Why Your Small Business Should Fire Bad Customers

Last week we fired a customer.

Yep, you heard me right.

We asked one of our customers to take their business please elsewhere.

Why would a small business do such a thing?

Who in their right mind would turn down revenue and earnings?

It’s really not that complicated. Some customers drain resources, strain the team, and end up costing you more than they bring in. There truly are some customers out there who you would happily send to the competition.

The trick is to identify these folks as early as possible and act decisively to stop the bleeding and start the healing.

Entrepreneurs and small business owners rarely think about firing a customer. After all, as you write a business plan and start your business, your goal is to maximize every available dollar of revenue.

But, there are times when the cost of continuing to deliver services to a customer far outweigh the revenues.

For instance, the customer I am writing about today has been with us for several years. For a long time, this user was not active on the site but would visit periodically, almost always accompanied by a question or three for our customer support team.

One of the first signs that there might be trouble ahead was when we received a list of “suggestions” on improving the product. Of course, suggestions for improvement are good, and smart businesses will listen closely to their customers. Having said that, when a user writes a manifesto telling you all of the things that are wrong with how you run the company, you might want to give thought as to their motivation.

In the past few months, this customer increased their activity on the site. They posted a project, sent in dozens of support tickets, called into our phone support line multiple times, and complained. And complained.

Did the complaints have merit, you ask? For the most part, no, they did not. They were mostly complaints about what the customer disliked about the business and the other users on the site and the interface and the payment system and the phone hours we maintain and the slowness of our team’s replies and on and on.

The crowdspring business model, like many other businesses, has relatively low-profit margins and a relatively low rate of repeat business.

This means that every single customer counts, and our support team work incredibly hard to make sure every customer is satisfied.

This means that we do not limit the amount of time an agent can spend on the phone with a customer or the number of emails the agent can send to solve an issue. So when a customer comes with a seemingly endless appetite for frivolous complaining, it can be a huge distraction and a gaping, sticky tarpit for the team.

As a manager, you must support your people and recognize when a customer is causing strife within your community. Take the plunge, make the call, and let the customer know that they are no longer welcome in your shop!

Here are four things you should consider when your small business identifies and fires bad customers.

1. Who are you?

The key is to identify the (hopefully) rare customer who costs more than they provide.

Are they someone who has endless complaints? Do they overtax your support system? Are they abusive to your people?

These are pretty good signs that they may be a customer in need of firing.

Of course, not every person who has complaints requires firing – many are legitimate customers with real issues that need to be resolved. Still, they train your people to raise the red flag when a single customer starts to account for a disproportionate share of your team’s capacity.

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2. What do you cost us?

It’s not that hard to do the math.

For instance, a customer service agent is a resource that costs you a certain amount of money for every hour they work.

If your agent costs $15/hour and a single customer ties them up for 10 hours, that means you have devoted $150 of support resources to that customer.

If the customer only represents $125 in net profit, you are already underwater, and there is reason to believe you will sink deeper if you try to maintain the relationship. Simple dollars and cents tell you to end the association.

3. How do we say goodbye?

This can be tricky and, when handled poorly, can lead to blowback.

I have found that the best way to end the relationship is gently but firmly. Let the customer know that you have looked hard at their account, that you recognize that they have not been happy with your company and that it is for the best that they not return.

If they ask why, sharing some of your simple math (see #2, above) can help explain. Ensure your team is in the loop on the decision and that they are trained to gently communicate a consistent message to the customer when the inevitable pushback begins.

4. What happens next?

In the age of social media, you need to be prepared for the pushback to go public.

Hell indeed hath no fury as a customer spurned, and many will be happy to let the world (or at least their followers) know just how poorly they have been treated by your awful company and your rotten employees. Answer their complaints publicly, but do it just once and then move on.

There is nothing to be gained by an ongoing exchange of fire, and most people are too busy with their own lives to continue the onslaught for long.

Patiently let them blow off their steam. Just beware not to get burned.

Illustration, Wikipedia:  “Faculty Foot” by Olaf E. Caskin, 1909

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