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Some customers you do not want. Trust me.

badcustomer by Jeremiah Olsen / November 21, 2014

"It's just leaving money on the table!"

Those were the words of my business partner. We ran a home services company that included pest control, window cleaning, walking the dog, cleaning gutters, waxing the car, hanging lights, and whatever my partner could convince anyone to give us money for. I found myself perilously hanging from rooftop gables, fighting giant black widows in crawlspaces, and risking my life for what I thought was enough money to get an early retirement.

Turns out I was wrong, not about the risking my life part, but the money part. Sure, our customers gave us money, but we barely had enough to cover our expenses. Why? I couldn't believe our accounting numbers from the previous quarter. We took on enough business to warrant hiring three more techs. We never turned a customer away. We took money from anyone willing to give it to us. Why then were we barely treading water?

Its cash flow, son.

It turns out that if you don't demand customers pay you, they won't. We accepted payment with cash, check, card, chickens, barter, IOUs, etc. We did the work self-assured that we were raking it in. Customers didn't pay us for months, during which time we had payroll, taxes, fuel, insurance, rent, and other costs to account for. Our creditors and landlords were unforgiving, yet we gave customers months to pay.

Solutions on the horizon

We couldn't and didn't want to keep it up. I made some changes. Making these changes are counter-intuitive business decisions--they seem like they are the opposite of the right decision but end up being the right one.

We refused any customer that didn't pay by credit or debit card. By enforcing a strict policy of card-only payment, a curious thing happened: our customers gave us their cards. Many customers told us "we prefer check." We replied, "we don't work if we don't have the card." More than 90% of our customers gave their card number. Our cash flow issues almost evaporated overnight. Sure there are bad cards, insufficient funds, etc, but its a lot better to deal with than no money. Paying merchant fees is a small price to ensure cash flow with a growing business.

It turns out that if you don't demand customers pay you, they won't.

Something else happened when we only accepted credit/debit cards. The customers that gave us the most headache were generally the ones who refused to give their card. We killed 2 birds with 1 stone: we solved cash flow issues AND got rid of the 5% of the customers that caused 95% of our headache. It was BEAUTIFUL. The hard reality is this: some customer you don't want. Refusing to do business with unreasonable people, especially in the service industry, will remove stress and fill your life with glorious joy. Why do business with people who call you back 50 times a week with unreasonable demands, refuse to pay you when you ask for payment, and haggle you half to death when they do pay? Don't do business with unreasonable people! In our case, if our customers refused our conditions, that quickly identified them as no-go customers.

You may say, "that is leaving money on the table." Maybe. But that is dirty money. Blood money. Ok, not really. But that money is not worth it! And there are always other customers out there that will pay your asking price and not call you at 1 am with crazy demands. Find them and do business with them.

Focus on doing what you do best.

Instead of doing anything for a buck, we stayed to the two biggest moneymakers: pest control and window cleaning. We became masters at these things. We squeezed every last percentage of profit out of our margins by mastering the processes of pest control and window cleaning.

Now you can do a broad-spectrum approach and do anything for a buck, but there is magic in focusing on the thing you do best, mastering that, then horizontally branching out.

It's ok to leave that money on the table. Grab the money on your plate instead.