It has been said many times, "The customer is always right." Unfortunately, not every customer is right when it's about you making money. Make sure to serve the customers who are making you rich.
The Value of Customers
These days, there are quite a few leeches and freeloaders around. If you listen to them, you will not be making any money. You should selectively deal with profitable customers. However, if you subjectively select customers, you will not make money either. People at casinos are good examples. When people are losing, they usually get irritable and start causing trouble -- that is, accusing the gambling house of pulling dirty tricks. They seem to be troublemakers; however, when customers are losing, the house is profiting. Despite their behaviour, they are profitable customers. When you are selecting customers, you need to calculate the true value of customers, rather than selecting them (or rejecting them) based on their surface behaviours.
Evaluating the Cost of Customers
Each business makes its profits in different ways, so there is no one-size-fits-all formula. But the basic principle they all share is that you should not only calculate revenues from direct sales, but also take into account your associated expenses. For example, a customer frequents your store but uses your customer-support service abusively. As a result, all the profits from selling him or her products are used up by having to pay your support staff's wages. This is what can happen if you ignore the associated expenses.
Excluding Costly Customers
If your careful evaluation shows a particular customer is not bringing you any profit, you'd better avoid dealing with him or her. Yet many business owners fear losing customers and/or profits. That's why many business owners do too many favours for customers, such as letting them miss payment due dates just because they place big orders. Any customer who misses a payment due date is a matter of concern, no matter how large the order is. If you do not receive payments on time, the orders you deliver will become business losses. You might lose customers, but you will never lose any profits, as long as your evaluations are accurate.
© November, 2012