Many startups believe they can’t end a customer relationship that is no longer a fit. That is a mistake. Accepting the need to fire a customer can be difficult, especially given most startups compete tirelessly to acquire and retain new business. However, there are circumstances when it is appropriate to consider parting ways. The integrity of the business is always a priority, and this means that business relationships that no longer serve the company’s goals can be ended, albeit as tactfully as possible.
Anticipate the possibility of problematic customer situations. The overall objective of every company should be to have mutually beneficial expectations for each customer relationship and to deliver on those commitments with dignity and respect. All customer relationships change over time. Recognizing and addressing problems in a customer relationship is an important aspect of delivering on commitments and operating with integrity.
Look for these warning signs
Be alert to these common situations. Assess the relationship before it progresses too far.
3 Signs your customer relationship might be headed for trouble
- The customer falls behind on their bills.
- The team can’t ever satisfy the customer.
- The customer repeatedly demands a lower price.
The customer falls behind on their bills
There can be many reasons a customer doesn’t pay on time. The customer may be having cashflow issues. They may be unhappy with your products or people, or they may be a company that makes it a practice to pay late. The first step is to talk to the customer to find out who is holding up payment and why. Can you negotiate a payment plan that is equitable to both? Requiring electronic payment, instead of by check, streamlines the process and helps clarify whether or not the customer can pay on time. Specify payment terms in contracts with discounts or up-charges for early and late pay, respectively.
The team can’t ever satisfy the customer
Some customers will be perfectionists, but there is a difference between a customer who raises the bar and a customer who is never satisfied. Make it a practice to clearly define expectations up front. Create checkpoints, especially in business-to-business (B2B) projects and sales. At the first sign of mission-creep or disconnect between expectations and agreements, call a pause. Don’t wait until the invoice has been presented to have a discussion. Everyone benefits from high standards; no one benefits from moved goalposts or unachievable targets.
The customer repeatedly demands a lower price
Successful advanced technology business models are built on value-add. Startups that can’t convince a customer that the benefits of their solutions justify the price may be doing business with the wrong customer—one who can’t afford the solution or one who conducts business with a commodity mindset. Even if that is good for their business, it isn’t good for yours.
The five steps to take before firing a customer
Step back and involve the whole team before the company decides to fire a customer. Make a repeatable process part of the customer management process.
The five steps to take before firing a customer
- Convene the team.
- Ask each person to describe how they may have made the relationship better or worse.
- Create a recommendation and action plan for dealing with the customer.
- Delegate a team member to meet with the customer.
- Ask if the team can bear the consequences of terminating the relationship.
1. Convene the team
Encourage every member, from sales to customer service, from accounts receivables to product support, to air their frustrations. Let them vent for as long as it takes. Then ask each person to say one positive thing about doing business with this customer. If no one has anything good to say, the relationship may have reached the breaking point.
2. Ask each person to describe how they may have made the relationship better or worse
What have they learned that they’re doing differently with other customers? The discussion may help the group look at the situation differently and apply lessons learned.
3. Create a recommendation and action plan for dealing with the customer
When it comes to customers, repair can be easier than replacement. What would it take to repair the relationship? Is the problem with one or two individuals or across the board? Does either the team or the terms need to be changed? Would revisiting expectations with the customer help? Is the situation a one-off or is it chronic? What are the pros and cons of keeping the customer versus exiting the relationship?
4. Delegate a team member to meet with the customer
Listen to their perspective. See if they’ll listen to yours. Are they amenable to tuning the relationship? Depending on the outcome of the discussion, adjust the action plan and implement.
5. Ask if the team can bear the consequences of terminating the relationship
It’s very difficult to lose a customer. Well-intended sales and support people have a lot invested, not to mention individual compensation and the company’s bottom line. The company will have to adjust expenses or increase revenue from other sources. Sometimes this reality makes a team willing to work a little more toward rebuilding the relationship with an existing, if somewhat troublesome, customer.
Cases in which the customer must be fired
Unfortunately, there are some scenarios in which firing a customer is the correct and only option. These situations demand swift action.
2 Scenarios that must always result in firing the customer
- They’re engaging in bullying or harassment.
- They’re doing something illegal or unethical.
They’re engaging in bullying or harassment
Fire the customer if they’re making your people uncomfortable or unsafe. It’s the company’s responsibility and duty to ensure that your employees are treated with dignity and respect on company premises as well as in any environments where the company asks them to go. This includes interactions (in person or online) with customers, suppliers, consultants, etc.
They’re doing something illegal or unethical
There can be no tolerance for illegal activity and actions that are unethical or violate the intent of the law. This one is simple. Do not do business with any firm or individual who is breaking the law. Don’t look the other way. Don’t hesitate. Seek legal counsel immediately.
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