Sack C & D Grade Customer
Sack ‘C’ & ‘D’ Grade Customers - A truth of business is that not all customers are created equal.
While some value the products and services an organization provides, pay promptly and actively refers new customers to the organization; others require as much work to service as they good they bring.
As part of one's marketing and business development strategy, an organization should take a realistic view of their roster of clients and regularly grade them using several different metrics. Here are examples of situations where you may evaluate the value of your customers:
One of the biggest challenges in this process is being blinded by the perceived upside potential of an organization. It is easy to look at a large multi-national company and feel that they must purchase your product or service in a large quantity. For them to purchase these from you would be assured prosperity.
You then find out through working with them that their standard payment terms are NET 90 DAYS from the first of the month following when your items are delivered. To invest in purchasing the raw materials, paying the labor and manufacturing costs, shipping to their location and waiting up to 120 days for payment would be an hardship on the cash flow of your organization.
One of your customers is a sole proprietor. He has regular need of your products and services. His business style is directly the opposite of yours, in terms of management, sales and operations. He often feels that his acute needs move him to the front of the line, no matter what the situation. He often confides in you things which have no place in a business relationship. Your staff generally likes him, but knows that an interaction with him will take a larger then normal amount of time. He often pays late or is slow pay.
You are one of many vendors to an organization that requires your product or service. The business has neither increased nor decreased its use of your product over the life of the account, no matter how many client meetings, specials incentives or attempts to increase share. Your margins on this account have narrowed with time. While it does produce revenue, the ability to grow the account seems non-existent.
As part of the decision making process, one has to identify ways to achieve the revenue targets desired. Are their clients currently in house who present an opportunity in which to drill down deeper. Would replacing an existing client with a new client provide a greater overall opportunity or is it a greater burden and expense on time and marketing? Is our dissatisfaction based on business or on personal emotions?
Only once one is in a business relationship with an organization will one find out that the relationship may not make sound business sense. Often the effort to cultivate a sale, deliver the product or service and collect from a company is more exhaustive, providing a poor return on resources and investment.
How To Sack ‘C’ & ‘D’ Grade Customers:
Send a letter to any customers that you don’t want to do business with. These customers are normally the most demanding of your time, hassle you on price and then consistently make late payments. They usually don’t need any encouragement to bring their ‘C’ and ‘D’ grade friends.
In your letter, politely and simply outline the minimum standards that you expect from your clients. This way they can either tow the line or go elsewhere.
Here are some useful hints and tips on sacking 'C' and 'D' Grade customers in the right manner:
- Don’t say ‘go away’, but make it clear what you are prepared to accept and what you aren’t. They should get the message.
- Remember that any customer isn’t necessarily a good customer. Some actually cost you money, and worse, take your focus from the ‘A’ graders.
Budget: $100 - $500 quarterly
By the way, business owners or managers who are reluctant to sack customers, even 'C' or 'D' Grade customers, should maybe consider alternative working capital financing options to help turn these 'C' or 'D' clients to 'A' and 'B' clients."
For example, some lending agencies are willing to lend against a business' accounts receivable, allowing you to gain immediate access to funds that might have been tied up in a 30- to 120-day delay of payment. Such asset-based financing options can be a more accommodating alternative to sacking your customers.