Get Rid of Non-Fit Clients —Morgan

SO YOU’VE trimmed your staff to the essential team and you’ve streamlined your workflow to be überefficient, but your profitability still leaves something to be desired. Next step: get rid of some customers. You heard me. As scary as that may seem, deep down you know it’s the right thing to do.

All customers are not equal and chances are that over the years you’ve accumulated some clients that, well, just are not good for your business…like the advertising agency, which pays 90 days after you invoice, whose rush jobs scream through the plant when they come in sporadically, bumping steady customers…and like the very, very nice and very, very small customer that prints its holiday cards with you once a year. It’s time to get rid of them.

Identifying Hidden Costs

Opportunity cost: In economics, opportunity cost, or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity). Consider that some of your customers may be keeping you from more profitable business. Even if you have excess capacity in the plant, think of how non-fit clients keep your customer service, estimating and sales teams from being efficient—and keep them from bringing in more profitable clients.

As a former consultant, when I reviewed customer lists in printing companies I would typically see that 25 percent to 40 percent of their customers were simply not a good financial fit. The accumulation of non-fit customers is not unusual; often you don’t know a prospective client’s potential or issues until after you’ve started working with them. Besides very slow pay or lack of volume, other reasons that a customer might not be a good fit could include that the company simply doesn’t buy your core competencies. Or maybe the client has the volume, but the profit margin is just too low.

With the fresh start of a new year, now is a good time to review your client list and evaluate your customer base to make sure that your company selects and focuses on clientele that are the best fit. Even if you decide not to get rid of any customers, it at least gives your establishment the opportunity to offer superior service and better scheduling to the more profitable clients.

Here are just a few tools you can use to evaluate your customers to determine which ones are the best fit for your company:

• Hit ratios (the number of jobs quoted vs. jobs awarded). This is a great resource to see if your estimating team can become more efficient. There are just two simple things to consider. Find out which customers (or prospects) you do a significant amount of quoting for, but rarely or never get their jobs. You should also evaluate hit ratios by type of job. For instance, does your company keep quoting perfect-bound books, but is never awarded the work? Foregoing a deep analysis, it’s likely your estimators could give you immediate input on this.

• History of volume purchased from your company.

• Profitability of jobs produced. Which customers have jobs that are typically not profitable? Can any of these clients realistically be brought up to a better level?

• Speed with which customers pay their invoices. This is easy to track, but you’ll also need to consider how efficient your company is in getting the invoices out.

• The potential of the account. Have group discussions with your management team, estimators and sales representatives to determine this.

As you evaluate your customer list, you’ll notice that some clients are clearly not the right fit and some are borderline. Go ahead and start the process of eliminating the obvious candidates, then you can devote more time to those customers that might be brought up to a higher level.

However, be careful of how you “fire” or stop doing business with unsuitable buyers. Most printers decide to just raise their prices as a way to get rid of customers that don’t fit. Don’t do it! There are two negative consequences to raising prices with the intention of forcing the customer to leave.

One is that it causes additional work for estimators. It may take the customer a while to “get it.” Meanwhile, resources are spent inappropriately. Perhaps more damaging is that it also confuses the print buyer. The buyer may believe that you low-balled jobs in the beginning and then dramatically raised your prices.

As buyers talk to each other and discuss the printers they work with, it’s probable that this misunderstanding perpetuates a negative image of “inconsistent, high prices” in the marketplace, causing you to lose opportunities with prospective buyers that are a good fit.

Make it a Clean Break

It’s highly likely that these clients don’t know that they are not a good fit for your company. Therefore, it’s important to explain to non-fit customers why the relationship doesn’t work. Sometimes just having an honest discussion with them can resolve the issue.

For the customers who are clearly not the right fit, be direct with your decision and let them know why their work isn’t apprpriate. Then “no-bid” any future Request for Quotations. But avoid surprising them with this decision. If you spring this on them when they’ve got a time-sensitive job that they need you to produce immediately, it puts them in a bad position and you won’t be remembered well.

Your customers will appreciate it if you are proactive. If possible, offer some recommendations of printer suppliers that can service them better. That will help smooth the transition.

By communicating with your non-fit customers proactively and openly, you’ll avoid confusion and possible negative repercussions from them talking with other print buyers. And, of course, you’ll give your customers the opportunity to improve their businesses by helping them find a supplier that’s a better fit with their needs.

There’s no need to feel bad about your decision. There’s a printer for every buyer. If they are not the right fit for your company, it’s highly likely that they will prosper from working with a printer that is right for them. PI

—SUZANNE MORGAN

About the Author
Suzanne Morgan is president of the annual Print Oasis Print Buyers Conference (www.printoasis.com) and Print Buyers Online.com, a free educational e-community for print buyers and their print suppliers (www.printbuyersonline.com). PBO has more than 11,000 members who buy $13 billion a year in printing. PBO conducts weekly research on buying trends and teaches organizations how to work more effectively with their print suppliers. Morgan can be reached at smorgan@printbuyersonline.com.