Remember when we used to charge home from school and proudly show mom and dad our report card. Grinning from ear to ear you would wait to hear their excitement over the A’s and B’s. Think of the sense of accomplishment and pride.
Do you apply the same report card to your business? Could you hold up your book of accounts and be proud of the A’s and B’s or would we find a large number of C’s, D’s and maybe some F’s.
In the school setting you would try to work harder and earn extra credit to raise the low grade, can you do that with your business? I propose that you apply the college system to your lower graded customers. Drop the class , cut your losses, fire your lower graded customer and spend your time on the A’s and B’s.
We all know that is harder to gain new customers than to retain current customers.
So how can I say you should fire your customers? The question is which of your current customers? Do they match the vision and mission of your company at this time? Using Pareto’s law of 80/20 we know that 80 % of your sales are concentrated in 20% of your account base. What will these customers look like, how will I know who to fire?
An example of an A graded customer is someone who pays their bills on time, is pleasant to deal with, is happy to pay your marked prices, sends their friends to do business with you and spends a reasonable amount of money with you each year.
Your B grade customers aren’t quite the perfect or model customers, but are still worth having. They might be a little more price conscious, yet still pay on time every time.
Your C grade customers would probably be the type who would return goods for a refund just because they changed their mind, would haggle for as big a discount and they could get every time, would not listen to your advice, and could have past due invoices.
The D’s are the group you never wished you had. They are creating a scene in your place of business. They treat you and your team like dirt, always complaining about your price and never are satisfied with the products or service. These customers are always late payers and cost you time and money in collection and finance charges.
How to move away from your less desirable customers?
My advise is to deal with customers who treat you as you wish to be treated and respected. Don’t put up with customers who don’t pay their bills, don’t treat you well, and constantly hassle you on price. In addition customers will generally refer similar types of people to you, that is the last thing that you want to happen.
To move away from your less desirable customers, make it hard to do business with you. Set solid discount structures, that will benefit your best accounts. Shorten credit terms or require prepayment for the cronic late paying accounts and freeze their accounts for non-payment. Change how they contact you, they no longer have a dedicated customer service rep or email contact. Reserve higher levels of service for the accounts that you want!
You will become more profitable and your team can now focus on solid higher margin, more rewarding accounts.
Lastly let you’re A and B accounts know that you can now devote far more time to taking care of their needs, more time and energy to give them better service and of course, to ask them for several referrals.
