Don’t Throw the Baby Out With The Bath Water

This past week I went to an event hosted by The New York Enterprise Report where John DiJulius spoke. John is the author of Secret Service Hidden Systems That Deliver Unforgettable Customer Service and What’s The Secret? To Providing World-Class Customer Service. Both books well worth reading, and by the way he is a fabulous public speaker. At the close of John’s presentation he opened up to take questions from the audience. There were several good questions but one in particular made my jaw drop just a bit was, and I am paraphrasing here, how do you have a world-class service organization and get rid of the smaller unprofitable customers?

To be honest with you, I don’t recall John’s answer. Maybe he was as thrown as I was but maybe my ears were just hurting and so it took awhile for me to hear again. Kind of like getting a light bulb flash in your eyes and your vision goes for a few moments. Well, if you have read my blogs you know I have addressed how to move out clients that need to be moved out. Yes, you should move out clients that don’t pay, haggle you for every nickel and dime, demand more and more and are continually rude to your staff. Ok, so maybe the gentleman who asked the question meant more like these types of clients and not just the smaller ones. And please feel free to go back to my article Should You Fire a Customer? for some suggestions.

But, if the client’s only failing is that they are small, then stop before you boot them out the door. I must say that I am always peeved when I am treated as ‘small’ and makes me think twice about doing business with or referring the provider who makes me feel small. I understand volume discounts, economy of scale and so on but I don’t understand professional snobbery that often times comes with it. I confess that I am more prone to take my business to other smaller businesses that appreciate my trade.

So what is the value of a smaller, less profitable client? Allow me to share with you what I have found over the years. If the smaller client is not sucking the life blood out of your staff or draining resources or making life miserable then they are keepers. Why? Allow me to offer you some points to consider. I urge you to truly evaluate a customer before you choose to move them out of your life and discover ways to make the small account profitable. Understand their value and by this I mean their full value including life-cycle.

Cash flow. No matter how good your business is cash flow is a wild animal we chase every day. Keeping money flowing through the system is key to survival. There maybe times in between projects or even hard economic times when the cash flow is less predictable. If this smaller customer offers a steady, albeit small, stream of cash flow then their life-time value is far greater than the size of any one of their orders. There is comfort in knowing that every month and year after year that an amount of money will continue to flow through your coffers. It serves as a piece of the foundation of the health of your organization.

Training Ground. I sometimes use our smaller more senior accounts to train new hires to our way of doing business and with the skills that they need to grow. If you make a mistake with one of these accounts your ability to reach out and make good is much easier since you should have a longer history of great service and know the owner more personally and so have a better chance of a gracious acceptance of your mistake, as long as you make it right quickly.

Referral Base. A small company maybe small but each person in that small company knows someone else. Consider the opportunity that their vendors, clients and social contacts become an open ear to hear their recommendations and hence these smaller companies can become a referral base. The staff in these firms can move onto other companies and recommend your business to the new management. Hopefully, you have been a good provider and that small client lands a big client themselves and begins to grow and hence, you grow with them.

So before you throw the baby out with the bath water, check and double check that you are doing the right thing for your own organization’s health.