Businesses often live by the mantra: “The customer is always right”. But is this true? For business to business relationships, smart managers understand that sometimes, the customer is not right for their business. Sometimes you need to fire your customer.
Customer evaluation should be an ongoing process, but “clearing the decks” for the New Year is an opportunity to review your customer base and see if you need fire your worst customer.
Here are a few questions to ask yourself:
- What is our gross income for each customer?
- What are our net profits and net profit percentage for each customer and how do they compare to other customers?
- How much time and effort are we spending on each customer and are we spending a disproportionate time on them compared to gross income and net profits?
- Do we have any customers who are disruptive to the business and/or depressing to company morale? (The account that no one really wants to work with - constant changes to orders, unreasonable deadline demands, etc.)
- What is our potential to get increased business from this customer?
You can use the answers to these questions to grade your customers:
F – Fire immediately
C – Keep, but if you can’t upgrade their contributions, you need to replace them (Your small accounts and new customers may start here if they are good customers, but not a lot of revenue to justify the costs. But be careful that you don’t drop an account that has potential growth.)
B – Good performers; but how can you take them to the next level?
A – Winners. Profile why they are winners and send your sales force out to find more like them.
Grading your customers can help you stay on top of who is good for your business and who is not. For the non-performers, consider making them someone else’s burden and focus your attention on finding winners.