As 2021 comes to a close, businesses should be asking, “How do I decide which customers/clients/patients to fire?” (For convenience, I’ll call them “customers”.)
From time to time, every business should do some “housecleaning” and disengage from undesirable customers to make time and space available to add more desirable customers who are more profitable and more pleasant to serve. Being self-employed gives an owner some control over who to serve, improving the quality of life provided by the business.
The easiest answer for those firms who have team members is, “Ask your team. They’ll tell you.” They’ll be glad to tell you which customers make their lives miserable.
How do you rank clients as As, Bs, or Cs?
One hurdle that I think is important is whether the client refers business to you, provided you guide clients about how to refer or you have a referral system. Just expecting referrals without that guidance is unrealistic. If you do provide that guidance, no client should be ranked as an A who hasn’t referred business to your firm.
Here are some suggestions for a customer scorecard ranking of customers. I suggest ranking them with a high score of 5 to a low score of zero.
- Refers new customers to your business
- Is an emotional booster for your business
- Doesn’t complain without a good cause
- Gives constructive suggestions to improve the business in a supportive, friendly spirit
- Fees billed and collected are at standard rates or better. (Low score should be given even when the poor realization/profitability is the business’s fault.)
- Pays billings without dispute
- Pays billings in advance or quickly
- Responsive. Provides necessary information timely (score negative points when provided near or after a deadline.)
- Follows advice given
- Fits the business’s customer profile. An appropriate customer for the business’s areas of specialization or focus.
- Financially stable
- Doesn’t indulge in high-risk behavior
- Philosophically compatible
You could add the scores and divide them by 13 to get an average score for a ranking. 5 is an A, 4 is a B, 3 is a C, 2 is a D, and 1 or less is an F. Ds and Fs are obvious candidates for termination, and even Cs should probably be terminated.
I think any customer that has a score of 3 or less for three or more categories is a candidate for termination.
Dealbreakers would be any customer who is a chronic complainer, drags down the morale of your team, chisels you on your prices or fees, or increases stress in your business by being unresponsive or with high-risk behavior. If the customer is involved in illegal activities or insists that you do something is unethical, the customer should be immediately terminated. (No work should be done for the current year when last year’s fees still haven’t been paid.)
If a customer is involved in a high-risk area that you don’t believe you are capable of handling, you should hire someone who can handle it or refer the client to someone else.
Marketing expert Dan Kennedy says, “If you lose sleep thinking about a customer three nights in a row and you’re not sleeping with the customer, it’s probably time to let him or her go.”
Would you like support going through the process of evaluating and terminating customers? Please contact Michael Gray at firstname.lastname@example.org to schedule a complimentary initial consultation.