How To Bin Your Low Value Customers And Replace With High Value Ones

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Young beautiful woman with recycling trash binWhen you start up your own business it’s very easy to fall into the trap of working with anyone who will pay you (and even some that don’t!).

You’re desperate to get experience and also to have some customers to validate your reason for being in business.

That’s okay right at the beginning. It is good to get the experience and to build up some testimonials.

If you’re not careful though you end up continuing in this start up mentality, when you should be moving on to growth.

You find yourself with a number of customers who do not pay anywhere near your current rate and take up a lot of your time and cause you a lot of stress.

Why don’t you just let them go, to make room for new customers who pay your current rates?

I know – you feel guilty. After all, these customers have been with you from the beginning. There was a time that you were grateful for the work. How can you just get rid of them?

Firstly, I suggest that you make a list of your clients and grade them A to E, with A being the best to work with (most profitable, less time consuming) and E being the worst.

If you’re not sure how to grade them, here’s some characteristics of low value and high value customers.

What are Low value customers?

  • Always want to negotiate on price
  • They try and squeeze extra work out of you, that was not agreed upfront
  • They take up a lot of your time in proportion to the profit you make
  • They drain your energy
  • They don’t do any actions they’ve agreed to
  • Your heart sinks when you see their number on your phone

What are High value customers

  • Pay your current rates, no quibbles
  • Recognise the value you give
  • Do what they say they are going to
  • Are a pleasure to work with
  • Take up less time
  • Recommend you

How to Get Rid of Your Problem Customers?

Once you’ve graded them you need to look at how you’re going to deal with them.

Obviously you want to keep the A’s and probably the B’s as they are, so no action needed there.

Any customers who you’ve graded an E, I’d suggest that these are the ones to bin first of all.

As these customers no longer fit with your business, you can send these customers an email or letter, explaining that you are no longer able to provide a service to them.

How to tell a customer they are no longer welcome

You can be nice about this of course, explaining that as your business has evolved you’ve needed to make some changes and, unfortunately this means that you will no longer be able to provide a service to them. You can even recommend someone else if you are happy to refer them on to another business.

If you don’t want to work with them again, then don’t invite an opening to get in touch to discuss your new services and rates.

End of.

If this fills you with dread then you need to get clear and remind yourself of why you are running your business and of how much more productive and profitable it would be to only work with A and B grade customers.

You’ll feel much better once you’ve done it, I promise.

Your C and D grades need a bit more thought.

For each of these ask yourself “Would I want to continue working with these customers at my new rates and with a new customer agreement in place?”

If no, then take the same action as with the E grades.

If yes, then these need to be handled a little more sensitively.

Rather than sending a letter or email I would suggest that you have a conversation with these customers.

As you’ve already done some work with them, you should be in a position to quantify the value you have added. If you’re not sure, a good way to do this is to set up a call or face to face meeting for a review.

In the review, ask them how they have found your work so far and what value it has added to their business.

Once they’ve told you this, in their own words, then you can explain that you’re really pleased about the value you’ve added to their business and that, going forward, you’d love to continue working with them at your new rates.

It’s up to them to decide if they want to do this.

Hopefully they are happy enough with your service and the value you have delivered to want to continue working with you.

If not, then you have to accept that they fall into the low value customer category that you no longer want to be working with.

By letting go of these low value customers, you are also creating room to take on high value customers.

Now that you understand more about who your high value customers are, it makes it easier to go out and find more grade A’s.

After all, do you want to be working 50-60 hours a week with 20 grade D/E customers or 30 hours a week with 10 grade A customers, and making the same or even more profit in your business?

micro business actionToday’s Micro Action

Grade your current clients and develop a plan to lose your low value ones.