Excerpt:
When and How to Fire a Customer

Most small business owners would never think of firing a customer. The very thought terrifies them; it goes against the entrepreneurial spirit.

But the truth is if you have a customer that is continually causing you problems (an "F" level customer), you need to be compensated for the hassle expense. And if the customer is unwilling to pay that cost, then in all probability you are better off without him. There is one very easy way to fire a customer: increase your prices. This is much less confrontational than telling someone you'll no longer do business with him. It then becomes the customer's choice. Either way, it's a win/win for you-you'll either be compensated for the hassle factor or you'll see the last of your problem customer.

Take the case of PRO member Mark, a building contractor who specializes in luxury homes. He recently turned down the opportunity to bid on a $2 million project. Why? Because he learned that his prospective customer had already fired his architect and another builder. From his contacts in the industry, he learned that this customer was impossible to satisfy. Although a $2 million project sounds tempting, Mark realized that this customer would place unreasonable demands on his time, money, and personnel. In the end, the cost outweighed the potential gain, so he walked away.

Firing customers goes hand-in-hand with classifying customers. Most small business owners don't consider the opportunities lost when they spend too much time servicing difficult customers. Yet these types of accounts devour both your internal and external resources.

Consider this: who is more important to you-your customers or your employees? Some employers insist that the customer comes first every time. But if you have problem customers who have your employees in a constant state of misery, then your employees are probably too stressed to service your good customers properly. In this scenario, you risk losing good customers-and good employees-at the expense of the bad ones.

Now don't go fire a customer just to prove you can do it. Rather, understand what kind of customer drives your business and creates profitability-and treat your customers accordingly.