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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

What Happens When You Outgrow a Customer?

Written By: Brad Shorr | No Comments

When you realize a customer is holding you back instead of pushing you forward, it’s one of the most bittersweet growing pains you’ll ever experience.

Justifiably so, companies hate to fire a customer. First, there’s the dollars-and-cents part: nobody likes to forego revenue that’s already in the coffers. But there’s also an emotional side of the equation: how do you ditch a customer who was there when you needed them, who helped make you the thriving business you are today?

Revenue and loyalty: these considerations are powerful arguments for hanging on to customers even when your service model no longer fits them, and even when the cost of maintaining their business has become a losing proposition.

But the issue of loyalty is really a good starting point for letting go. When you realize that hanging on may be a disservice to your customer, it’s easier to contemplate options. It becomes not only a question of how you can best grow, but also a question of how you can best help your customer grow.

Here are options I’ve seen (and used) for successfully working through these tough situations: 

Refer the customer to a better supplier. Firing a customer and leaving them in the lurch will damage your reputation, and almost certainly destroy the relationship. On the other hand, if you recommend an alternative that will help your former customer thrive, you can keep the relationship going … and the day may come when doing business together makes sense again.

Develop a referral program. If you have a number of legacy customers who no longer fit your business model, partner with a similar firm that is perfectly set up to help them. In this way, transitioning customers will be a smooth, positive experience for all concerned – and you may be able to collect a finder’s fee or ongoing commission as well.

Crank up your new account acquisition activity. If you’ve decided to let go of a customer(s), you’ll sleep like a baby knowing your pipeline is overflowing with high-quality leads.

Shift customers to the right products and services. Sometimes it’s not so much that a firm has outgrown a customer, as a situation where, frankly, the firm is too lazy to get the customer on board with its new business model. If your customer is set up on a fossilized service contract from 1998 … whose fault is that?

Create a new business unit. Instead of firing customers, perhaps there’s enough existing (and potential) volume to continue servicing them. The key to making it work is to restructure your organization so these troublesome customers no longer bottleneck your main business. Once you make the troublesome customer someone’s top priority rather than everyone’s distraction, that’s when the magic happens.

So, as you can see, there are several ways to handle customers who are no longer ideal. It can really pay off to take a look at who they are, what they need, and decide on the best way to connect them with the right resource.

How do you handle customers you’ve outgrown?

Article written by
Brad Shorr is the Director of B2B Marketing for Straight North, an Internet marketing agency headquartered in Chicago. With many years of entrepreneurial experience, he writes frequently on business strategy and content marketing topics.