Is there ever a business case for firing a customer?

Sometimes, we need to let people go. Be it ending a fruitless partnership, terminating the employment of an abrasive team member, or switching service providers, we’re often compelled to leave those holding us back.

But what about when these people are our customers? As a rule, we fight to prevent the end of a customer relationship. We want to make our customers happy; to retain their loyalty and keep them buying with us for as long as possible. Usually.

Unfortunately, keeping some customers can be an uphill battle — and one with little gain. In such cases, is firing a customer the right choice for your business?

Clinging to the wrong customers

Some suggest that firing the right 10% of customers can double profitability. This comes from an idea from Philip Kotler, that the ‘bottom 10%’ of any company’s customers aren’t actually profitable at all.

When you cling to the wrong clients, you risk the loss of your time and resources by chasing unreasonable or unresponsive customers. You can face declining profits when customers fail to pay on time, or refuse to upgrade to your new pricing system. You can lose talented team members by holding on to an abusive customer instead of standing up for them.

From neglecting other customers, to diluting your branding, to delivering weaker products and services, catering to the wrong customers can negatively impact your business in many ways. But that doesn’t mean you should go on a mass customer cull right away. When it comes to firing a customer, you need to make doubly sure it makes strong business sense. So, when is firing a customer the best option?

Evolving business (it’s not you, it’s me)

As businesses evolve, they often change and sharpen their focus onto a core goal. You could find yourself wanting to pursue the most profitable feature set, which doesn’t cater to a minority of your existing customers. In such a situation, you have two options:

  1. Try to keep those functionalities to please your old customer

  2. Resolve yourself to firing a customer and continue business on separate pathways

Unfortunately, it’s a fact of life that you can’t always please everyone. If you choose to attempt to cater to a customer that doesn’t match your business goal, you end up trapped in legacy assignments. These tasks distract from your core business goal, which in turn dilutes your brand. They also use up resources that you could be using to further your business growth.

Plus, you can’t justify dedicating as much attention to these legacy assignments. So, they often end up outdated and unhelpful to the customer anyway. Sometimes, firing a customer is the better option, rather than providing a minimal solution that doesn’t really suit you or your customer.

Another instance where business evolution means you may need to face firing a customer is when your pricing strategy shifts. As products, services and businesses grow and improve, the value of the product increases. In turn, the costs of maintenance, production and ongoing support also rise. This means you need to raise your prices.

However, you may face a customer that refuses to pay the updated costs of service or subscription. They instead insist on staying with the old pricing, which no longer fits the costs of your product and can mean a decrease in profits. If they insist on the reduced price beyond what you can offer, and after you’ve explained why you’re unable to reduce your price for them, it might be time to let the customer go.

‘Bad’ customers (It’s not me, it’s you)

While the above customers might be inadvertently holding your business growth back, others can be actively dragging you down. These ‘bad’ customers can ruin the office atmosphere, waste your time and resources and distract you from more invested customers.

  • Abusive customers

The number one way to determine a customer is ‘bad’ is if they are consistently abusive to you and your team — particularly after you have given them a warning. Unacceptable language use and threats to your person (or your team members) are demoralising, and should not be tolerated under any circumstance. Firing a customer is a necessity where abuse enters the fray.

  • Unreasonable customers

A customer can also be considered ‘bad’ if they repeatedly cause stress for your team and waste time with exorbitant requests. Unreasonable customers aren’t cost-effective for your business. They are demanding of your resources and eat up an unbalanced amount of your team’s time. Often, they aren’t willing to compromise or pay more for extra support or services.

Unreasonable demands can vary from expecting the completion of big tasks in minute timeframes, to requesting features and functionality you don’t, and can’t, offer. Unreasonable customers don’t respect your boundaries or office hours. These customers don’t value your team, your time or your product. So, this is another instance where firing a customer becomes a viable choice.

A caveat

There’s a difference between challenging customers and bad customers. Challenging customers are coming to you with a problem and giving you a chance to fix it. They aren’t trying to be difficult, and successfully supporting them often leads to high customer satisfaction and even some positive word of mouth.

Plus, firing a ‘bad’ customer should always be a last resort. You need to have exhausted every other option for dealing with difficult customers first. (With the exception of customers who continue to abuse your team after receiving a warning — in which case firing them is the best, and only, option.)

For example, the first step to dealing with an unreasonable customer is to manage their expectations. Talk to them about their expectations and make sure it’s clear what you can do for them and what you can’t. Explain the time frames you can do things in. You should only consider firing an unreasonable customer when they disregard your points and continue to make impossible demands.

Firing a customer

Ending any kind of relationship is hard, and when it’s a customer it can feel counter-intuitive to your business success.

But when you take control by firing a customer that’s holding your growth back, you stand to improve your profitability, encourage a comfortable, trusting workplace atmosphere, and dedicate more time to more of your customers. So, there is a business case for firing a customer, but only as a last resort.

Useful links

How to fire a customer How to raise your SaaS prices The death of the unique feature set, and what it means for your brand
Grandfathering in SaaS: the pros and cons Legacy code dangers: code is inventory SaaS pricing models explained