How Firing Troublesome Clients Can Increase Gross Revenue

Firing Bad ClientsFor a long time, it’s been a business rule that you should never tell a customer “no” and that the customer is always right. We have grown into an age where businesses no longer feel that that is true. In fact, telling certain customers “no” and sending them along their merry way to another business is sometimes to the best thing that you can do for your company. The reason for this is because of the 80/20 rule, also known as Parato’s law.

What is Parato’s 80/20 Law?

If you have never heard of the 80/20 rule that is commonly used for business and life, it is a logic that is put to use that can help you better see the more important areas of your life. The rule states that 20% of your input makes up 80% of your output. In business, this translates to 20% of your efforts make up to 80% of your outcomes, or 20% of your customers make up 80% of your revenue. It can also refer to 20% of your employees providing 80% of your business productivity.

How Firing Bad Clients Relates to 80/20 Rule

When you have troublesome customers, it slows down the productivity of your business. You know you have bad clients if you they have the following traits:

 

  • Doesn’t pay invoices on time.
  • Always nitpicks at everything.
  • Is rude and dishonest.
  • Needs to be looked after to stay on schedule.
  • Is a tough negotiator.
  • Is bureaucratic.
  • Is inconvenient to your business.

 

All of these are warning signs that you are dealing with clients that are not worth your time and efforts. Not only are they slowing down your time, but they are slowing down your revenue. It can be hard to tell a paying client “no”, especially when you are trying to get every cent of revenue that you can get your hands on. But if you are seeing that you have customers that are making things hard for you, then it isn’t worth it.

Focusing on the 20%

In order to make your business thrive, you have to identify the 20% of your customers that are actually “good”. All of your focus should be placed on them because they account for 80% of your business and revenue. Keeping them happy is important, so that they remain loyal clients. Here’s how you can identify the 20%:

 

  • Client is profitable to your business.
  • Client is strategically important to your business.
  • Client is a high-volume customer.
  • Client asks you to do things that you do well.
  • Client values what you do well and is willing to pay you for it (at fair market price).
  • Client challenges you to improve your skills and increase your knowledge.
  • Client takes you in new directions that comply with your business strategy and planning.

 

In order to keep these customers around, you should learn everything you can about them. Ask what’s important to them, what attracts them to your business, how you can improve your business and how you can continue doing more business with them. By giving your 20% more attention, you will be able to keep your company profitable, without the headache of dealing with horrible clients.

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