How to Recognize Which Customers Are Bad for BusinessSome customers take up too much time and energy. Here's how decide who isn't giving you a return on your investment.
ByJoe Worth•
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Q:How can I identify the customers I should shed--the ones who suck up my time and energy in exchange for meager returns?
A:Most business owners know in their guts that a good chunk ofcustomersare not profitable. But in a universe in which it's drummed into us that the customer is always right, it amounts to heresy to admit that a customer may, in fact, be wrong and should go. It's difficult to send any potential revenue packing, but culling the client list is worth it--it frees up resources to take better care of your best customers.
The Pareto principle, more commonly known as "the 80-20 rule," can be applied to customer profitability. In short, it means that 20 percent of your customers likely provide 80 percent of your profits. Inversely, it says that 20 percent of your customers may be sucking up an astounding 80 percent of your direct customer costs.
