Some folks think it’s never good business to turn away business. I beg to differ. In fact, there are times when new business will cost you money, tarnish your reputation, and possibly even damage the long-term prospects of your organization. You’re probably thinking, “You’re kidding, right?” The fact is, there are times when it’s good business to turn away business.
Less can be more.
Subtracting Business Is as Important as Adding It
If you’re one of those folks who believe that new sales are always a plus, the customer is always right, or you should never turn away business, here are 10 cases where that thinking can cost you dearly.
Holding a fire sale. There are many reasons why people sell products or services for a VERY skimpy profit. For example, some folks panic when they hit a slow period. Others offer quantity discounts even though the customer doesn’t qualify for them. And of course, some salespeople discount goods just to get the order. As the saying goes, “They lose money on every sale, but make it up on volume.”
Failing to satisfy needs. Some people make the sale even though the product or service won’t satisfy their customer’s needs. That doesn’t stop them, but it should. If you think good news travels fast, know that bad news travels faster. The fact is, a one-time sale should never trump a long-term customer relationship.
Making false promises. Some folks close a sale even though they don’t have the resources, capacity, or the experience to deliver on their promise. They think they’ll get the order and then figure out how to deliver it. Or they’ll fake it, and outsource the business to another organization. If that thought crosses your mind, think again.
Accepting unrealistic customer demands. Some customers are high maintenance. (Ugh!) They’re demanding, unreasonable, and expect special treatment. The truth is, you’ll never make those customers happy. Plus, they’ll be the first ones to post negative reviews on social media. Ask yourself whether their business is worth it.
Ignoring ill treatment. Some customers are mean spirited; they mistreat your employees and destroy your other customers’ experience. These customers will sap your energy and demoralize your staff. Don’t take it personally, though; they treat everyone that way. Customers who play games should find someone else to play with.
Losing focus. The 80/20 rule, also known as the Pareto Principle, suggests that 20 percent of your activities account for 80 percent of your results. That principle can often be applied to your customer base — 20 percent of your customers contribute 80 percent of your sales volume. Having said that, if you let “high-maintenance” customers distract you from your top ones, your best customers may feel neglected and leave for greener pastures.
Tolerating greed. Some customers want to prove they’re in charge. They’ll “beat you up” or nickel-and-dime you to death — until you surrender. They refuse to accept the fact that all business relationships should be win-win. That behavior can take a tremendous toll on your psyche as well as your bottom line.
Winning at all costs. Some salespeople will do anything, and I mean anything, to win. That includes making promises they’ll live to regret. It’s better to walk away from a sale than to lose your shirt.
If you sell strictly on price, it’ll cost you dearly.
Trying to be all things to all people. Some folks forget what business they’re in. (Their company is a mile wide and an inch deep.) They’ll take on anything that walks through the door. The fact is, being all things to all people is a guaranteed recipe for mediocrity.
Caving in to unethical or illegal demands. Some folks will do just about anything to get a sale — including deceptive or illegal practices. They know that what they’re doing is wrong, but they rationalize their actions by thinking it’s just one time. The truth is that it rarely is. You may get the sale, but you’re selling your soul in the process. You be the judge whether that cost is too high.
The next time you celebrate a sale, make sure it’s in your best interest to do so. As the saying goes, “Knowing when to walk away is Wisdom. Being able to is Courage. Walking away with grace, and your held head high, is Dignity.”
Do You Turn Away Business?
Please leave a comment and tell us what you think or share it with someone who can benefit from the information.
Additional Reading:
Do You Promote Excellence?
Are You Sabotaging Your Success?
Step Up Your Game
Thanks for a Job Well Done
50 Insane Mistakes Companies Make
Mediocre Behavior Is a Choice
30 Questions Every Business Owner Should Answer
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Hi Frank, i.just did yesterday. I realized I did not have enough time for the business as the tasks would be a time suck and I want to service my current business as best I can.
I have a few freelancers but this new business was not work I could even pass along.
I totally agree with you as I’d had 2 customers that took up way too much time for the money.
Good for you, Lisa. What you did takes a lot of courage and discipline. I’ve learned that it’s the right thing to do in the long run.
BTW, I’m not suggesting these examples should be followed to a tee, but it’s important to at least give it some thought. The normal, knee-jerk reaction is that all business is good business.
Thanks for taking the time to write.
