This month’s focus: Not All Business Is Good Business.
One aspect of business that gets far too little attention is the need to cull the profitable business away from, then to jettison either the marginal or unprofitable customers. Yes – I’m in fact stating: You need to look at your current clients or customers and decide which you’re no longer going to keep. Regardless if they are paying, marginally profitable, or not.
I know this sounds like heresy in these economic times. However, if I’m going to sound heretical let me go all in and leave no doubt with the following: It’s exactly in times like these that demand this type of action and thought process!
You can’t be as servicing or as attentive as you want to be – to everyone. Or, much more importantly; as to what your best customers may need you to be, if you’re allocating valuable resources to marginal clients. If you want to move and grow your business, you should be looking to quite possibly crop 10% to 20% off your current business annually. (Personal services, i.e., consultants, financial planners, lawyers, accountants, et al usually fall on the higher side, where a retailer, i.e., grocer, clothing, furniture, etc. may fall to the lower)
Case Study: Part of my sales routine was to quote both current and prospective customers with pricing structures and specials for the upcoming week. This was a very time-consuming process along with time constraints and/or set appointments. I had quite the amount of calls that needed to be made, and time was of the utmost.
I had some potentially very large customers that only placed minimal orders. They always “promised” they would buy more in the future. Yet, the smaller outfits were ordering 10 to 1 if not more week after week. The larger of the 2 sometimes took me twice as long if not longer to price out, for they sometimes required 100’s of items (or more) priced where the smaller would only ask 50 or so. Along with the caveat if there was not a change in price there was no need to quote. The other? Every week, every item, every line item, regardless. The larger client was capable of ordering millions of dollars of product from me easily but – never did. My smaller customers although 1/10th their size – always did.
I made the decision and told them I would no longer quote or call as I was doing. If they needed a certain quote on a specific item I would be happy to. However, I was just to busy and it hadn’t shown me any true benefits as far as added or increased business. Then I politely ended the call. (The people on the other end I knew were left slack-jawed for everyone they were dealing with begged for such a chance to quote. And here I was saying; thanks, but no thanks.
Needless to say, my customers noticed the subtle change in my ability to service their needs with more attentiveness. During this period not only did I see an increase in their orders, I had more time to effectively quote and seek out new business. As for those potentially larger customers that “promised” yet never delivered?
A few months went by when I received a call. It was the head of purchasing for one of my previously culled clients asking why I no longer would quote his underling. I reiterated my discussion when the phone seemed to go silent for days. He then stated: “You’re right. If you don’t mind, please resume calling and quoting. I’ll make some adjustments here on my end.” I said fair enough and resumed.
They moved from being a client not worth keeping, to one of our overall top grossing customers. And that would have never come to fruition if I hadn’t been willing to cut dead wood when it showed it needed to be cleared.
© 2014 Mark St.Cyr
Profiting At The Bottom Line™ is a monthly memo, which is pithy, powerful, and to the point. It focuses on innovative techniques and or ideas that you can put to work immediately in your daily or business life.