Would you ever drop a customer?

May 1st, 2009

YES! Especially in today’s challenging economy, it is even more critical to re-evalue your customer base. Is there a customer that absorbs excessive inventory? If so, even if they have a decent margin, it might be something to think twice about since inventory absorbs extra cash. Or, find a way to modify the agreement. Certainly, re-evaluate low/ negative margin customers. There is no way to come out ahead on a negative margin customer with volume! (sounds funny but I’ve heard it before) What if you have a decent margin customer that never pays their bills on time? It depends. Or, what if your customer has a significant risk to their liquidity due to their customer base or another reason? All of these considerations should be evaluated. And, if you decide to drop a customer, treat them as you’d expect to be treated. Give them ample warning and help with a transition. Or, on the other hand, you might find a “gem” customer you have overlooked. Appreciate them.