Why Choosing the Right Customer Can Make or Break Your Business
Are all customers created equal? When you’re a cash starved start-up, it’s very easy to fall into the trap of ‘any customer will do as long as they’re buying’. But take on the wrong customer, and they can end up costing you a lot of time and money. From the tyre kickers that eat up valuable hours, to customers that cause a complete deviation in your business plan. If you’re not careful you can quickly find yourself heading down a path of lost income and missed opportunities.
Not long ago we had to fire a customer. Things weren’t working out. They were unhappy, we were unhappy, and the whole relationship was becoming an emotional and financial drain on all of us. Now, in our non-business life we actually have a great respect for each other and we both run great businesses. So what was the problem? To put it simply, our businesses were not compatible.
It all started with the roll out of a new product. This product was ‘almost exactly’ what our customer needed ‘with a few minor changes’ and so they propositioned us to help them. They were excited to have found a solution and we were excited to have major contract fall into our laps … even if it meant a small deviation.
But one small deviation led to an avalanche of changes that in turn affected our other customers and our other businesses. Instead of our bank account growing, cash flow slowed right down. The money we made from the initial contract was quickly swallowed up and we were beginning to use our own money to meet the demands. It set us back almost a year.
This transaction taught us some harsh lessons. And it also helped us carve out a simple set of guidelines that we now use in all our business models:
1. Know Your Target Market and/or Target Customer
Create the perfect customer avatar and stick to it. Remember, It’s okay to say no to a potential customer if they don’t fit (trust me, you’re doing them a favour as well!)
2. No Compromises!
If it doesn’t fit your model forget it. Don’t be tempted to “change” your model to make it fit and don’t think “Oh its 80% there, let’s do it”
3. Know Your Value – You’re Worth It
Discounting can set a dangerous precedent, generally you shouldn’t. Offer them a “value add” instead. There are other customers out there who will pay for your expertise
4. Trust That Gut
If it doesn’t feel right don’t do it. Over the course of doing business you’ll develop a feeling about people. This is enhanced if you’ve set goals and created a customer avatar. If you have a bad feeling, move them on
5. Clarity On All Sides
Both you and your customer need to be clear on the terms of engagement. Make sure there’s a paper trail to refer to and if relevant, set out a scope of work or a Service Agreement. Don’t let yourself get into a situation where the customer says “you promised me you would do that for free” or “That’s not what we agreed to, I’m not paying you”
So no, not all customers are created equal. And not all customers will be the right fit for your business. Sometimes turning business away is the very key to your growth. Sometimes you need to say No, and that’s ok!
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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