Nobody wants to sell anything for a loss, yet every company has customers with whom they continue to do business who are costing the company money. Now is not the time to be messing around with customers who are taking too much of your valuable time and resources.
Review the profitability of your customers, and I’m sure you will find a few of them who are returning to you a net profit far less than your average. The time you spend with these customers is taking you away from the time you need to spend with the customers that are going to make a difference to you. I realize it’s a tough decision to trim a customer list, but it could be the best choice you make, especially if those customers are sucking the profit out of your business.
Going through the process of determining which customers to let go of is never done lightly and definitely needs to be done in cooperation with management. Once you have decided which customers to terminate, the easiest approach you can take is to give the customer a price increase equal to the amount of profit you would need to have the customer be one worth keeping. Surprisingly, you will find it is not unusual for the customer to accept the price increase. If they do, you have kept the customer and increased your profitability.
Just be careful with this step that you don’t start back-pedaling with the customer and accepting less than the full margin you need. If you allow yourself to negotiate down from the full margin you need, you will only set yourself up for more problems down the road, where the customer wants more service for less cost.
