How ‘sacking’ customers can be good for your business
Picture the scene………. the phone rings in the office, a handful of people look down at the handset and recognise the telephone number, then they look up briefly to see who’s going to answer it…….. somebody then says out loud what all the other people in the office are thinking – ‘oh god it’s them again!!!’
It’s exactly what happened to me at my first business and one that I see time and time again in many businesses we speak to. In my case, I will always be eternally grateful to, what was, my new company accountant – although at the time I must admit to being more than a little nervous.
Looking back the pressure I felt on my shoulders was pretty immense. I was a pretty young MD at the time, had recently re-mortgaged my house to buy the business, inherited a couple of unruly staff and was generally struggling to get my head around people that didn’t agree with me. To top it all off my accountant had now told me to ‘sack’ 7 of my ‘Top 20′ clients. My response……..’Are you nuts? I’ll go out of business!!’ ‘Matt, if you carry on doing what you’re doing you’ll go out of business anyway!!’
You see, unbeknown to me, he had already done a full analysis of the customer base, interviewed staff about some of the ‘key’ accounts (and found out about some of the poor relationships we had with some of them) and come to the conclusion some of our accounts just weren’t worth having, at least not on the money we were currently charging them.
My accountant then explained, ‘I’m not suggesting we just get rid of them, but let’s talk to each of them and review our relationship with them’. Upon further planning and analysis that is exactly what we did.
The result was far better than I could have ever wished for, with 6 of the 7 accounts under review being retained under far better profit margins and payment terms. As well as the increase in profit, the quality of the day to day relationships the clients had with our staff increased because the team knew they were paying a fairer price for our service, and not having the feeling that a customers was holding us ‘over a barrel’.
That month we lost just one solitary client throughout the whole review exercise but far more importantly, because we’d increased our margins and raised staff morale so successfully through the other accounts under review, it ended up being one of the smartest moves we ever made.