When a business opens, no customers are the wrong customers. Long term business success, however, is dependent on finding profitable customers. Good customers refer good customers. Bad customers refer other bad customers, promote ill will, and require an inordinate commitment of resources to service. Pruning bad customers from a customer base is almost always a profitable decision.
When it comes to customer behavior, you will train your customers. You have no choice in that. But you can either choose to train them well or train them poorly. If you train customers well, they will respect your time, value your services, and pay on time. They will be happy customers. If you train customers poorly, they will pay slowly, complain repeatedly, and torture your soul.
How can you determine if a particular customer is a good customer? My business partner, Paul, and I consider ourselves experts at dealing with difficult clients in our CPA firm. Our client base consists mostly of small business owners. If you are a small business owner, you will undoubtedly agree that business owners can be a difficult bunch on a number of levels. First, you don't overcome all of the problems associated with producing a thriving business without a healthy dose of stubbornness. The meek don't survive long. Second, small business owners like to control their destinies and environment. People, who like to be in control, have strong opinions. Third, successful small business owners are financially savvy. They aren't afraid to ask for lower prices. They are difficult clients by any reasonable definition. I am one too. I share all of these characteristics.
Given that most successful small business owners are a bit difficult, and given that we want successful clients, Paul and I have learned to deal with difficult clients. We rate clients in the following way. Our top clients are those who pay nearly immediately and don't gripe incessantly about price. That doesn't mean these clients aren't demanding. They usually are demanding. Clients, who pay well and quickly, expect and deserve the best service. We give it to them. If they need a letter written to a bank or a financial analysis completed immediately, we provide that level of service. When they need to meet with us, our schedules magically open for them. When they call, our office staff knows to interrupt us and put their calls through. They are happy clients, who provide a wealth of referrals for us. Great clients tend to associate with other great clients. We consider these clients “A” level.
Our “B” clients pay mostly on time and also don't complain much. We also provide a very high level of service to these clients, but they don't get the immediate turnaround on projects that “A” clients demand and get. Their telephone calls are returned on a timely basis, and we can normally schedule meetings with them within a few days. Of course, if an “A” client and a “B” client are both on hold, guess whose call gets answered first? “B” clients are also happy clients, who provide us with a few referrals each year.
“C” clients are normally people, who don't pay on time, but are nice people, who don't complain much. They respect our time and have reasonable expectations for turnaround. Many times, these clients have businesses that are in some financial difficulty. We aren't happy about not being paid on time, but as long as “C” clients are nice people to deal with, they are still valued clients. Over the years, we have seen a few “C” clients become “A” or “B” clients when their business fortunes have improved.
We have a technical term for “D” and “E” clients. We call them ex-clients. They don't pay on time, they gripe about price, and generally just aren't nice people. These clients are also among the demanding about our level of service. They expect immediate turnaround. A few years back, one “E” client asked me why it always took so long to complete his projects. I told him, “You are going to pay me in six months. I have other work I can do that pays immediately. What would you do if you owned my business? Would you work for paying customers or nonpaying customers?” I knew he didn't have any money, and his business was barely one step ahead of bankruptcy. He went somewhere else. I was glad. I had been willing to have him as a client as long as he understood the deal between us. Slow pay means slow service. When he no longer understood that, it was time for him to go. I don't miss him. Bad clients also refer other bad clients. When you get rid of one, you are saving yourself the headache of dealing with several more. This guy's referrals had all been struggling business owners, who paid poorly. My life measurably improved when he was gone.
During tax season, Paul and I also keep a top secret list called our bucket list. This is a list of clients, who have become “D” or “E” clients by violating established standards of human behavior. For instance, they made our lives difficult during our busiest season by just generally being pains in the ass. We might have had problems getting them to provide information for their tax returns, or they might have lousy payment histories. In general, that isn't enough to get on the bucket list. These attributes usually have to be combined with general nastiness. That gets them on the bucket list. The bucket list is our list of clients, who are dead to us. We want them dead and gone from our lives.
A couple weeks after the April 15th tax deadline, we sit down and re-evaluate the clients on the bucket list. My bucket list will normally consist of five or six clients, who have fallen to the level of vermin in my eyes. A couple weeks after tax season, I reconsider the situations that have put clients on the list. With tax season over, my emotions have calmed, and I am in a position to really consider if a client is a bad client. In a lot of cases, I have to honestly admit to some blame myself. By the time I am done, the bucket list normally shrinks to two or three clients. They get the firing letter. The firing letter is just like the breakup letters high school girls send ex-boyfriends. The general theme is, “It's not you. It's me.” I don't mean that any more than high school girls do.
One client a few years back had his banker call me about when his corporate tax returns would be done before this client had even sent me his tax information. During tax season, I don't have time to deal with useless telephone calls. There was nothing I could tell the banker. Because of confidentially laws, I literally couldn't discuss anything with him since I didn't have the client's permission. This was an absolute total waste of fifteen minutes of my precious, limited time on earth. When the client's tax information came to our office the next day, I packed it back up and sent it right back to him. This guy had become an ex-client before actually becoming a client in the first place. Here is a hint for you. Don't have your banker call your CPA before you have given permission for the communication. This maneuver will get you on your CPA's bucket list. Yes, he / she has one. We all do.
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