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Firing Customers

Some customers just aren't worth having. This is particularly true if you are a "lone wolf" self employed person, but it's often true even for larger firms. There can be any number of reasons why not having a particular customer is better than having them, but I'll list some of the more important reasons here:

The customer who buys too much

Am I crazy? Everybody should have such a "problem" customer, shouldn't they? No, not really. A customer who ties up all of your credit limit can prevent you from being able to sell to dozens of smaller customers. In the long term, those smaller customers may be much more important to you than that one big score.

It's also possible to get yourself in big trouble with big customers. I know someone who lost their home because their large customer suddenly folded, leaving him holding invoices they weren't going to pay. That was very, very sad. Your parents always told you not to bite off more than you can chew, didn't they?

Big customers can also tie up too much of your time, again preventing you from servicing other smaller clients. I have seen this too many times: a small business gets a juicy relationship with a big firm, and soon enough that firm is their only customer. Easy living ensues, until the day when the relationship ends, and the coasting small business now has nothing. A mad scramble to get more business sometimes succeeds, but often does not. The owner of a medium sized company once said to me "Somehow all those 'consultants' end up working for us". Most of them did so because they made mistakes like these.

The customer who sucks your soul dry

We've all been there. You have a customer you just don't like. Maybe they are too demanding, always nit-picking or complaining without justification. Maybe you have to go to their place of business to service them and it's too noisy or dirty or smells bad (I once had a customer with a dead rat in his office ceiling !). Maybe your customer is a loud mouthed bore or has bad breath or questionable morals. Whatever: you never feel good about anything you do with them or for them.

Dump them. This kind of customer ruins your day, and you know it affects everything else you do. They drain you, emotionally or physically or both, and that lessens your ability to provide good service for your other customers. Move on.

Too much of a stretch

This customer needs something that's just a little bit beyond the reach of your tallest "ladder". It's good money, but it's just a little bit above your expertise or would stress your production line just a little too much. So tempting, and of course we can't grow if we don't stretch now and then..

Each case is of course different. Sometimes you can grab a nice plum with just a little extra effort. But any time a job is beyond your present capabilities for whatever reason, step back and look at it critically. Forget any extra financial gain or future growth that might come from it and ask yourself the hard questions: Can I really do this? Is there a risk of getting sued here because of failure? How bad could this hurt me if it all goes wrong? If you don't feel good about the answers, don't do it. Don't do the "yabut" thing ("Yeah, there's some risk but the rewards..").

Ignore the "potential dance"

As an erstwhile software developer, I used to get this pitch all the time: "Help me write this application and we'll share the millions that will come from it". I called that a "potential dance". My answer was always the same: "No, you pay me now, and you can have all the profits for yourself". Few self employed people can afford to make this kind of deal. If the other person really has such a great idea, they should be able to attract investors who would pony up the money to pay you. What that person is really asking is for you to become an investor. Don't.

Although that can sometimes be the wrong decision. A long, long time ago, a certain Dr. Land offered my dad stock as payment for some equipment. My father quite reasonably demanded real money, and thus missed his opportunity to own a good chunk of Polaroid Corporation - which would have been worth quite a bit not too much later. But who knows which deals are the winners? My father didn't, and neither do you or I.

No spec work

Another tempting offer. You have very little coming in, but a company suggests that you provide some free "samples". Maybe you are a graphic designer, an ad agency, a software person a web designer: it could be a nice reference for you, right?

Can you imagine a lawyer or a doctor taking that bait? Right, they wouldn't, and you shouldn't either. I've done work for a lower price to get my foot in a door that wouldn't open otherwise, but not for free, and not for a whole lot lower. If your prices are realistic, and you have whatever other qualifications you need, you don't need to be someone's free apprentice. Stick to your guns and if they pass, so be it.

Pro bono is good for whom?

I have done pro bono work, but only where I strongly believed in the cause. For example, I have done free work for a psychologist who does interventions for people who have been abducted by religious cults. I did some free work for the Aids Action Committee way back when. However, you can only afford so much of this kind of thing. If you wouldn't reach in your pocket and hand the organization a hundred dollars in cash, you shouldn't be giving them a hundred dollars worth of whatever you sell. It's NOT cheaper, it doesn't cost you any less. It may even cost you more, because it takes only seconds to write a check, but providing product or service for free again takes away time from real customers who surely will be more important to you in the long run. Get rich first, and then give your money away where ever you want to. Be very wary of giving away anything else.

Firing

When you have to fire a customer or otherwise refuse their business, you don't have to be too apologetic about it. After all, the important thing is your survival. Their problems are their problems; you need to worry about your own. So be polite, explain why if you feel you need to,and be professional. Some customers are just not worth having.


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© Tony Lawrence







Sat Dec 8 21:20:47 2007: 3301   TonyLawrence

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I was reminded of this yet again today, because I did it myself just recently by extending more credit than I should have to a new customer. The total amount was a little more than $15,000.00 and although there was a nice little profit in there, I had to pay my costs before they paid me.. so because I did that, all month I've been very short on cash..

This wasn't a humongous mistake, but it wasn't real smart either. I should have at least demanded 50% up-front to cover more of my costs, and really I should have taken the whole thing in advance or just turned it down.

Shows me why I need to read my own pages now and then :-)



Sun Dec 9 05:34:27 2007: 3304   BigDumbDinosaur


Shows me why I need to read my own pages now and then :-)

Every one of us steps in it now and then. I've occasionally overextended myself because that apple higher up in the tree looked so good. Once that got me into a bit of financial trouble. Now I'm more cautious (and not just because I'm closing in on Social Security age). As long as you collected on the project don't kick yourself too hard. <Grin>

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