Your customers are your business. Without them, all is lost. That's why experts from around the country talk at length about ways to retain them. But as important as they are to your operation, not all customers are worth having. In fact, some can be downright miserable, even unprofitable. For those, a "Dear John" letter may be the best thing for your business.
Identifying Problem Customers
Customers come in all sizes, shapes and personalities. Some are more profitable than others, and some are just easier to do business with than others. They vary in other ways, as well, including property type, proximity to your operation and the level of maintenance they expect. And then there are those who are particularly difficult to accommodate.
One contractor, recently interviewed for a Walker Talk story, told about having a two-complaint rule. If a customer complained once, his crews would make the appropriate fix. If the customer complained a second time, his company literally fired the customer.
Sounds a little bold - and it was. But this individual felt so strongly about the level of service his company provided that more than one customer complaint was considered unfounded, and a nuisance. To accommodate that customer was both frustrating and costly. The solution: send the customer packing.
How can you identify your problem customers? In most cases, you know who they are just by measuring your blood pressure when you're on the phone with them. But there is a more scientific way to make a judgment, says Scott Evans.
A Walker user and a Walker Talk subject in Volume 7, Scott with wife Pam operates Scott and Company in Bay City, Texas. He also runs an employee service for contractors, and does some consulting. Evans advises you to grade all your properties (customers) on four criteria: 1) profitability, 2) the hassle factor, 3) their proximity to your facility, and 4) how proud you are of the landscape.
Give each property a grade from 1 to 10 (1 being the lowest grade) on each of the above criterion. Depending on your business situation, you may weigh each of the four categories the same. Or you may decide that one of the four is more important for your operation. For example, your company isn't making enough profit so you need to give category 1 (profitability) more weight. Either way you do it, grade each property. And when the dust has settled, look at the lowest scores.
Instead of outright firing an unprofitable account or one that gives you a lot of hassles, Evans suggest simply raising your price to them. One approach is to raise prices to the 20% of those properties receiving the lowest score. If customers accept the increase, that's not a problem, he adds. The raise will make the problem accounts more profitable, and more tolerable if hassles persist.
Tread Lightly
Getting rid of unprofitable or problem accounts may be the best thing for your business in the long run, but don't take the move lightly, advises industry consultant Jack Mattingly. Make sure, for starters, that you can live without their revenue.
"Even accounts that don't turn a profit may help pay the overhead," he emphasizes. "Be sure you can do without before actually doing without." Evaluate any possible repercussions, too, he adds. Is this problem customer going to spread rumors about your operation? Or will losing the account create other hard feelings. In other words, there is a right and a wrong way to relieve a customer of your services.
For your own peace of mind and theirs, Mattingly suggests you take problem customers to the point where you've done everything you can for them before firing them. Ideally, that includes showing them photos of their property before and after you took over the account, and documenting in a friendly way all your attempts to fix perceived problems.
If nothing really satisfies the customer, then, in his words, "It's time to throw in the towel; life is too short." He agrees with Evans that selectively raising your price is an effective and diplomatic way to weed out bad customers. Unfortunately, most contractors can only do that once a year, and problems usually occur well after the contract has been signed. When a price increase isn't feasible, the resignation letter will suffice, along with an explanation documenting your best efforts. Again, you need to explain to customers why you can no longer offer your services.
Once you've identified problem customers and decided to fire them, there is no better time than now to act, says Evans. "A good economy gives lawn maintenance contractors the opportunity to strengthen their business foundation: to upgrade their facilities, equipment and properties. If you don't upgrade now, when the economy is good and when you have money coming in, when will you be able to make improvements?" he asks.
The customer selection or weeding out process is part of this "good economy" upgrade strategy. Why? When the economy is good, contractors can more likely afford to lose a customer or two. If you can't get rid of troublesome or unprofitable customers when you can afford to, when will you? A scary thought!
So act now, Evans emphasizes. You're in this business to make a prof1t. It's not fair to your family and your employees to maintain unprofitable accounts or those that otherwise can be too troublesome. But as Mattingly suggests, don't take the move lightly. When you drop customers, you lose a business opportunity.
Site Search
