Back in early July, there was a brouhaha over Sprint's (NYSE: S) decision to terminate roughly 1,000 subscribers because of persistent calls to customer service (the average was about 40 to 50 calls per month).
But isn't the customer king?
Maybe so, but there are some customers that can wreak havoc on your business. For example, there always seems to be some people who pay late (or not at all). At the same time, they keep demanding more services and changes. Such customers can eat up lots of resources and drag down the performance of your business.
True, with some customers it might be smart to put up with their bad behavior, even if you must take a loss on their business. This can be the case when you want to land a marquee name. In this situation, a troublesome customer can be worth the price if they provide a boost to your credibility and a reference for future business.
But this is the exception. Basically, to run a profitable business, it's critical to be rigorous on the return on each customer. Simply put, there are some customers that are not worth it.
Perhaps the best way to deal with this is to screen potential customers. Although, this is not easy -- and does take some experience (each industry has its own nuances). Yet, it's common for business owners to ignore obvious warning signs because they have a hard time turning down customers.
Also, if you are extending credit, you should have a credit application. This means actually checking credit information, job information, bank information, and so on.
To get some more perspective on all this, I recently talked to Michelle Dunn, who is a recovering bill collector (more than 20 years in the business) and the author of books like Ultimate Credit and Collections Handbook.
According to her, it's smart to -- once a year -- spend time finding customers to fire.
She says: "When I work with business owners, I tell them that each year when they 'fire' their top 5 or top 10 'trouble' customers, a good way to fire them is to tell them that since you cannot provide the service that they need, it will be better if they go somewhere else. This way, you are not burning any bridges and you are being honest without going into detail about how this customer may drain your time, and cause you stress with their troubles."
Or, another approach is to increase your fees. This is likely to spur the customer to go elsewhere.
No doubt, all this sounds brutal. But then again, bad customers can be frustrating -- making life difficult for your employees, wasting time, and taking away from your bottom line. In fact, firing a customer can be extremely helpful for your business.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.











Reader Comments (Page 1 of 2)
8-11-2007 @ 1:34PM
Ralph said...
Amen! As a retail business owner I have watched customers morph this "customer service" ideal into expectations of free service and products, outrageous demands, and even abusive language and behavior. I now treat every customer with the same level of respect they decide to bring through my doors.
8-11-2007 @ 7:19PM
RR-AR said...
I concur with Sprint's decision to terminate contracts. It makes good business sense. However, when customers decide to terminate agreements with cell phone companies, there's an early termination fee plus a now useless phone that lost value quicker than a used car. This dichotomy favors big business. If taken further (and eventually we may see much more of this), this will eventually lead to this type of contract: "Give us your money, and don't bother us."
This inequity needs to be addressed soon.
8-11-2007 @ 9:30PM
matt said...
When I read the Nextel story, I thought that the company I work for was going to be dumped, since we complained a lot with no satisfaction. We use about 12 Nextel phones with the push-to-talk feature, but there are usually two that are constantly out-of-service for technical reasons. Nextel takes them in for repair (we send them to a Motorola repair depot) and they come back unfixed, a month or more later.
Of course Nextel continues to charge us the monthly fee whether or not the phone is working, and they can take over two hours to respond at customer service (I've had them on my speakerphone and keep getting put on hold by a different person or department). The boss just bought two more phones with service and they're OK and he continues to pay for the bad ones...just a cost of doing business. We no longer bother with customer service, and plan to move to a different carrier with the push-to-talk when that becomes available, but we lose about a grand a year for service we don't get. I even filed a complaint at the FCC; people moved a little faster for a while, but it's back to mediocrity.
8-13-2007 @ 6:56AM
Frank said...
Congratulations to the last 2 commentors, they have proven the author's point...."I can agree with them, but take some time to whine about my own special perceived slight"...If you have a problem with product or service, go elsewhere. It will be better for you and night convince companies to improve their offerings.
8-13-2007 @ 7:00AM
Christy said...
I totally agree with the concept and for about 15 years I was horrified by the idea... to fire a client?? How could you? Well, finally, when I was well established and respected, I started doing just that out of frustration... after the first one it gets easier! I never gave them a reason to blame me, just as the article says, you always leave it open as if you just "can't provide the service they need". In my case it was time... the length of time it took to provide the service that they complained about. So I posted notices that "quality work takes time, your patience is appreciated". And that set the stage. Once I got started, I was on a roll though. I actually had a mental list... people who complained about everything, people who never kept appointments, people who wrote bad checks, or were always late...etc. I have become so busy with locked-in standing appointments by clients that respect and appreciate me, that I don't have to deal with the others at all. They are all gone (except one who is coming in today... glad I read this article to remind me I don't have to "put up with" her shenanigans). And my work days run much smoother, everyone's basically happy now... and business is good.
