

While firing a customer can be an uncomfortable experience, it is often necessary for the growth and success of your business. By differentiating “good” and “bad” customers, contemplating alternatives, breaking the bad news gracefully, and preventing future issues, you can streamline your customer base, drive more revenue, and make life easier for your employees.