For many entrepreneurs, having the laser focus to identify a customer that is not a good fit for their business model is not always on their list of priorities. However, the most profitable MSPs know who their ideal customer is and steer clear of those that aren’t. If you’re struggling with this part of your business, check out my recent blog 6 Clues A Customer May Not Be Right for You.
Getting rid of a less than desirable customer is a skill, and the process can be a daunting one. So, here are some ways to approach this if you need to separate yourself from an underperforming customer.
First, let’s talk about why this needs to happen. Some customers, and you know who they are, are simply a pain. They don’t appreciate you and they complain about your service, your price, and everything in between. You keep them because we are all trained to believe that we need to keep all our customers. However, if you do a profit analysis on each customer, you will quickly see the difference between the customer described above and the ones that value your services. Like anything though, there is a right way and a wrong way to fire a customer.
It’s worth remembering that it’s not uncommon for a customer who was fired to come back once they realize how good you actually were to them. Therefore, how you fire them is extremely important because if they come back, they will not be the same customer as when you fired them. There are three components to a good separation: it should not be a surprise; it should be mutual; and it should be organized and well executed.
“Be prepared” is not just the Boy Scout motto, it happens to be a great idea in business. In this case, I am referring to your service agreements. Your service agreements should always spell out the possible reasons and process for dissolving your relationship. This also puts the customer on notice up front that you expect a level of cooperation on their part, or you can opt-out of the business relationship. In addition to the provisions as to why you would decide to end the agreement, you should also provide the process of how. Off-boarding is just as important as on-boarding. A good off-boarding process leaves the opportunity for a customer to come back. As I mentioned above, a customer that comes back is usually much happier and loyal.
As with any relationship it should always start well. Your service agreement should already have set the expectations properly, including your on-boarding process. Your on-boarding process is your opportunity to level-set the environment. If the on-boarding process is set correctly, you will have the chance to get everything up to par and the added expenses, if any, will not be a surprise to the customer.
When it comes to firing a customer, it should never be a surprise to either of you. The worst thing you can do is identify a poor-performing customer and then just notify them you will no longer be servicing them. Once you identify such a customer, your goal should be to bring them up to ideal before you think of letting them go. This process should start with your regular meetings—sometimes called QBRs (quarterly business reviews) because they are business reviews, frequently done quarterly. Coaching a customer to do the right thing is your job as their service provider. If they decline or ignore your advice, approach them about the consequences and how you simply cannot expose your company and other customers to that kind of risk. I will leave it to you to decide how long to allow them to be non-compliant before cutting ties. Just don’t let it go too long.
In the end, if they cannot be coached into compliance and a separation is warranted, make sure you explain the process up front and offer to help them transition to another provider. One of the dangers here is letting them drag out the process. Set a date for the final service period, provide all the appropriate training and documentation before that date. If they do not pick another provider by that date, you have transferred the appropriate knowledge to the customer and need to not provide service after the final service date. I know this sounds harsh, but I have spoken to many MSPs who allowed a customer to drag this process on for months past the agreed upon date.
Firing a customer is never easy but the short-term pain is worth the long-term gain. The alternative is long-term pain for very little gain. Have a plan for firing a customer, be up front, and be fair. Those things will assuredly bring some of them back when they realize how good you really are.
Eric Anthony is the Head Operations Nerd at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed services provider business for over six years.
You can follow Eric on Twitter at @operations_nerd
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