Bad customers cause you to lose sleep, miss family time, and give you more headaches than they’re worth. But how do you identify a bad customer before you accept them as a client?
Characteristics of Bad Customers
There are some common characteristics of bad customers that just about every company shares:
- They don’t pay invoices on time
- They argue about every deliverable
- They don’t truly understand the value of your time
- They expect your product/service to be more than what you proposed
However, there’s often a reason that companies attract these bad customers:
- Unclear buyer persona or ideal client profile
When you know the detailed characteristics of your best customers, you can avoid taking on bad ones. This is a really important step in growing a business.
Many small businesses feel the need to take on anyone as a new customer. While that may be a financial necessity at first, don’t make it a habit to keep these customers or to continue accepting them into your client roster.
To grow your business, you’ll need to create a habit to identify a bad customer.
Paint a Picture of Your Ideal Customer
My favorite exercise to create an ideal client profile is to make a slide that includes the following:
- a picture of a real person (stock photos are fine to use here)
- a name so I know how to reference them in conversations with my team
- their pain points that illustrate the problems they’re trying to solve (which our solution can help with)
- their influencers, the people that they listen to like their peers, groups they participate in, their advisors
- their buying considerations, such as integrations with their existing solutions, onboarding time, price sensitivity
I share this slide with everyone in my company so they know who our ideal buyer is.
How to Identify a Bad Customer
You want to identify a bad customer before you sign on the dotted line. They can make your life a real headache fast. As much as you try to make them into a happy customer, you’ll never be able to satisfy their requirements.
Here are 3 signals that can indicate that you have a bad prospect – and that you should avoid signing a contract with them:
1. Their first question is “what’s the price?”
There’s a nuance here: if they ask “what’s the price range?” then they are likely a savvy buyer who understands the value of your time and theirs and simply wants to know whether you’re within their budget. But if they leave out the word “range” it’s usually a dead giveaway that you’re about to take on a headache of a client.
The other nuance is how much they understand the value of what you’re offering. If you sell a commodity, then asking about the price would be a normal question up front. If you sell services or something that requires a conversation first, the “what’s the price” question is a tell-tale sign that you’re talking to an unqualified prospect.
2. Their deliverable requests are vague
This is a serious pitfall and you want to avoid it. Be super specific and concrete about what you will deliver and what is included within the agreement. Make sure there is a provision in your agreement that anything not covered within the scope is extra.
You can decide later whether you want to allow for small updates without charging for them, but the agreement up front saves you from losing your time to uncompensated work.
3. Questions that suggest the client won’t listen to you
Use your sixth sense here to identify a bad customer. There’s a good chance that deep in your gut you can tell if a client will be a pain down the road. If you’re an expert and your solution helps a client with best practices, a good customer will appreciate your advice. A bad one will keep reverting to their frame of reference, which may be outdated or inaccurate.
Bull headed clients are a disaster every time. If you need the money desperately and can deal with the headache, that’s one thing. But in the long run, you will not have enough time to grow your business because you’ll be fighting fires due to bad clients that drain your time.
To minimize the risk of taking on bad customers, create a detailed profile of your ideal clients. If a prospect doesn’t fit that profile, pass on them.
Author: Raj Khera, Partner MoreBusiness.com