Small business strategy question: If you had to get rid of 90 percent of your customers, which 10 percent would you keep?

Entrepreneurs use my 100 Small Business Strategy Questions as a way to regularly review their businesses and identify opportunities to grow. From this list of 100 questions, I occasionally take a question and blog about it in greater detail.

The Small Business Strategy Question I’m looking at today is: If you had to get rid of 90% of your customers, what 10% would you keep?.

At first glance, this is a simple question: “My best customers” is the easiest answer. But let’s dig deeper. How do you define your “best” customers?

Consider all of your customers in a giant list. We can slice and dice that list all day long, sorting them into different groups by using different categories and metrics to sort. With each category or metric, we end up with a different group of customers in that top 10%.

Perhaps you might keep the top 10% of your most profitable customers. Early in my career, profitability was a key metric for me to take on new customers and “fire” old customers. But profitability isn’t necessarily the best metric. A customer who is highly profitable might not necessarily be a customer who purchases the most, or the most frequently, or pays on time, or provides the most consistent cash flow, or refers people, (etc., etc., etc.). Perhaps the most profitable customers today might be bankrupt tomorrow, or they might replace your offering with some alternate offering that does the job better.

See what I mean? Profitability is a good quality to have a in a customer (obviously!!!) but it’s not necessarily the only quality or even the best quality. A profitable customer today might be a good customer today but over the long-term, it might not be the only metric you should use. There needs to be other factors and you need to combine several factors that are important to you when sorting out your customers.

In my business, I sort my customers into that 90/10 list in this way: I want a customer who is profitable… but I also want a customer who works in the financial and real estate industries, provides ongoing, consistent cash flow, is easy and fun to work with, will work with me on an ongoing basis (i.e. several projects over several months or years), who is the key decision-maker and (preferably) has budget control, who refers other people to me, and who is an enthusiastic and positive idea-generator.

Once you’ve sorted your customers and identified the top 10%, you then need to consider tweaking your business just a bit to deepen your relationship with those customers, earn more money from them, and try to get more customers like them. For the other customers (the bottom 90%), you might consider bumping them up to fit within that category (by selling more services to them and in general by encouraging them to commit further). Or, you might fulfill whatever you’ve agreed to do and then simply not market or sell to them again. Or, you might fire your customers.

Sorting customers by using multiple sorting categories isn’t easy or an exact science (unless each sorting category is a measurable metric, which they don’t have to be). But the exercise is an important one for a few reasons:

  • You’ll figure out what’s important to you in a customer. Believe me, you’ll end up feel so good when you get rid of customers who don’t fit this “ideal customer” model.
  • You’ll start to see how your customers can contribute to the future of your business (or how some of your customers — like the bottom 10% — are actually holding you back).
  • You’ll improve your marketing by honing your message to connect even more deeply with your best market.

Of course you can serve other people besides that top 10%. In practice, I find that I prefer working with that top 10% — they’re the best for the long-term success of my business — but the top 25% (even up to the top 50% of my customers) are awesome but I like the variety (and challenge) of working with a group of customers that might be defined within the top 25%. But I build my business on that top 10%.

Published by Aaron Hoos

Aaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He is the author of The Sales Funnel Bible and other books.

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