puzzledThe customer may always be right, but not every customer is right for you. Not everyone is the ideal customer for your business. Many business owners feel that they have to keep all their customers or clients because if they don’t, their competition will.

Do you have any customers or clients that take many resources and time but are not providing a good income for your business? In my own businesses I have needed to look at the possibility of discontinuing work for some clients.

I recall having a client that we would provide services, send them an invoice, and wait for payment. Periodically, we would meet to discuss the next steps in the process and create project steps. The topic of payment of their outstanding invoices would be a topic of discussion, in which, the client would continue say just bill them and they will get it paid. This continued for some time until we decided to stop providing services to the client. One month after we decided to discontinue the services, the client declared bankruptcy. Please don’t wait for this to happen to you.

Have you or do you have customers or clients that take more of your time and resources than profit or no profit at all? Do they always want a discount or free products and services? Do you spend most of your time trying to keep them happy?

Maybe you have a client or customer that asks for unrealistic timelines or not having a budget to support the project. A client I encountered wanted to implement an electronic forms printing solution but wanted to be able to use their existing equipment, which was over 15 years old. When we discussed the issue of the outdated equipment and how many hours are required to utilize the existing equipment instead of purchasing more current equipment, the client’s response was to “Just make it work”. This situation demands objectivity and not just a quick decision. We decided it was time to FIRE the client and recommend them to someone else.

Do you have a competitor that takes on any business? Recommend them to the customers or clients that you need to fire.

After all, business is not about growing revenue, but about growing profitable revenue with the right target customer. By focusing on customers with the highest potential in terms of repeat business and larger average transactions, one is able to create a more successful business because marketing and customer service efforts (and costs) can be allocated to where they matter most. But for many business owners, there seems to be a mandate for growth creates a bias for quantity of revenue over quality of revenue.

The initial step is to do the math. You need to calculate the annual revenue from each customer and the cost of serving them, including materials, staff, and outside services.

To determine how much customers or clients actually cost your business, You need to estimate how much time it takes to do common tasks, including a full explanation of a their account statement, and ask employees to record every action they take on behalf of a customer or client. You may be surprised that the customers you find to be the most profitable are not the customers you expected.

For many businesses, the size of the first purchase is a good indication of what future purchases may be. For your current customers who provide less income, but cost you dearly in terms of customer support or other costs, you may want to consider a pricing structure where higher support services are not FREE. In actuality, you can offer customers the choice to become more profitable or to leave.

Your best customers are your fans who have voted with their pocketbooks. They are the customers who will recommend you more often than other customers and would miss you most if your business no longer existed. Find more customers or clients like them, and spend less time trying to turn others into customers like them. You need to thank your best customers for their great patronage and worry less about, or simple FIRE the others.

Steven J. Beaman is a Licensed Professional Business Coach at Soaring Eagles Business Advisors in Minneapolis, MN and can be reached at sales@bcs-mn.com