Have you ever heard of the 80-20 rule? It suggests that 20% of your efforts leads to 80% of your results. This idea is known as Pareto’s principle, and entrepreneur Tim Ferriss famously applied this rule to business and sales. In his book, The 4-Hour Workweek, Ferriss asserts that 80% of your sales actually come from 20% of your customer base.

 

This 20% is made up of your most loyal customers, those who are easy to work with and provide you with consistent revenue streams. That also means that you probably spend a large amount of time fussing with difficult customers, who make up the majority of your customer base, but contribute very little to actual sales. Saying goodbye to bad customers can free up time for your company to focus on high-revenue clients and healthy relationships.

 

Cost-Benefit Analysis

 

Sit down with your customer service and marketing teams to identify customers who are consistently problematic. These might be individuals who are late with payments, unnecessarily argumentative, or hard to communicate with. Record how much time you’re actually sinking into these interactions. You might initially value a customer when they invest in your products, but if you a lot of time with them to resolve a minor issue, you may be negatively impacting your bottom line. Also, certain types of customers, who order only a certain subset of what you offer, may not be worth the time and effort to recruit into your business.

 

Trim the Fat

 

Always use professional language when terminating a business relationship. Explain that your services or products are not the best fit for your customer’s needs, and suggest a few “outs” for them. If they give you pushback, then fall back on your company’s guidelines and policies. Depending on the scenario, you might want to speak to your company’s legal advisor to untangle from problematic clients.

 

Be clear with termination deadlines and payment requirements. You’ll want to have this information in writing. Initially, you might be worried about losing revenue after dropping these customers. But don’t forget that your company’s time is also a commodity – and certain customers are taking advantage of it!

 

Cultivate Good Clients

 

Remember that 20% of great clients? In some cases it may be less or more depending on your business. The important thing is to know who they are, what they need, and strengthen your business relationships with them.

 

Their referrals can help you build a higher quality client base. Network with your best clients and see if they can help you drum up new business opportunities. Have you ever heard that old adage, “Birds of a feather flock together?” Chance are, these great clients know other fantastic resources. Make sure that you have an easy way for referrals to get in touch with you, such as a dedicated toll free number or company email address.

 

Before Saying Goodbye

 

How do you “fire” your customers without incurring their wrath or legal repercussions? Well, first you’ll want to close out any contractual obligations you have for this customer. If they have already violated the contract for a service, then you can just send them a notice that a service will be discontinued unless they adhere to the contract.

 

It’s also possible that corrective measures might actually patch up a broken client-business relationship, especially if the client has been unaware of their behavior or violations. However, if these tactics do not work, then may be best served to sever the relationship.

 

If you continue to have issues with problematic clients, you should work on revising your Terms and Conditions and your business contract. These can give you an easy exit strategy when you need to fire bad customers in the future. While it is sad to watch your client base dip, you don’t want to spend valuable resources on problematic customers. Firing problem customers should be a clean process – you don’t want to stretch it out over long periods of time. Just thank them for their business and move on.