Is it time to fire some of your customers?

Every business does it. They declare from on high that their unique point of difference is customer service and that they go the extra mile. The big question is, should they?

There is a commonly held principal that most businesses spend 80% of their time on the things that make a 20% difference to their business and 20% on the things that have an 80% impact on their business. Yet every day they get up and go to work without stopping to reflect on whether the things that they are sweating over are worth the sweat.

Take for example a promotions business that seeks to provide unique solutions for every possible business that agrees to meet with them. They aim is to get an order, no matter how small or what potential the customer has to become a long term client. The efforts made to provide a wow moment for a smaller or “one of” customer, is no less onerous than that done to gain a bigger or potentially more consistent long term client.

The smaller customer sees each dollar as a significant cost and as such is more likely to scrutinize every nuance of the proposal. The larger business sees the promotional products as an investment to promote their main game. The dollars are less impactful.

On placing an order, the larger business has the volume to be important to the manufacturer and as such is more likely to be given preferential treatment in both costing and delivery times. Even if the customer is smaller, but is a regular, the manufacturer will prioritise or value the relationship ahead of new orders of small size. On the other hand, the smaller new customer will have a smaller order and as such be placed behind the manufacturers’ orders that give them greater volume or consistency.

On pacing their orders through the promotional company, the larger business goes on with its life and seeks for the delivery to just happen. The smaller new customer calls each week, adjusting art because the colour won’t match the new business cards or reassessing quantities as their promotion grows near. Never realizing that each change will further delay their order.

The end result is the staff spend a disproportionate amount of their time focusing on fixing problems on an order that does not impact the business significantly.

By no means do I mean to suggest that smaller clients are not worth having. The intent is to suggest there is a balance and that the effort to profit ratio needs to be considered as well as the contribution to longevity versus volume. A good regular small customer is better that an irregular large one, but a large consistent client is the best of them all.

As an exercise, if you sat and wrote down your top 10 customers on a sheet of paper. Next to each of their names list their contribution to your bottom line, or the volume of orders, or whatever is an appropriate measure for your business. Then do the same with your bottom 10 customers. On completing the list, ask yourself, “If I drew a line through the bottom ten customers, how much impact would it have on my business?” Ask also, if the time my business spends on the bottom ten were used to:-

A)   Increase support for the top ten. Would they be happier and would they buy more?

Or

B)    seek to find new customers that had the potential to be in the top ten. Would my time be better spent?

If your answer is Yes to either of these questions, perhaps it is time to fire some of your customers.

Article written by David Gregory – CEO of the Small Business Mentoring Service www.sbms.org.au , an organisation that has supported thousands of small businesses for over 25 years. SBMS has over 140 Mentors in Victoria and NSW. He is also the Founder and CEO of The Small Business Institute. www.tsbi.com.au