Can You Fire Your Worst Customers?
During a tight economy, it’s sometimes difficult for you to turn down a questionable business engagement — even if you know the customer is going to be a nightmare, and the margins aren’t going to be so great.
But MSP University CIO Erick Simpson offers some solid advice on how to transform your business, so that you can focus on fewer, higher-paying customers. Take a look.
According to Simpson, you need to “squeeze” your customer pyramid as part of a long-term strategy. I think Erick is onto something. Check out his complete blog entry, highlighting how he transformed his own customer base in recent years. His lowest-paying, least desirable customers are no longer part of his business.
Erick didn’t achieve this transformation overnight. It was part of a long-term plan. Now, during the economic slowdown, Erick isn’t scrambling to “say yes” to customers he doesn’t want. Instead, he has a base of customers who truly trust him.
I agree with Erick, you can and absolutely move your customers up to the top of the pyramid. As you grow your business you tend to be more selective with new customers, tighten your SLA and as such increase your profitability.
So the question of what to do with these customers becomes more and more relevant as you grow. One concept would be to just fire them. Unfortunately, this will generally end up with a company that is not very happy with you and could potentially have a negative impact when prospecting.
A couple alternatives to this would be to go back to these customers with a plan that will move them up the the “B” level customer in regards to profitability. This will work with maybe 1/3 of them, but what about the others?
Perhaps you know of another MSP in your area that is at an earlier stage than you and might consider these customers “A” customers? If you can find somone that you are comfortable with then I would suggest working with them on a program to “transfer” these customers to them.
This can be a win-win-win for all three companies. You have increased your profits as you have “fired” your “C” customers, the customer does not loose support completely, rather they are introduced to a company that is very happy to work with them and the other MSP has just been handed a new customer list with a minimal sales cycle.