Disposable clients are historical in nature or easily acquired to fulfill quarterly quota. And then they stick around. Over time, this clientele drives organizations crazy with repeat orders for low-value, low-quantity and low-quality products. Then, disposable clients turn into demanding divas, continuously eating up employee time and attention addressing a never-ending list of complaints.
And you thought your organization was humming along in the black, poised to make the quantum leap to the “next level.”
Unintentionally acquired disposable clients impede business growth and profitability. Think about an entire client base full of them.
One of my clients is an Industry40 small custom fabricator with a sales force of two: the CEO and the General Manager. Over time, the CEO left business development and sales in the hands of his General Manager. However, the GM generates business by cold calling companies and bidding on whatever crumbs of projects they throw in his direction. Or else he calls on existing customers and essentially asks for those same types of crumb projects.
As a result, the company often is ill-prepared to honor the plethora of small orders clogging up production lines. Since the CEO travels a lot, the GM is responsible for project prioritization. And there is none: production lines and paint booths continuously shape-shift. That scenario means constant – and completely unprofitable – setup and teardown, often during in the same day.
When we examined the quantity of orders each customer represents each year, continuing to do business with these disposable customers makes sense. After all, there are a lot of these customers and they pay their invoices.
However, based on gross annual revenue generated per customer, project profitability, and degree of project complexity, another story emerges. At that point, the absent CEO realized that he and the GM were not exactly on the same page, in terms of what constitutes a desirable customer. The type of customer required to drive business growth and expansion, as well as sustain the business.
Intentionally, or not, developing a client base full of disposable clients impedes business growth. Rather than fueling it.
Some of these should-be-disposable clients are “first” clients: the ones acquired “way back when” the business was born. As a result, leadership is sentimental about retaining them. In fact, by this point, some of these “first” clients are personal friends.
These older clients retain your company for the same emotional reasons that you continue to do business with them. However, continuing to conduct the same type of business with them, at the same scale as those initial orders, actually holds you both back. Because what you both are capable of, right now, is something else entirely, isn’t it?
Then again, other disposable customers unintentionally segment your own company as a provider of limited, low-quality products and services. Even when you tell them you are capable of so much more than the “same old.” As a result, they never offer you anything more than crumbs. While awarding more complex projects to others.
Either way, are you unintentionally continuing to do business with clients who should be disposed of? Are these clients the folks who bring out the best in your organization’s core capabilities?
Take this small to mid-size business assessment to determine whether you are doing business with the right set of customers to drive business growth. Click here to download.
Why unintentionally continue to do business with disposable clients? The types of clients which hold you back from business growth?
Are you way overdue in developing a strategy to transition away from disposable clients and towards business growth? Contact me and let’s collaborate.
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