Breaking Up (with Customers) is Hard to Do

A few weeks ago, I was having a phone conversation with a dear friend of mine who is reaching the natural end of a relationship. For some time now, she’s been contemplating breaking up with her live-in boyfriend, but as is often the case, it is hard for her to pull the trigger on the decision, especially now that it’s the holiday season. 

As I advised her (there’s never a GOOD time to break up with someone, so you might as well do it as soon as you know you are going to, rather than letting them carry on, thinking everything is hunky-dory), I thought about all my clients who’ve had similar conversations with me about bad customers, and how they struggle to “break up” with them. There are a multitude of different reasons why ending a difficult, unprofitable or even toxic customer relationship is hard, but several come up again and again. 

For some, it is a matter of scarcity thinking—if I fire this customer, I’ll never find another one, and my business will collapse. In those cases, it is important to remember that one customer should never make or break your business. If you are overly beholden to one source of revenue, serious work needs to be done to diversify your customer base. But more often than not, this is simply a feeling, not a fact, and firing one customer won’t be the end of your business and will, in fact, free you up to seek more and better business with other customers. 

Another issue with firing customers is the sunk-cost fallacy. You’ve already spent so much time/effort/energy to close and work with this customer, if you quit now, all that will be wasted. In this situation, I like to trot out one of my dad’s favorite sayings, “Don’t throw good money after bad.” Or good time. Or good effort or energy. You’ll never recover the money/time/energy you’ve already put in if the customer relationship isn’t productive or good. But you WILL waste even more money/time/energy on them if you keep working with them. 

Finally, and this one’s a killer, there’s the “Marquee Customer” excuse. That’s when you’ve worked to close a customer who has major name recognition, or is one of the big dogs in your industry, or who carries a lot of weight. Often, these customers are fully aware of their position in the market and they take advantage of their vendors because of it. Long payment terms, tiny margins, unreasonable demands, renegotiating terms mid-deal, etc. And, if you are a smaller company, or one looking to make a start, or just a decent human who wants to provide good customer service, you can get sucked into doing all these things, and not making much money at all, but being unwilling to leave because it looks so cool to be able to list this company on your customers page, or in the proposal to investors. 

All three of these reasons, and a handful more, can stop you from doing a clear-eyed analysis of your customer base and breaking up with those customers who aren’t a great fit for you. Maybe you tell yourself you’ll just finish this engagement and then quit, but another one comes up and you say yes. Or maybe you think that the next annual pricing bid will be better and you just have to get through losing money on them for a little while longer. Or you think that the other, good customers you have will balance them out and you can just struggle through it. 

But you seriously need to knock that off. All of it. Your product or service is worth more than that, just like my dear friend in the introduction is worth more than her current relationship. It doesn’t matter that it’s the holidays, or that things are busy, or that you have the time for them...now. There will never be a good time to end a customer relationship, so you just need to rip off that particular Band-aid. Wind down the engagement, suggest other service providers who might be able to help them, whatever it takes. Just get them out of your business so you can focus on other business that’s worth your time, effort and energy.