We’re going to go out of business…but we don’t care if we do:
This is what three partners said to each other when they went through their entire customer base and decided who to fire. It was the end of their fiscal year and they were really tired of doing business with some of their customers who were costing them money. These customers:
- Always complained
- Always wanted a discount
- Didn’t pay their bills without collection calls or were notoriously 60 to 90 days or more late
- Were rude to their employees
- In one case, the building that their employees went to was unsafe.
Once they got through making the list, they were firing about 10% of their customers.
This made them a little nervous but they were resolved to do it.
They fired them with “ruthless compassion.”
What does this mean?
They met with each customer they were firing and explained that they were not going to do their projects the following year. They also gave these fired customers a list of potential companies who could do their projects.
What happened?
To their surprise, profits actually increased the following year. They realized that they weren’t spending time with unprofitable customers and they could spend time with profitable customers.
As a result, at the end of every year, they review their customer list and decide who, if anyone, they are going to fire. The list was never as long as it was the first year.
The thing that really surprised them was around the third year, several of the fired customers called asking if they could come back. The owners said yes as long as they didn’t complain, paid their bills on time, etc. These customers realized how well this company took care of them and didn’t find another one who performed as well as they did.
Never be afraid to fire unprofitable customers. It doesn’t make sense to keep a customer that you pay to do their projects (their net profit per hour is negative)
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