Business owners or employees, when do you cut your losses?

[Nocturnal]

As far as clients go, when do you cut your losses with bad clients? Or, do you EVER cut your losses? Is a sale worth that much? What's your opinion on this and how has it held up as far as business practices go? Does it work by trying to hold on to any and all clients, even if they're repeat problems? Or if not, is cutting your losses worth while in the long run? Does it damage your reputation or business any?

 

[waggy]

yes you dump them. when? now that is the question. when they start costing more then the contract is worth (not just financial but in terms of employee moral etc).

 

[Grey]

I have only done it twice.

1) It is never just them, they know someone who knows someone. It always get's back to you.

2)Are you LOSING money? If not, maybe rotate who their contact person is for a breather.

3) If you are being diverted away from better clients just tell them you can't live up to their standards and drop them.

 

[jrphoenix]

Depends on the business & circumstances. I'm a business owners and have had to ask clients to leave (politely) and I have had to ask employees to leave. The customer is the focus of my sales business but, you always have to take return on investment into account. Is that client costing me more to service them than what they bring in?

 

[Nocturnal]

Well basically these are the free loaders, everything for FREE and NOW instead of later and if they can't have their way then they don't wan ANYTHING and they, "won't give me any of their business."

 

[Descartes]

I don't understand how a client could cost more than you make unless your business model is flawed. Every aspect of a service should be calculated in the fee. If there's a way for any single client to drain your resources then you need to reevaluate how you deliver your services. You should never lose money on a client.

That said, I've had to drop a few disruptive clients. They are usually clients that serve to frustrate more than anything else, and usually they do the smallest amount of business. It's not worth frustrating you or your team on such clients.

 

[DrPizza]

Originally posted by: Grey
I have only done it twice.

1) It is never just them, they know someone who knows someone. It always get's back to you.

2)Are you LOSING money? If not, maybe rotate who their contact person is for a breather.

3) If you are being diverted away from better clients just tell them you can't live up to their standards and drop them.

#1 is often tauted as the reason "the customer is always right" - I've never bought into that philosophy. As soon as you can provide better services for your other customers simply because you've dumped one that it eating up an unfair share of your efforts, it'll pay off in the end. Quite often, the people that the worthless customer knows are either aware of what a pita that person is, or are other people like that person. Thus, the additional business that you lose is quite often people who you don't want to do business with in the first place. The rest of those potential customers hopefully see the situation for what it's worth.

 

[xSauronx]

Originally posted by: Nocturnal
Well basically these are the free loaders, everything for FREE and NOW instead of later and if they can't have their way then they don't wan ANYTHING and they, "won't give me any of their business."

well if youre not getting it anyway....

 

[Descartes]

Originally posted by: Nocturnal
Well basically these are the free loaders, everything for FREE and NOW instead of later and if they can't have their way then they don't wan ANYTHING and they, "won't give me any of their business."

What are you doing where you're giving something away for free? I understand the notion of giving a little to get some in return, "salting the jar", etc. but again, if that's not calculated then you're doing yourself a disservice.

I have to give away business at the beginning of almost every project, but that's the cost of doing business and it's calculated into the business plan. There's no way for any single client to continually drain resources.

 

[WildHorse]

You have to make a judgement that's similar in many ways to a "quality control" judgement.
Is that client WORTH a high, medium, or low level of follow-up & interaction?

You may decide you need to downgrade the "quality" (to you) of what once had actually been, or had seemed like a good prospect.

Still keep up some level of visibility with them, but maybe downshift from expensive visits in person to an occasional phone call & a card mailed at Christmas instead.

Gotta "grade" (prioritize) the attractiveness (ABC analysis?) of prospective clients & put your resources where you can make them pay off the best.

Of course, where you say, "do you cut your losses with bad clients?" you're not explaining what makes them bad. If it's illegal, immoral, hurts people or the earth, etc., get outta there!

 

[jrphoenix]

Originally posted by: Descartes
I don't understand how a client could cost more than you make unless your business model is flawed. Every aspect of a service should be calculated in the fee. If there's a way for any single client to drain your resources then you need to reevaluate how you deliver your services. You should never lose money on a client.

That said, I've had to drop a few disruptive clients. They are usually clients that serve to frustrate more than anything else, and usually they do the smallest amount of business. It's not worth frustrating you or your team on such clients.

It really depends on the business. For example I own my own insurance / financial services business. Some clients want to have one small policy which is charged by the fortune 100 company I represent. If that person become overly "needy"... continual service... I have no problem sending that person to another agent in my area while I focus on clients that are the ones I really want to keep.

If you have never broken your business down by A, B, and C clients you are missing out. I want to focus on getting those A clients in for appointments to see how I can serve them better and expand on our relationship. The A clients have business with me, always pay on time, and do continually contact my team for small things... I need to get them in at least once a year. My industry is probably different than yours?