Run a mental checklist over your client base right now. Who fits into the 'good' client list and who falls into the ‘bad’ client list?
It all really depends on what you define as good and bad.
As we know not all clients are good for your business. Some clients
are a wrong fit for your business but could be a good fit for someone
else; therefore in of themselves they are not necessarily ‘bad’.
However, others are just downright bad for your business.
It is important to consider how much your ‘bad’ clients are costing
you in terms of time, money, frustration, people and product resources,
lost productivity, bad press, angst, legal fees, and tarnished
If you have too many customers falling under the ‘bad’ column you need to ask yourself, “How did this happen?”
Have you set yourself up as a magnet for overly demanding, time
consuming, nit picking, miserly clients who do not see value in what
you do or offer and seem to want a slave rather than a legitimate
Have you set yourself up to be taken advantage of by unscrupulous and unethical people looking for victims?
It is difficult to focus on your best clients if you cannot shed your ‘bad’ ones.
For example, there has been recent media attention on the rise in
Businesses Pheonixing; the act of Phoenixing is where a new company is
formed to buy the assets, contracts, and goodwill of the failing
business for a reasonable market rate. The legacy debt is left within
the old business which is then liquidated thus allowing the new Phoenix
business to trade on, debt free. Creditors and Suppliers to the old
business are often left with unpaid debts which may in turn lead them
to suffer their own financial difficulties. I am sure no one wants to
be put at the mercy of Businesses Pheonixing (‘bad’ clients) if they
can help it.
Chasing the ‘easy’ or ‘quick’ sale may be more trouble than it is
worth especially if the prospect or client is not properly investigated
in relation to their legitimate needs or their intentions are clearly
So, what constitutes a ‘bad’ client?
Besides the obvious impact of bad debts, there are other criteria which constitute ‘bad’ clients. Here are some examples:
- They are bad credit risks with a track record of always paying late
or not at all – they can be checked out by using reputable credit
agencies that keep track of people and companies’ credit ratings.
- They are a poor fit with what you offer and what they need thus
leading to misunderstandings, poor relationships and confusion – this
is usually due to a poor sales approach and not properly understanding
your client and their needs in the first place.
- They are overly demanding on your QA or Customer Service
departments – the ‘nothing is ever right’ syndrome and all they want to
do is complain.
- They ask for expensive prototypes or very detailed proposals with
little probability of a significant purchase – what is usually
happening here is that they are siphoning you for your Intellectual
Property at no cost to them so they can either do it in-house or get
someone cheaper to implement your idea.
- They only want to deal with ‘you’ and expect levels of service
that do not go with their purchasing level – they expect first class
service when they are buying ‘no name’ or house brand products at very
- They complain loudly, often, and publically to anyone who will listen and usually only for ‘effect’ not fact.
- They do not keep their promises and break contract conditions regularly.
- They take your IP and claim it as their own .
- They say one thing and then another – you never know where you
stand with them and they seem to play games, trick you or set traps.
Don’t be fooled by these types of clients they are not worth it, no
matter how attractive they look on the surface and how desperate you
might be to get a sale. Unfortunately, when times are toughest we can
fall prey to these types of prospects or clients which can lead to more
stress and less return on investment.
An experienced business banker once told me a story about an
entrepreneur and business owner who was looking for a new bank to work
with. On the surface this individual and his business looked plausible,
charming and sincere, but when the business banker did his
investigation, he discovered a litany of evidence – failed businesses,
bad debts, frequent changing of banks, poor staff retention and staff
legal issues and a myriad of other things that did not bode well for
this prospect becoming a valid business banking client. As you could
imagine the aforementioned business banker did not proceed with that
If these types of business people continue to behave in this manner
they will eventually run out of legitimate business suppliers or
partners to work with and sadly if they do, they will usually pull up
stumps and go and find fresh victims to exploit.
Another tell tale sign is that they will not have a history of any longstanding, viable relationships of any value or substance.
Many people have slated the sales profession as being ‘shifty’ but
in truth most sales people and their clients are out to do the right
thing by each other. So, it pays for the sales person to also be on
the lookout for the potential ‘bad’ client and do proper
investigations. So don’t believe everything you hear. Do your homework.
So why not have a conversation with your sales team and run your
collective eye over your client base to see if you do have any of these
types of ‘bad’ clients on board? Then work out a strategy to let them
go, learn from your mistakes and don’t get mixed up with these types
again if you can help it.
Maybe it’s time for a client spring clean. It might just free up your time to find and work with more productive clients