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Business Mentor Royston

Are ALL your clients worth keeping?

We tend to think that any paying customer is a customer worth having. However in my experience some customers are more trouble than they’re worth, and potentially end up costing you money every time you deal with them.

The Pareto principle or ’80:20 rule’ would suggest that 20 percent of your business comes from 80 percent of your customers, but this also means that 80 percent of your headaches will generally come from 20% of your customers and some of you would probably argue it’s nearer 90:10! Taking that a step further we may conclude that 50% of your problems come from 10% of your customers, so do you really want to be dealing with them?

Try making a list of the qualities you want in your ideal customers, this may include things like ‘they pay on time’, ‘they don’t endlessly ask for discounts’, they don’t endlessly complain or perhaps they’re just nice people you want to do business with!

Now, go through your customers and categorise them into four grades – A, B, C or D.

A-grade customers are your favourite kind of customer. They probably pay you on time, are pleasant to deal with, are happy to pay your quoted price, refer people to you, spend a reasonable amount with you and generally tick all the boxes. If you could clone a customer, this person would be the one you’d choose.

B-grade customers are still good customers, although they’re not quite perfect. They might be more price conscious, but they still pay on time and don’t give you a hard time.

C-grade customers give you minor headaches. They’re the type that haggle for a discount every time you deal with them or bring back goods frequently because they’ve changed their mind. They don’t take your advice and will tend to pay late and need regular chasing.

D-grade customers are those you wish you’d never encountered. They are the scene-causers, the ones who treat you and your staff like dirt or even those you suspect may be dishonest. They love complaining about anything and everything and they do it loudly! We all know them yeah?

The simple truth is that you don’t have to put up with D-grade customers, or maybe even C-grade customers. The bottom line is they tie up a lot of your time, the profit you may make out of them is likely to be small, and they create bad feeling and can upset and demoralise staff. Remember, one bad customer can ruin your day, and that has the knock-on effect of affecting the way you deal with your other customers and staff.

I’m not suggesting here that you physically throw these customers out of the door. The easiest way to get rid of them is to create some new rules to protect yourself….and stick to them. For example, you no longer discount or perhaps re-position that your expectation is that they pay on time. A great strategy is to put your prices up, they’ll either clear off or in more cases than you might think, will pay them and at that point the extra profit you’re making may justify keeping them on!

Politely communicate the changes you’ve made to all your customers. Some will abide by your new rules and may move to becoming better customers. Others will leave and you should expect that, it’s fine, let them go.

Once your D-grade (and perhaps C-grade) customers have been phased out, you can devote more time to nurturing your A-grade customers with the goal of getting them to buy more and/or asking for referrals. You can also invest in turning your B-grade customers into A’s!

Of course every business is different. Someone you might regard as an A-grade customer may be considered C-grade by someone else and vice versa. Don’t let guilt or sense of duty hold you back from letting go of poor customers, your running a business and think of it that they’re taking their business to a company that suits them better!

I appreciate this concept may be rather alien if not scary to many people but give it a go, you may be surprised. Go on, I dare you!