Firing Your Customer: Why it's Really Not Crazy

How to Justify Firing a Customer

Don’t be fooled. We’re not advocating you go out actively searching for as many customers to fire as possible. It’s always in your best interest to try and make a relationship work from the start (and as you gain experience, you’ll become good at spotting the warning signs of a troublesome customer that’s best to avoid).

But there are circumstances where it proves impossible for both parties to mutually benefit from a business relationship. In these instances, it’s best to sever ties.

Here are reasons you may consider firing a customer:

• Not living up to their end of the bargain.
  Does your customer constantly reschedule or cancel meetings at the last minute? Are they always lateon deadlines, causing you to chase them? If so, they’re occupying valuable time you could be spendingwith other customers.
• Consuming too much time.
  Does your estimating department spend more time quoting and re-quoting jobs for a customer than yourproduction team spends producing them? Some customers with ‘penny-pinching’ reputations are notworth the hassle.
• Causing excessive or unnecessary rework.
  You’re not perfect and there will certainly be times a job isn’t done right the first time. Occasional reworkis normal. However, when a customer has unrealistically high expectations and is constantly asking for ajob to be redone, this creates a serious drain on resources (staff time, equipment usage and materials)and eats into your bottom line.
• Not paying on time (or at all).
  Nobody should have to deal with a customer who’s consistently late in payment or forces you to engagea collections agency. If this is happening, it’s time to cut ties and move on.

Cost of a Bad Customer

Even if a customer isn’t directly eating into your profits (through rework or failure to pay), there are indirect considerations that may be harming your company.

• Opportunity cost.
  Could the time your sales team spends with a troublesome customer be put to better use finding newcustomers or working with more profitable customers?
• Employee morale.
  Some of your employees may become so frustrated by a bad customer that it harms the work environment.  Negative repercussions may include loss of motivation, under performance or resignation.

Considerations Before Firing a Customer

Before letting a customer go, you’ll want to make sure you are adequately prepared to replace their business. It’s a good idea to do some forecasting. Look at your existing customer base and sales projections and ask yourself these three questions:

1. Are you expecting any additional upcoming work from some of your existing customers?
2. Are some of your smaller customers growing with the potential to turn into a bigger and more profitable account?
3. Are you on the verge of acquiring any new accounts in the near-term?

If you answered ‘yes’ to one or more of the questions above, you may be well positioned to let that troublesome customer go.

However, if you are hesitant to move on from your customer, be mindful that alternative options are available to you.