Treat your Business as a Startup — Five Steps to Evaluating Your Customer
By Jim Hardwick
Edited by: Simon J Blattner, III
While treating your business as a startup, we are continuing to examine the facets to be analyzed to make good decisions. Managing your business and managing your customers are intertwined. Most companies do not think about managing their customers. Take a look.
This post is about examining your customers, and the five steps you need to take to evaluate, and therefore increase the effort you spend, on your good customers. This will help you identify the customers you want to work with, and help you determine the criteria for defining a “good” customer.
Here are the five steps:
1. Identify your most profitable customers
2. Interview your Team Members
3. Determine what makes a good customer
4. Decide which Customers you want to keep
5. Fire those customers you do not want to keep
Step 1. Take the time to understand if you are making money or losing money on what you perceive to be your largest or best customer. Upon examination you might find the amount of work to keep the customer and the pricing you are offering them to be losing money. Every business has its own standards. Is it minimum Gross Profit? Ease of doing business? Most logistics costs? Look at your total cost, including Cost of Goods Sold, Selling Expenses, and Working Capital expenses.
Step 2. Talk to those within your organization that have contact with your customer. Ask if they are a true partner or if the relationship is one-sided. Is it worth the time and effort that is exerted to keep them happy? Do you consider this customer be your ideal customer? If not, it might be time to cut ties. Take your team’s opinions seriously. They work with them minute by minute and day by day.
Step 3. Create a model so that you can recognize what a good customer looks like. Do they work with you as a partner with an understanding of helping each other succeed? Can you have the difficult business discussion without fear of losing the business? Do you celebrate success and know what success looks like? Is the relationship a give and take or is it all take? Do you see a long-term partnership? Do you like them?
Step 4. Now is the time to decide who you want to be in business with. Not all business is good business. Make a list of those customers that you want to keep. Cultivate, grow and nurture those customers and strive to help make their business be as successful as it can be. The result of this mindset will change the way you see your own business and the payoff is extremely rewarding.
Step 5. The thought of firing a customer puts fear in most companies. The truth is you may actually be losing money by working with some of your largest and key customers. You have two options. Meet with them and set up new requirements so that you can turn a negative into a positive. Be willing to have a discussion with your customers. Keep it friendly and positive and try to work towards mutual benefit. If you cannot reach an understanding, fire them without remorse or regret. Quickly, you will see the benefit of your bold decision.
Just make sure, at the end of the day, you have a darn good reason to fire your customer.
If you want to keep your business, you will take these steps to treating your business as a startup.
December 18, 2020
Jim Hardwick is president of Aspire Sales. As a Fractional VP of Sales, Jim helps companies create a sustainable process to generate profitable revenue. He is passionate about helping small to medium sized businesses understand their sales situation, developing solutions to improve and grow their revenue through a simple and disciplined approach. Jim has been in sales for 36 years and a VP for 20 years.
Simon (Buddy) Blattner is president of GLSB, Inc., a consultancy that uses a proprietary system that small and medium-sized companies can use to assess their business in less than 30 minutes a month to drive faster decisions and better results. Buddy has been a business owner, CEO, COO and CFO in manufacturing, wholesale distribution, and branded distribution.