Dealing with High a Maintenance Customer

“You’re the worst kind; you’re high maintenance but you think you’re low maintenance.”

– Harry Burns (Billy Crystal), When Harry Met Sally

Whether you call them high maintenance, overly-demanding, or just plain bad, certain customers have a way of forcing you to ask yourself if they’re worth the effort. The answer often involves more than just a dollars and cents calculation. Even a profitable customer can cost you and your company a lot in ways that have little to do with what they’re paying you and what it costs to service them.

As a business owner or operator, all you really have to make your company succeed – aside from your expertise or products – are time (a finite number of work hours in a week), resources (personnel, products, money, etc.) and energy (both physical and mental). Any customer that draws more than a reasonable amount from any of these areas is probably already testing your patience.

But what to do?

Recognizing and Dealing with the High Maintenance Customer

High maintenance customers tend to fall into two categories.

1. The Hyper-Needy Customer

The customer is always right. Right?

Well, no. It’s tempting, during a time when the economy is still unsteady and every sale is considered important, to indulge every customer whim. Yes, you’re in business to make a profit and – by extension – to serve your customers, but you need to set some limits.

You can often spot the hyper-needy customer by the way your sales and service people react when he calls the office. He asks for a lot, calls probably too much, and – worst of all – may not have a clear, precise definition of what exactly it is that he needs or wants. If he doesn’t really know, then how can you expect to actually help him?

Here’s what you need to do:

  • Establish your customer’s needs. This might take more of your time initially, but it will allow you to set priorities and manage expectations in the future. And, of course, make sure the customer has a written explanation of your company’s processes and policies that directly impact him. This can save a lot of repetition and effort.
  • Be proactive. If the amount of revenue (current or potential) from this customer warrants it, consider establishing a regular weekly call or meeting where random questions can be answered and loose ends can be tied up. Make sure the customer understands this is for his benefit. If the nuisance contact continues, there’s nothing wrong with very politely saying, “I’m glad you called, but I’m really stretched thin right now, John. Could this wait until our regular Thursday call?”

2. The Financially Draining Customer

You knew this was coming. Bad debt and slow-paying customers are constant problems for small businesses, and they are never easy to deal with.

In a September survey of 750 business owners by Citibank, 30 percent named slow or delinquent receivables as their biggest cash flow management problem, and nearly a quarter blamed late or non-payments for sudden cash shortages during the past year. The survey also noted that making a collection call was the second “most uncomfortable business finance challenge.” (Reducing staff was first.)

Collecting on past-due and slow-paying accounts is literally an industry in itself, which shows how common the problem really is. Here’s what to think about:

  • Figure out if it’s worth it. Let’s be honest…it very well could be. Some of the biggest names in U.S. industry have reputations as notoriously slow payers, but the size and consistency of the orders can make it acceptable. (It’s no big secret that shrewd suppliers price their products and services slightly higher than the going market rate to compensate for the extra time it takes to get paid – and many of the buyers know it!
  • Have a candid conversation with the buyer. Is there anything you can do to make the situation work better? Are you offering discounts for early payments? Some corporate purchasing departments are required to take advantage of these offers.
  • If late payments are a consistent problem, consider invoice or receivables factoring. Working with a factor like MP Star Financial lets you sell your receivables for cash now, instead of waiting 45, 60 or 90 days for payment. You can start the invoice factoring process with an online application.

When to Fire a Customer

It does happen. Except for very narrow cases in certain industries, you can always politely inform a customer that you don’t feel you can meet his needs properly and refer him elsewhere.

But this is the “neutron bomb’ approach to the problem, of course, and much discussion with your team needs to occur first. For example, are there personality issues that are making the relationship difficult? Maybe a different contact person representing your company can improve the situation.

Addressing three very basic questions might help you decide whether to pull the plug.

1.)  Is the customer profitable? (Make sure you account for extra time and resources serving the account.)

2.)  Can the relationship lead to more business, with that customer or others?

3.)  Is my team both learning something and enhancing our reputation in the industry?

The profitability question is obviously most important. If you can add a “yes” response for one of the two others, it’s likely worth staying around.

But if you’re 0 for 3, you need to plan for a way out.

 

Does your company need to get a cash flow management plan together? MP Star Financial provides invoice factoring, purchase order financing and other alternative and asset-based lending services. Call to discuss your options with a no obligation consultation. (800) 833-3765, extension 150.

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