Are you investing in the right customers?

Ever fired a customer? Tough, isn't it? I've seen businesses flounder because they couldn't do this.

Sacred cow alert. How could you not love all your customers?

Except maybe when they grind you into the ground during a renewal negotiation, take you off strategy with product demands, or keep your support team working through the night on something that could have waited 48 hours.

Top accounts are usually selected by the amount of revenue they generate for your business. If these same accounts also provide a customer-level margin that exceeds your overall targets, that’s great. If not, it’s important to know so you can figure out what steps you can take to improve the picture.

Test your relationships

Pick your top five accounts and add up the costs that you incur to keep them happy. This cost should include an allocation of sales time and all COGS (a portion of product development costs, support and service, training, even G&A). It doesn't have to be perfect to figure out whether an account is good for the business.

Now line up the cost for each account against the revenue generated. Do the margins look good, bad or indifferent? If these were your only customers, would your business be better of worse off?

If you find this exercise revealing, how could you extend to the rest of your customer base? Consider grouping smaller customers into segments to make the exercise easier. If you missed these related articles, here's a chance to catch up:

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