Should I fire my bad clients?

Run a mental checklist over your client base right now. Who fits into the ‘good’ client list and who falls into the ‘bad’ client list?

It all really depends on what you define as good and bad.

As we know not all clients are good for your business. Some clients are a wrong fit for your business but could be a good fit for someone else; therefore in of themselves they are not necessarily ‘bad’.

However, others are just downright bad for your business.

It is important to consider how much your ‘bad’ clients are costing you in terms of time, money, frustration, people and product resources, lost productivity, bad press, angst, legal fees, and tarnished reputation?

If you have too many customers falling under the ‘bad’ column you need to ask yourself, “How did this happen?”

Have you set yourself up as a magnet for overly demanding, time consuming, nit picking, miserly clients who do not see value in what you do or offer and seem to want a slave rather than a legitimate business partner?

Have you set yourself up to be taken advantage of by unscrupulous and unethical people looking for victims?

It is difficult to focus on your best clients if you cannot shed your ‘bad’ ones.

For example, there has been recent media attention on the rise in Businesses Pheonixing; the act of Phoenixing is where a new company is formed to buy the assets, contracts, and goodwill of the failing business for a reasonable market rate. The legacy debt is left within the old business which is then liquidated thus allowing the new Phoenix business to trade on, debt free. Creditors and Suppliers to the old business are often left with unpaid debts which may in turn lead them to suffer their own financial difficulties. I am sure no one wants to be put at the mercy of Businesses Pheonixing (‘bad’ clients) if they can help it.

Chasing the ‘easy’ or ‘quick’ sale may be more trouble than it is worth especially if the prospect or client is not properly investigated in relation to their legitimate needs or their intentions are clearly defined.

So, what constitutes a ‘bad’ client?

Besides the obvious impact of bad debts, there are other criteria which constitute ‘bad’ clients. Here are some examples:

• They are bad credit risks with a track record of always paying late or not at all – they can be checked out by using reputable credit agencies that keep track of people and companies’ credit ratings.
• They are a poor fit with what you offer and what they need thus leading to misunderstandings, poor relationships and confusion – this is usually due to a poor sales approach and not properly understanding your client and their needs in the first place.
• They are overly demanding on your QA or Customer Service departments – the ‘nothing is ever right’ syndrome and all they want to do is complain.
• They ask for expensive prototypes or very detailed proposals with little probability of a significant purchase – what is usually happening here is that they are siphoning you for your Intellectual Property at no cost to them so they can either do it in-house or get someone cheaper to implement your idea.
• They only want to deal with ‘you’ and expect levels of service that do not go with their purchasing level – they expect first class service when they are buying ‘no name’ or house brand products at very small volume.
• They complain loudly, often, and publically to anyone who will listen and usually only for ‘effect’ not fact.
• They do not keep their promises and break contract conditions regularly.
• They take your IP and claim it as their own.
• They say one thing and then another – you never know where you stand with them and they seem to play games, trick you or set traps.

Don’t be fooled by these types of clients they are not worth it, no matter how attractive they look on the surface and how desperate you might be to get a sale. Unfortunately, when times are toughest we can fall prey to these types of prospects or clients which can lead to more stress and less return on investment.

An experienced business banker once told me a story about an entrepreneur and business owner who was looking for a new bank to work with. On the surface this individual and his business looked plausible, charming and sincere, but when the business banker did his investigation, he discovered a litany of evidence – failed businesses, bad debts, frequent changing of banks, poor staff retention and staff legal issues and a myriad of other things that did not bode well for this prospect becoming a valid business banking client. As you could imagine the aforementioned business banker did not proceed with that prospect.

If these types of business people continue to behave in this manner they will eventually run out of legitimate business suppliers or partners to work with and sadly if they do, they will usually pull up stumps and go and find fresh victims to exploit.

Another tell tale sign is that they will not have a history of any longstanding, viable relationships of any value or substance.

Many people have slated the sales profession as being ‘shifty’ but in truth most sales people and their clients are out to do the right thing by each other. So, it pays for the sales person to also be on the lookout for the potential ‘bad’ client and do proper investigations. So don’t believe everything you hear. Do your homework.

So why not have a conversation with your sales team and run your collective eye over your client base to see if you do have any of these types of ‘bad’ clients on board? Then work out a strategy to let them go, learn from your mistakes and don’t get mixed up with these types again if you can help it.

Maybe it’s time for a client spring clean. It might just free up your time to find and work with more productive clients

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT.