Possibilities Unlimited

Divorcing Clients – When It’s Time to Say Goodbye

“The secret to winning is constant, consistent management.”
– Tom Landry, Legendary NFL Football Coach

 

In a recent sales training session, we started talking about the issue of difficult customers and the strain they place on a business. One of the participants stated that his high-maintenance clients took up about 80% of his time but contributed only 20% of his revenue. That’s the old 80/20 rule in reverse. He was frustrated that his high-maintenance clients kept him from doing his job but was fearful about losing them.

I believe that especially in these tough times, you need a client base that will yield as much profit as possible and not be a drain on company resources. Here are some actions to help you develop a desirable client base:

The first step is to identify who your ideal clients are. Make a list of at least ten characteristics of an ideal client – consistent payer, a certain company size, a likelihood of repeat business, a minimum order amount – whatever makes sense for your company. Next, go through your existing client base and see what percentage of your customers fit this profile. What percentage of your sales do they represent? What percentage of profit? Then look at your clients who fall outside this profile. What percentage of your time do they take up? What percentage of your profit do they represent? Year end is a great time to do this kind of analysis. You can always institute new terms of agreement with your clients at the beginning of the year. Do you need to rewrite and enforce payment terms? Do you need to make your contracts more stringent as to what types of customer service you provide?Once you know what kind of client is best for your company, work hard to find more of those kinds of clients. Where do they network? What kinds of associations do they belong to? Who are they buying from now, and what can you offer that they might not already be getting?Don’t waste time pursuing prospects that don’t fit your definition of a good client. Sure they may pay a little, but in the long run, you stand the chance of losing out on getting good clients that pay regularly and are nice to deal with. I firmly believe there are still a lot of possibilities for doing business with good people in this marketplace.Finally, what to do about those problem clients? Be professional and polite as you show them the door. If you have clearly stated your conditions for working together, and they have repeatedly abused the privilege, then explain that you can no longer service their needs.

It makes no sense to be spending 80% of your time on the worst 20% of your client base. Let your competitors put up with high-maintenance, non-paying clients. You go after the cream of the crop. You will soon find that this strategy frees you up to be more productive and work with people who pay. And that’s a winning strategy in any economy.


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Possibilities Unlimited Inc. is more than a business coaching firm. We believe in an integrated approach to business and life. Your business should enrich your life! If you've lost touch with why you went into business in the first place, we can show you how to create new possibilities for your business and rekindle your entrepreneurial spirit.

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