Dear Client from Hell: “You’re Fired!”

Save Your Resources for the Clients You Want to Keep

All Customers Are Not Created Equal…

Most small business owners have never fired a customer. They’re usually more intent on getting and keeping customers… not getting rid of them. And we’ve learned that the “customer is always right” and we should do whatever it takes to hang onto them regardless of their behavior. This couldn’t be further from the truth. Rather, it is your obligation and responsibility to “fire” customers you’d be better off without.

When is it Okay to Fire a Customer?

Answer: simply put, whenever he / she behaves badly. And since we all know that past behavior is the best predictor of future behavior you should do it sooner rather than later. But the good news is that it’s generally 1 percent of your clients that are causing 95percent of the pain.

And although there are a myriad of possible grounds – objective and subjective – you really need just one major reason.

You should consider firing your customer if they…

1. Regularly make outrageous demands

Complain unnecessarily; change requirements mid-stream; use up precious time on frivolous matters and stress over minute details.

2. Rude to you and / or your staff

No one, not even a customer, should be allowed to insult your employees; use demeaning language; or belittle anyone in your business.

3. Unresponsive or No-Shows…

This is particularly important for service providers who depend upon their clients to provide critical information; timely feedback and/or review or show up for scheduled appointments on time, or at all.

We recently “fired” a new client, Larry Jones, the owner and president of a small, local telecommunications company, for this reason alone.

Larry was not the typical awful customer. He was pleasant. He paid our invoices – sometimes a little late, but not overly. He was able to give and receive constructive feedback in a positive way. He never called to complain about anything. In fact, he never called, or emailed, at all… not even when he promised to do so. As a matter of fact, Larry regularly postponed or cancelled scheduled meetings and conference calls at the last minute; “forgot” to return phone calls and emails until sometime after the fifth message and consistently failed to send us promised information.

After dealing with this for several months, it became increasingly clear that Larry’s behavior was not going to change and therefore, we could not provide him the help he needed and deserved. We moved on and he understood completely and vowed to call us again if/when he got “it” together.

4. Consistently Slow or Non-Payers

These are the customers who plan on paying you late – for as long as they can get by with it – or deliberately ignore repeated invoices. They are not the folks who are experiencing a financial crisis (we advise you to continue to work with these people). It doesn’t matter how much business someone does with you on paper, if you don’t get paid or have to waste time and money badgering them.

5. Prove unprofitable

When the costs associated with serving a customer are more than the profits you receive, it’s time to fire them. Additionally, if you’re not spending enough time with important customers because of excessive hand holding; rework and the like, you’re likely to keep them and lose valuable clients!

This concept is illustrated perfectly using Pareto’s 80 / 20 rule.

How the 80 / 20 Rule Can Help You

The Pareto Principle, commonly known as the 80 / 20 rule, is one of the most effective tools in helping manage businesses effectively. It is a “formula” that applies to almost anything and correctly identifies that 20 percent (or the minority) of anything is vital and as much as 80percent (or the majority) is trivial.

For example, in most businesses 80 percent of the profits come from 20 percent of its customers. Alternatively 20 percent of customers cause 80 percent of the problems. It works both ways.

Use this principle is as a reminder. Focus on the 20 percent of customers and tasks that really matter. If you have a customer database there is no better reason than this for spending some time reviewing and analyzing what you find. If not, it’s time to begin gathering as much information as possible about your customers.

First, identify the customers who are contributing 80 percent of your revenues and profits. Then look for other things, such as the 20 percent of your customers who account for 80 percent of unnecessary complaints or rework. Once identified, begin each day with a commitment to focus on who (and what) is most important and refuse to let others sap your time and energy.

However, use this rule wisely. Don’t just work smart, work smart on the right things.

Can You Turn a Bad Customer into a Good One?

Sometimes… There are instances when a difficult customer may be behaving poorly because of something that happened in the past – usually a situation that was not satisfactorily resolved.

In this case it may be possible to make things better and end up with a happy, profitable customer. If your customer is receptive, ask them what you can do to “make things right.” Then be prepared to listen with an open mind and look for ways to uncover a workable solution. You’d be surprised how much you can learn from less-than-happy clients and sometimes a problem customer turns around and become a valued one.

In any event it’s a good idea to ask yourself some basic “what if” questions first. For example, what if there is a new system (like automatic payments) I can use to ensure that my customers always pay on time? Or, what if I add a FAQ page and / or offer an incentive for online orders to ease lengthy phone conversations?

