Customer from Hell? Don't be afraid to fire them
Every small business relies on its clients, perhaps now more than ever due to the still rather uncertain condition of the economy. But some customers can be more trouble than they’re worth. Should they be fired?
"It’s certainly something that I encourage the companies I work with to do," said business strategist Jim Stewart of ProfitPATH, a small business consultancy in Toronto. "I’ve done it myself. But you have to be careful how you do it."
Stewart says it’s an example of the so-called Pareto Principle, also known as the 80 – 20 rule, or ‘the law of the vital few’. The principle suggests that 20 per cent of your client base accounts for 80 per cent of your revenue, or in this case, 20 per cent of your clients may be responsible for 80 percent of your headaches!
Not worth the effort
"There can be all kinds of reasons for letting customers go," explains Stewart. "They’re the ones that always want a break on price, or they call on short notice with requests. They can be abusive to your staff. Or they’re the ones that always want something that isn’t quite in your product or service range of expertise."
An unreasonable demand was the reason Edmonton-based entrepreneur John Vreugdenhil fired a client not long ago. His company, Lonely Cars Vehicle Storage, houses cars for clients who may be taking a temporary work assignment overseas, or perhaps putting away their ‘toy’ for the winter.
"We had a customer who emailed us her return date and said she’d like the car delivered that day. We replied and asked where should we deliver it — her home, her office, the airport — and will someone be there?"
Vreugdenhil waited patiently for a reply that didn’t come. Finally, with the customer’s arrival just 24 hours away, he e-mailed to say he’d deliver the car back to where it had been picked up, at her office. It seemed like a safe guess at the time. Wrong!
"We got an email back expressing extreme displeasure," he says. "She demanded the car be at the airport instead. So we bent over backwards and changed our schedule and delivered it. And when we got there, her mother told us that’s the way she is, she does that with a lot of people."
Vreugdenhil says as eager as he is for business, he worries that such unreasonable behaviour could signal the type of client that would resort to some sort of legal action, or would slander his company in the marketplace. "All of our staff now knows that if a request comes in for storage from that person, send it up the management chain," he says. "We’ll turn her away."
A website builder in the Atlantic Provinces also had a story to tell me, but wanted to speak off-the-record, since he is actually doing business again with the bad client he fired. What caused the original break-up?
"He spent a good five minutes swearing at me on the phone," says this technology expert. "And it wasn’t a problem I’d caused. So I told him ‘I’m not here for you to basically take out anger or frustration. If you want to have a polite conversation, I’m available. But from here on out, I’m not interested working with you anymore.’ And I hung up."
The client called back a few minutes later, full of apology, but the answer didn’t change. "I said no thanks, find somebody else to do your work."
So how did this client win back the services he clearly needed? "Over a few beers," says the website builder, chuckling.
But in reality, it wasn’t the beer that made the difference. It was the client’s promise to pay his bills up front, and agree that if at any point abusive language was used, the relationship would be over again, whether the work had been completed or not. "And he put it in writing," says the entrepreneur.
Strategist Jim Stewart recommends reviewing your client list once a year, and classifying them, in order to determine which ones should be dropped.
"The question I usually ask clients is this: you have a certain amount of time every day, every week, every month, every year. Do you want to spend that time working on difficult clients that are essentially low margin? You can’t just look at the profit margin on the product or service you provide — you have to look at the time you put in trying to react to their needs, to collect payment, to manage the relationship. Or do you want to take the equivalent amount of time and invest it in a client who understands and appreciates the value of what you offer?"
It takes guts to sever a relationship. Once upon a time one of my guilty pleasures was reading advice columnist Ann Landers, and as I recall she had a key question for people considering leaving a marriage: "Are you better off with or without them?" That question definitely applies to business relationships too, particularly if you want your company and revenue to grow.