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'You're Fired!'
Randall Hilton

Some tips on deciding if, and how, you should ‘fire’ customers.

Not long ago, a major player in the cell phone market made big headlines by firing over a thousand cus-tomers at once. The populist news media had some fun at the company’s expense for its public relations faux pas, but the company’s basis for handing out pink slips was sound: They couldn’t earn a profit by serving this batch of customers. Every now and then, PHC contractors need to do some trimming as well. Let’s explore a few pros and cons of firing a customer.

First, some excellent reasons to make out a pink slip in a jiffy:

Solicitation of illegal activities. “I’ll tell you what,” Bill told Kim, his service profes-sional, “if you write it up as defective piping on this insurance job, I can let you replace the toilet at my home, too. Feel free to include the trip charge and a tip in the price.”

Although the temptation for an upsell was strong, Kim declined the opportunity. “Accessory to fraud” was not in her resume. She wasn’t a crook and certainly wasn’t going to start being one today. She handed Bill his pink slip and left.

Health risks to you and your employees. Over the years I’ve seen some hideous liv-ing conditions. No, I’m not talking about slums in a third-world country. I’m talking about homes in middle-class suburban neighborhoods which don’t look too bad on the outside but behind the entry door is an overwhelming stench of pet filth, garbage, mildew and other health risks.

I couldn’t ask an employee to work in an environment like that. Besides health issues, imagine firing up a torch in one of these places. Hand them a pink slip and get down the road. They need more help than you can offer.

Other firings require a bit more tact and thought before filing out the pink slip:

Refusal to be cooperative. You need to get approval before proceeding with a repair and your customer has evaporated. Calls to his cell phone are greeted with voice mail and here you are, wasting time. Do you stay or do you leave?

We all have surprises from time to time, so assume your customer has experienced a surprise of some sort. If you have other customers waiting, inform whomever is watching over the project that you’ll be leaving and will return when you can communicate with your customer.

If, on the next trip out, he abandons you again, then perhaps it’s time to cut your losses and run. If a customer is this difficult to chase down for work approval, just think how much trouble you’ll have when it’s time to collect. Just leave the pink slip on the door knob.

Unrealistic expectations. Some customers have unrealistic expectations. The trick is to determine what created the expectation in the first place. If your advertising boldly proclaims, “Our flat rate pricing saves you money,” yet your company is the highest-priced in town, then don’t be surprised when a customer complains about the price.

There’s nothing wrong with having the highest price in town, especially in our profession where most don’t charge enough to begin with. But giving your customer the expectation of a low price sets up an unrealistic expectation. Firing this customer will probably be necessary but it’s not their fault. Focus your marketing on customers who appreciate the level of service you offer and you won’t have to fire so many.

If you’re a budget-priced contractor, you’re not off the hook either. Don’t claim 24-hour service if you can’t deliver it. Don’t claim strong guarantees, fast service, top-notch customer care unless you can deliver it. These are items that make the high-dollar companies cost more.

If you don’t have the money in your budget, yet you advertise as if you do, then you’re setting up an unrealistic expectation. You may have to fire a few customers for expecting you to deliver this level of service, but more likely they’ll fire you. If you’re going to be a low-budget contractor, market to a low-budget customer base and there will be fewer firings.

Regardless of the economic strata of your customer, be concise when spelling out the services to be performed. Don’t let a customer fool themselves into thinking that replacing a capacitor on the con-denser unit is going to guarantee there are no other problems in the system. Be very clear about the other problems that may be revealed once you take care of the original issue. If he continues to ex-pect a new system for the price of a capacitor, then it’s time to put him on your “do not serve” list.

Wheeler dealers. A wheeler-dealer property manager poses a bit more complicated decision. You offer a service, quote the price and he responds with a counteroffer. Deal or no deal? This is a decision best made in the office but before firing him, do some quick math: If the discount he’s asking for isn’t much different than the percentage you pay for marketing, then why not give him the deal?

This is one instance where a high volume of repeat business actually makes it worth the discount. On the other hand, if he wants a deeper discount, plus 90 days to pay, then it may be pink slip time. The deeper you cut your pricing, the slimmer your margins. Slim margins leave little room for error, which means errors come out of your pocket, not out of the profits.

You Can't Fire Me, I Quit!

Successful PHC contractors should get a substantial portion of their service work from existing customers and new customers referred by them. The longer you’re in business, the more repeat and referral work you should harvest.

It’s difficult to pin down a benchmark since different contractors have different goals for growth, but if you’ve been around for three years or more, at least half your work should come from repeat and referral business. If you’re not getting your share of this gold mine, then perhaps your customers are quitting.

Some customers simply forget who they called the last time they needed help. Others may have been disappointed with some aspect of your service. If you don’t follow up after every completed job, and stay in touch at least three times per year afterwards, then don’t be surprised when you find your competitor’s truck in your customer’s driveway.

The Cost Of Firing A Customer

Owning a service company does not automatically guarantee a flock of customers. You have to pay for each and every one of them, including those whom you think are “free” by way of referral or re-peat business.

Do you know what a new customer costs? It’s sometimes a difficult number to pin down, but if you ask each customer how they found out about your company, you can divide the cost of that advertis-ing campaign by the number of new customers it generated to get an idea. Don’t be surprised to find that a new customer costs you more than $200. If your advertising budget is 10 percent of sales, then you need to see at least $2,000 in sales from that customer before you hit your budget numbers.

Even when a customer is difficult to work with, if he’s meeting these revenue expectations, think long and hard before firing him. If you’ve done everything you can do to help a customer be profit-able for your company, then it’s time to hand out the pink slip. But the pink slip is not the end of the process. Pay attention to why you have to fire customers. Perhaps there’s a common thread that can turn into a market for you.

Try to base your firings on numbers and policy, not emotions. Firing customers who take up too much time while sucking your profit margins dry help you do a better job of serving the customers who fit your business.

Don’t be hasty to fire, but don’t be bashful about it when the time comes.

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Visit Randall's Web site at www.UpFrontPrice.com or e-mail him at Randall@upfrontprice.com.