Best,
Frank
Hi Frank,
I worked in the retail bike industry in the 80’s. At the time, we were over a week backlogged for repairs. And a lot of that was stuff that was junk/difficult to work on for someone who had unreasonable expectations of what they would end up with. The owner thought we needed more repair business and wanted to cut repair prices to bring in more repairs. ‘Cut prices and make it up on volume.’ But we were already overworked. I explained if we bring in more repairs, we need more staff. That increases overhead – you know the story – we would be chasing our tails to work on junk/difficult stuff. Since we were overbooked, I suggested increasing prices 10%, we could lose 20% of the repairs – hopefully all the junk/difficult stuff from those with unreasonable expectations – and still make the same dollar volume of profit, and get a little bit of a breather for staff. As I recall, neither happened but for me, it was a good financial exercise for me.
Your instincts are excellent, David. I’m sure you learned an important lesson. The question is whether the bike shop owner did?
In any case, setting proper expectations is key. Winning a short-term sale at the expense of a long-term relationship never makes sense. When you tell the truth re: the delivery date, the customer is forced to make a choice between leaving the bike or taking it to another store. Plus, if they need the bike back sooner they may even volunteer to pay a premium — that’s a win-win scenario.
Thanks for taking the time to write.
Best,
Frank
Frank, your reasons for NOT taking on business are really great but more important, if people elect not to follow your advice, any profits will be destroyed by the hassle and grief it will cause. Before my partner and I decide to take on a new client project we insist on meeting with them over lunch. Having a face-to-face is the is the last task in our due diligence process. Over lunch the potential client will slip into his / her real personality. If they talk incessantly, it is a clue they won’t listen to advice and counsel. If they constantly tell you how great they are their ego will get in the way in forming a working partnership and they won’t listen to advice. If they don’t make an attempt to offer to pay for lunch (BTW, we would NEVER allow a client or potential client to host) it indicates they 1) assume we want the business and will take advantage of the situation now and every time we get together in the future; 2) offering to pay is a good sign they are reasonable people and will probably be good partners and; 3) there is some intangible feeling you get (instinct) that will guide your decision on taking on a new customer — listen to your instincts.
Hi John
You bring up a very important point.
It’s critical to be selective in accepting new clients.
A partnership is successful to the degree that it’s win-win. It replaces the traditional “us versus them” mentality with a new “us” that enables everyone to focus on what they can achieve together.
Formal contracts don’t make successful relationships, people do. It requires a willingness to create a foundation on which trust, loyalty, and commitment can be built.
Clients who understand and embrace a win-win philosophy often find that the journey is more pleasurable and the results far superior.
Thanks for taking the time to write.
Best,
Frank
Frank,
I’ve been in the cleaning business for 15 years now. When we first started it was yes, yes, yes to everyone. As we matured, I learned, the hard way, that not all customers are created equal and the small customers demanded as much or more of us then our large customers. So, I set a vision of what the customer base should look like in 5 years, 10 years, etc. This allowed my team to slowly adjust to new saying NO. We started with raising our minimum monthly billing and review it, as a company, every year. This creates buy-in. We’ve also de-selected industries that aren’t a good fit.
It takes time and new reps always want to “eat the candy” of low hanging opportunities. I tell them they can go ahead and do that but no commissions will be paid. It stops the behavior pretty quickly.
Getting rid of the noise in our system had given us the time to focus on the customers we really care about. But this is a process not a point in time event and you need to be true to your hard lines in the sand, even if it means passing on a big opportunity (that you probably wouldn’t get paid for because their credit is so bad).
Great advice, Cindy
Your plan is well-thought-out 🙂
Four factors contributed to your success. First, you set goals by determining what you wanted your customer base to look like in five to ten years. Second, you increased pricing to weed out customers who were only interested in price rather than value. Third, you identified your target market — industries that represented a good fit for your organization. Last, you revised your sales commission structure so that their behavior would be in sync with your goals. This integrated plan is awesome. It’s easy to see why you were successful.
Thanks for taking the time to write and sharing your story.
Best,
Frank
The company I work for always kept plenty of stock compared to their rivals, so when Covid hit, with lockdowns and deliveries not being sent from China etc, they opened up their rules about drop shipping for their customers, picking up a huge amount of business where other suppliers had run out of stock.
The problem was however, that the cost of processing small orders, is a lot higher than processing large orders, plus some items were low cost but large and awkward to ship, resulting in a financial loss for handling them.
You always have to consider whether it’s worthwhile dealing with some types of business as making a profit has to be a key factor.
Great point, Tony. The knee-jerk reaction is often to chase business irrespective of whether it makes any sense to do so. As the saying goes, “They lose money on every sale, but make it up on volume.”
Thanks for taking the time to write.
Best,
Frank