Sales: When to Fire a Customer?

Alpha Power, one of your best customers, regularly buys from you. They order pieces and parts yet seldom yield a larger, more profitable consultative opportunity, choosing instead to call others for these services. They call frequently, requiring lots of assistance from your inside sales and shipping people, seeming to have many issues frequently requiring attention. They pay late, but they always pay eventually. They buy at a discount and you earn less profit than you should for an account of their size. You call on them regularly, socialize with their managers over lunch and enjoy a good reputation throughout their firm. You may feel this is one of your key accounts. Does this scenario sound familiar? Or… does it sound all too familiar?

Beta Scientific is also one of your regular customers. Your business here is quite different than at Alpha. Here, you provide solutions based upon your product mix and your years of experience. Your profit margins are considerably higher and their company pays their invoices promptly. Your communications with their personnel are typically over the phone or via email. You make quarterly calls on key personnel and may occasionally take a key official to lunch. They operate in a very professional manner causing your inside salespeople, customer service staff and shipping department few problems. Since you are in the business of providing solutions, you often miss their storeroom purchases since that competitor is often on-site weekly, checking their bins for low-margin, price-sensitive replacement parts. You have become an important resource to many key players in this company and they reward you with referrals and consistent opportunities to serve them.

Many of us will find that we have far more customers like Alpha Power while actually needing to cultivate more customers like Beta Scientific. How does this happen? As human beings, we tend to get comfortable. Many salespeople have told me that they simply don’t have the necessary time to locate and develop more customers like Beta. "It is the Alpha’s that pay the bills" they often say. That may appear true on the surface, but underneath, the Alpha-types are actually putting a stranglehold on both your sales and earnings.

I have found it wise to review my accounts at regular intervals, determining where to invest my precious resources. How much time do I spend and where am I looking for additional customers? What I have learned is that we often need far fewer Alpha's and considerably more Beta's. Our sales and profit growth is going to come from establishing more accounts like Beta Scientific and weaning ourselves away from accounts like Alpha Power. How can we accomplish this?

I have several ex-customers and ex-prospective accounts that I have chosen not to do business with. That’s right… I chose to fire them! While the reasons vary, the common thread is that pursuing their business is not a wise use of my time or company resources. The net profit gained from my selling investments will not justify pursuing or keeping these customers. I chose to allow a competitor to service them. If my competitors are consumed with servicing these Alpha-type accounts, I have more opportunities and less competition at the more lucrative Betas. It really is that simple.

Use your time wisely, invest your resources carefully and carefully choose customers that you can afford to deal with in a profitable manner. This is truly the selling scenario where everyone wins.

...........................
Daniel Sitter
Author
LearningForProfit

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Comments

[Shane]

Daniel,

This is one of the best posts I've read in a while. "Alpha Power" companies suck the life out your sales team. And I have a friend who's dealing with one right now.

My advice to him and what I do myself is, rather than burning the bridge and "firing" them, raise your prices.

Raising the price makes it worthwhile if they stick around. And if they leave (most likely), they sometimes come back because no one else wants to deal with them either.

And if they leave and don't come back ... well that's fine too.

[Daniel Sitter]

Thanks Shane. I really appreciate your commentary. I love your verbage "suck the life out your sales team" as that is truly what happens.

Raising their prices... great idea!

[Rick]

I second that! After the Alpha Companies "burn all of their bridges" they will be back. If you treated them well and fired them in a professional and creative way, they will be calling on you again.

[Daniel Sitter]

Valid point Rick. Hopefully, if you decide to accept them, they will become a better customer the second time around.

[Mike Maddaloni]

I completely agree! Twice I have had the gut feel that I should fire a client for reasons in line with what you posted. However, as they were also small businesses and people who worked with them were people I knew, I hung on. SO what ended up happening? They fired me! Of course I was angry at first, but then I realized that as much as I aim to serve my clients, I need to remember to serve myself and my business.

mp/m

[Daniel Sitter]

Agreed Mike. You have to "mind the store" if you want to have a healthy business in place to serve all of your customers.