8-13-2007 @ 7:13AM
AF said...
As a consumer of many decades, I understand the concept of DUMPING 'troublesome' customers. I understand checking credit, job history, etc. But I will tell you all something else I understand completely. There are many instances, and the number is growing, of consumers getting bad credit with specific so-called service and/or product providers because American consumers are getting more and more 'disenchanted' with paying premium prices for mediocre to poor services and products, and the assumption on the part of the service/product providers that we will put up with it, pay for it, and there is nothing we can do about it. And, rightfully so, since they obviously have no intention of fixing their poor service/products, and the government doesn't care, so long as they get their money. So, on that note, your article is just another example of companies taking our money, and acting as though they are doing US a favor by doing so. BAD BUSINESS. So, DUMP AWAY, but it will come back to haunt you. The American consumer is getting mad as hell, and the day will come when they will not take it, anymore.
8-13-2007 @ 8:21AM
smc said...
I think that this article is referring, not to customers with legitimate complaints and expectations, but to ones who expect you not only to jump through hoops but provide those hoops at no cost to them! I was in business for 7 years for myself, and those 3 customers who I had to drop gave me so much grief I would honestly dread seeing their faces come through the door. I was able to tactfully but firmly let them know that I would no longer be accepting their appointments, and as the article suggested, that I could not meet their needs. Those "missing" customers just opened up schedule slots for people who remembered that my business was not created for them to have an abusee!
8-13-2007 @ 8:26AM
duttymonk said...
Sprint is not so great to customers either. I bought a phone gor my fiance and myself and told sprint theat we had 2 weeks left on our old plan and we were going to let it run out. Two weeks later, we received a bill for $585 dollars and we didn't even take the phones out of the box. I explained to them that we didn't even use the phone yet and Sprint knew that their store reps stole our service and did nothing about it. They sent us to collections and we never used the service. I had to pay the $585 and immediately cancelled their service.
8-13-2007 @ 8:49AM
Vikki said...
Amen to the value of learning the difference between unhappy customers and "bad" customers" and not being afraid to send them elsewhere! We too own a small retail service business and it was only after my husband had a heart attack at the age of 50 that we learned how draining some of our customers were and realized we didn't need to make everyone happy, if fact we can't. That was 8 years ago and the joy of going to work returned after weeding out those customers who had no patience , lacked a kind heart and lacked appreciation for the quality of work and the prices we had to charge to provide it. We can are accountable to our "unhappy customers" as we drop the ball on occasion like everyone else. The "bad" customers share in common the same traits and have no idea how they contribute to getting dumped, probably by many businesses. Their expectations are all about them, they want to pay the least and get the best, they don't complain nicely, they use our knowledge and then price shop elsewhere, they expect immediate gratification and an employee and truck available just for them the minute they call.
I am also a consumer and although frustrated at times with larger companies it amazes me how I recieve acceptable service most of the time when I go out of my way to be kind and humorous. Even with Nextel, which our company uses for the 2 way radio feature, I have never had a problem with repairs and service and rarely need them. I find that people forget the old adage about getting a bee with honey.
No client will ever walk into our business again who cannot smile and be kind and who treats us with suspicion just because someone else ripped them off.
They are not worth a heart attack and taking away the joy of coming to work and giving our attention to our clientel who deserves our best!
8-13-2007 @ 10:45AM
Travis said...
While I agree with some people can't be pleased no mater what you do, I would choose wisley which ones and for what reason/s I drop a client. Just little "emph" on caution.
I have high expectations for a company (any) I am purchasing from. But I also will pay for what I am getting and be fair about it.
They are there to make money and the consumer is there to get some bang for their buck. Got to meet in the middle. But above all, no one is there to be subjected to abuse.
8-13-2007 @ 11:06AM
Mark said...
I get people all the time telling me how I should run my bar / restaurants I have 3 , almost everyone of them is a expert, I listen, I ask them what they do for aliving, how long have they been doing it, they tell me , and then ,I tell them,we have so much in common, because , I don't know anything about there Business ......Thank's for coming.....I have never been one to think that the customer is always right
8-13-2007 @ 11:13AM
GG said...
