Get Rid of Non-Fit Clients —Morgan
February 2007
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SO YOU’VE trimmed your staff to the essential team and you’ve streamlined your workflow to be überefficient, but your profitability still leaves something to be desired. Next step: get rid of some customers. You heard me. As scary as that may seem, deep down you know it’s the right thing to do.
All customers are not equal and chances are that over the years you’ve accumulated some clients that, well, just are not good for your business…like the advertising agency, which pays 90 days after you invoice, whose rush jobs scream through the plant when they come in sporadically, bumping steady customers…and like the very, very nice and very, very small customer that prints its holiday cards with you once a year. It’s time to get rid of them.
Identifying Hidden Costs
Opportunity cost: In economics, opportunity cost, or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity). Consider that some of your customers may be keeping you from more profitable business. Even if you have excess capacity in the plant, think of how non-fit clients keep your customer service, estimating and sales teams from being efficient—and keep them from bringing in more profitable clients.
As a former consultant, when I reviewed customer lists in printing companies I would typically see that 25 percent to 40 percent of their customers were simply not a good financial fit. The accumulation of non-fit customers is not unusual; often you don’t know a prospective client’s potential or issues until after you’ve started working with them. Besides very slow pay or lack of volume, other reasons that a customer might not be a good fit could include that the company simply doesn’t buy your core competencies. Or maybe the client has the volume, but the profit margin is just too low.
With the fresh start of a new year, now is a good time to review your client list and evaluate your customer base to make sure that your company selects and focuses on clientele that are the best fit. Even if you decide not to get rid of any customers, it at least gives your establishment the opportunity to offer superior service and better scheduling to the more profitable clients.
Here are just a few tools you can use to evaluate your customers to determine which ones are the best fit for your company:
All customers are not equal and chances are that over the years you’ve accumulated some clients that, well, just are not good for your business…like the advertising agency, which pays 90 days after you invoice, whose rush jobs scream through the plant when they come in sporadically, bumping steady customers…and like the very, very nice and very, very small customer that prints its holiday cards with you once a year. It’s time to get rid of them.
Identifying Hidden Costs
Opportunity cost: In economics, opportunity cost, or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity). Consider that some of your customers may be keeping you from more profitable business. Even if you have excess capacity in the plant, think of how non-fit clients keep your customer service, estimating and sales teams from being efficient—and keep them from bringing in more profitable clients.
As a former consultant, when I reviewed customer lists in printing companies I would typically see that 25 percent to 40 percent of their customers were simply not a good financial fit. The accumulation of non-fit customers is not unusual; often you don’t know a prospective client’s potential or issues until after you’ve started working with them. Besides very slow pay or lack of volume, other reasons that a customer might not be a good fit could include that the company simply doesn’t buy your core competencies. Or maybe the client has the volume, but the profit margin is just too low.
With the fresh start of a new year, now is a good time to review your client list and evaluate your customer base to make sure that your company selects and focuses on clientele that are the best fit. Even if you decide not to get rid of any customers, it at least gives your establishment the opportunity to offer superior service and better scheduling to the more profitable clients.
Here are just a few tools you can use to evaluate your customers to determine which ones are the best fit for your company:
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