You may be surprised at what you’ll come up with. For example, we recently had a client, Jane, who owned a small company that provided and maintained plants in office buildings. She complained about wasting considerable time answering questions from unqualified prospects and low value customers who called in. Jane also spent a great deal of time driving to sites and meeting with prospects. The solution? We developed an inexpensive, but impressive web site, which contained a robust FAQ page; pricing information; pictures of plants and arrangements, etc. She was then able to refer her callers and prospects directly to the site where they could obtain the information they needed, thereby saving her considerable time and money.

However, if all this fails, it’s time to move on. Politely explain that your company cannot provide the level of service they need – without giving too many reasons, which might make a bad situation worse.

The First Time is Always the Hardest…

After struggling for a year to jump start my small business consultancy, Strategic Marketing Advisors, I was understandably thrilled to accept a large retainer from a new client, George Smith, the owner of a creative advertising company.

George hired us after our local chapter of SCORE (Service Corps of Retired Executives) recommended to conduct an overall business assessment – that is, review, analyze and provide recommendations for improving and streamlining processes, marketing, systems, etc.

After a month-long “courting” process (several face-to-face meetings and dozens of emails and phone conversations) we signed contracts and started to work. And even when numerous “red flags” were raised (e.g. George refused to accept constructive feedback; changed his requirements – which he could rarely articulate – on a daily basis; kept one, or both, of us on the phone for hours; constantly questioned our “expertise,” and paid our invoices late after quibbling about every charge) my partner and I felt we could figure out a way to make it work.

We were wrong. As all Guerrilla marketers know, small businesses should measure success by profits, not sales. Because George demanded excessive hand-holding and reassuring we wasted many hours on senseless rework, unnecessary meetings and repeated cajoling – making him an unprofitable client (although he was paying us by the hour, he complained incessantly every time we charged him for lengthy phone calls and the like).

And although this was our main consideration, we acknowledged that his behavior made us both feel stressed, confused and frustrated and that we weren’t able to devote as much time to other, nicer, clients. So, after a few months, we fired George.

And as a result of this experience, we redefined what we wanted in a customer and continue to use it as a model for getting (and keeping) new clients. In no time we replaced George with three smaller clients… ones who were pleasant, paid on time and appreciated the superior services we provided.

How Did We Fire George?

Carefully. Although by that point we were ready to “vent” we understood that it was our responsibility to end our working relationship amicably. After all, although this was a tough decision for us and it was also a very unpleasant experience for George – no one likes to be singled out for “scolding.” So although we wanted to move on, we knew we had to be sensitive to his feelings and make certain that we didn’t make him feel embarrassed, defensive or unimportant.

Additionally we wanted to minimize any potential damage that George could do to our new business by ensuring that he was treated with the utmost respect throughout the process.

That’s why we did not do the following:

1. Shout, intimidate or yell

2. Charge him twice as much as every other customer

3. Send him a terse (remind him that we’re in business to make a profit, not deal with impossible people like him) and impersonal form letter

Tempting as it may be, techniques like these will only make things worse. Even if our anger was justified, this was not.

We chose instead to do the following:

1. Sat him down and politely discussed our professional differences (e.g. working style, project goals, scope of work, etc.) only. We did not accuse, blame or insult, while making it perfectly clear that we no longer thought it was either of our company’s best interest to continue working together.

2. Offered to finish up the work as a logical end point; agreed to help transition with a replacement and even offered recommendations of companies that he might consider using.

This conversation was summarized by a follow-up email that we sent a day or two later.

What Was George’s Reaction?

At first he was very apologetic… he said that he understood he was difficult to work with and thanked us for our time, patience and expertise. However, after he had more time to think about it, he became understandable more offended. George knew that he was a significant client of ours and therefore, felt he could take advantage of the situation. He forgot that although he was paying us money, he was not contributing to our profits (and obviously didn’t calculate the opportunity costs involved in serving him).

It was a tough call but the right decision. And we learned this important lesson: If you offer something of real value, you do not have to offer it to every single person who is willing to pay you.

You may remember the two rules that were etched in granite outside of Stew Leonard’s business:

Rule #1 – The customer is always right.

Rule #2 – If the customer is ever wrong, reread

Although in most instances, I completely agree with these… I just wished he had said it like this:

Rule #1– Pleasant and profitable customers are always right.

Rule #2 – If a pleasant and profitable customer is ever wrong, reread Rule #1.

Rule #3 – If a customer is neither pleasant nor profitable, fire them.