I have been firing customers for about 20 years, and it has not hurt my business in the least Some customers feel that the world revolves around them and that they should get everything for free or at a special discount. They also seem to think that the more they abuse us the better deal they will get. I have actually phoned 911 on a few occasions to remove people from my store. Our employees are trained to spot BAD SEEDS and let us know immediately, and we will take care of it. Our customers are MEDICAL PROFESSIONALS, and believe me, we have been amazed at how abusive they can be. One woman (an RN) bought a scrub set, took it home and washed it, spilled bleach on it and brought it back the next day and demanded that we replace it. She said she was not going to be out the money for it. She even told us she spilled bleach on it. When we would not replace it, she went nuts. She actually slung all of our inventory in the floor. Threw stuff at us. Called us horrible names, said we were racists because we would not replace it. My poor husband offered to give her a discount, she refused it and said she would sue us. She got in my face, and believe me, it was all I couold do to NOT PUNCH HER IN THE NOSE. She was so close she was actually spitting on me. One of the employees was on the phone with 911. I told her to leave and she finally went outside and caused a scene. Our employee was still on 911, and 911 said get her license plate number. My husband stepped out on to the front sidewalk with a pad and pen to take her number, and she screamed at him and said she would run him over. She ran her car up on the sidewalk, and he barely got away. She then jumped out of her car and said we were going to get blown up. She even said she would see to it that someone came in and robbed and killed us. 911 heard all of this. When the police came, she turned into an angel. She said we were bad to her. The police officer, seemed like he was trying to get a date with her. We actually had to speak with the police captain. They basically did not want any trouble in the area. (our store had been there since the 1960's and the neighborhood had gotten pretty bad.) We got a tresspass warrant on her, and let it go at that. Things of that sort happened almost daily. My husband had a heart attack. We moved our store to a very nice and safe area. We are doing just fine here. I guess you could say we fired all of our customers and got new ones.
8-13-2007 @ 12:26PM
Teresa in Virginia said...
I agree that some customers just can't be pleased and I do dump those. The ones that are just a little annoying I try to please them. You can't dump them all or you will have no business left. Especially if you are in an industry where they talk to each other.
8-13-2007 @ 12:32PM
Frank said...
I have a small business that provides repair service to the consumer. I find that you have to get rid of a customer(s) who always complain in order to get free service. Sometimes I fire a potential customer when they complain about other businesses, I just know they are bad news so I refuse service before they become a customer. I do listen to customers who pass on complaints about other bussineses that they heard from others but are not comlaining themselves
8-13-2007 @ 12:45PM
norma said...
we have an auto repair business and people are so down on them, but my husband would not do work that is not needed. We drive an old car and own our home. We cater to older people and do great for them but there are so many auto repair shop will rip people off that they distrust all which is not fair. Do your home work you will find out what most are all about.Not all shops rip people off.So know what you want when you go in, go to 3 or for shops to see how many answer you get. Lets you would not trust a Dr. on your first trip said you nedd surgery so look for places you can trust and remeber treat people like you want to be treated thank you have a great day
8-13-2007 @ 12:56PM
norma said...
we have an auto repair business and people are so down on them, but my husband would not do work that is not needed. We drive an old car and own our home. We cater to older people and do great for them but there are so many auto repair shop will rip people off that they distrust all which is not fair. Do your home work you will find out what most are all about.Not all shops rip people off.So know what you want when you go in, go to 3 or for shops to see how many answer you get. Lets you would not trust a Dr. on your first trip said you nedd surgery so look for places you can trust and remeber treat people like you want to be treated thank you have a great day
8-13-2007 @ 1:05PM
Rod said...
This is al the farther this will go because everyone is so conditoned to not say anything or u will get in trouble the government walks on the genral public on a day by day bases no one says anything why souldn't big bus. do the samething it takes more than typing about it. We as the working class are shushed by anywhere u complain. we are at the merce of a big government & Industry. Are personal rights are a THING OF THE PAST
8-13-2007 @ 1:07PM
Joe said...
As a small AV business owner for 29 years, I have to say---WHEN A CUSTOMER FRUSTRATES YOU SO MUCH THAT YOU FIND YOURSELF TAKING HEADACHE PILLS---THAT's IT!!! No customer is worth causing a health issue. In my business, stress is the norm. If the microphone goes dead, you don't get paid. If a customer refuses to use a microphone (he only had a short presentation)---(actually, he had NO presentation) then complains that he could not be heard?! FORGET IT. Next time hire RCA Victor!!
8-13-2007 @ 1:17PM
FAITHxFATE said...
I thought I was the only one that has fired her clients, sometimes it has to be done, if not they will run all over your business >^,,^
8-13-2007 @ 1:19PM
swilkinfl said...
As a small business owner, I have implemented firing troublesome customers and poor payers.
We bend over backwards in our customer service and have found that some customers are more trouble than they are worth.
Since doing this we have seen many return because they have gotten poor service elsewhere. If they were slow pay or no pay, we take them back with a SIGNED CREDIT CARD AUTHORIZATON FORM ON FILE. It can be a win/win. Also, it has actually boosted our bottom line, less write offs and quicker cash flow.