Do you want to improve the profitability of your company? Then it may be time to consider firing a few customers. You can make an informed decision about this difficult situation if you first clearly identify who are you profitable and unprofitable customers.

Profitable Customers: While these customers amount to 20% of your total number of customers, they will generally account for 80% of your profitable business.

General Characteristics:

-Buy from you repeatedly.

-Value the service you offer them.

-Accept the pricing structure you have established.

-Discuss the options with you before making a final decision.

-Trust you to perform the service you have contracted for.

-Refer you to their associates.

-Pay their bills on time.

Unprofitable Customers: This category also accounts for another 20% of your customers, but they can cause 80% of your headaches.

General Characteristics:

-The service they want is not what you normally provide.

-The price is always an issue.

-He will add extra services or products after the original contract is agreed upon.

-She will not want to pay for any extra services requested.

-The service is never acceptable.

-He is slow to no-pay.

-She spread negative stories about your company.

As a business owner or manager, you have the opportunity and responsibility to ask the right questions and provide the best level of service possible for the price paid. While we all have room to learn about improving our business and the service we provide, this article is about identifying those customers who, no matter what you do, will end up being unprofitable.

Once you have identified who the profitable clients are, you can create a profile of them. This profile will identify various characteristics such as type of business, size, location, number of employees, etc. You may have multiple profiles for different categories of clients.

The profile of your profitable clients will help you target to whom you want to market. You can also eliminate those prospects that match the profile of your unprofitable customers. Why waste time and money marketing to those marginal, or worse yet, the unprofitable prospects? Wouldn’t it make more sense to spend your marketing budget on developing specific targets that match the same profile as your most profitable clients?

This process can actually reduce your marketing expenditures and increase your profit margin at the same time. Don’t wait until the end of the year to begin this process. Begin it right now and you will gain better control over your bottom line.

Gloria Berthold is president of Marketing Outsource Associates, a database marketing firm specializing in the identification of profitable prospects in both the commercial and government markets. Her strategy includes identifying profitable customers, creating a profile of the most profitable customers, locating prospects that match similar profiles, creating a schedule of contacts with the prospects and executing the schedule on time and within budget. For more information visit http://www.targetgov.com

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