What would it take for you to fire a client?
All clients are not created equal.
Some learn faster than others. Some are more coachable than others. Some become your close friends. Some are high-maintenance, some are low-maintenance.
And let’s be honest, some are more trouble than they’re worth…
The “more trouble than they’re worth” clients are the ones who demand, demand, demand, and don’t contribute much, if anything, in return. They’re the first ones to complain about the price they pay to train with you, and they don’t seem to appreciate the value they receive. They’re usually the ones who walk through the door and cause you to think, ‘Oh man, I have to deal with that asshole again for the next hour?’ And they’re the ones that provide you with a sigh of relief if and when they finally quit.
Have you ever considered that these types of clients are actually hurting your business? Not just in the sense that they cause you stress, and suck your energy levels dry, but believe it or not, these clients can legitimately hurt your business’ bottom line.
The popular book “Profit First” by Mike Michalowicz explains why firing these clients might just be what’s best for your business.
Michalowicz refers to a study done by a Chicago-based growth-consulting firm called Strategex to prove his point.
“Strategex analyzed the revenue, cost, and profit breakdown for a thousand companies. What they found was nothing short of a “duh” moment, as in the “Duh, I already knew this, but I still haven’t done anything about it in my own business because I’m a glutton for punishment” type of duh,” Michalowicz wrote in Profit First.
In short, Stratefex divided clients in each company they studied into four quadrants, based on the amount of revenue they generate for each company.
“For example, if a company had a hundred clients, the twenty-five clients who generated the most revenue were put in the top quartile, the next twenty-five revenue-generating clients in the second quartile, and so on,” Michalowicz explained.
The result: “The top quartile generated 89% of the total revenue, with the lowest quartile only accounted for a meager 1% of total revenue.”
In case that’s not enough, the study also found that, although clients contribute to a company to varying degrees, each one requires pretty much the same amount of your effort (based on cost and time).
“This means that it took the amount of effort to serve a big-revenue client as it did a client who barely affected revenue at all,” Michalowicz wrote.
He added: “Then came the awkward “gulp” moment. Strategex’s profit analysis showed that the top quartile generated 150% of a company’s profit. The two middle quartiles were effectively break-even, and the bottom quartile, the one that generated 1% of the total revenue, resulted in a profit loss of 50%! In the end, the profits generated from the top clients are used, in part, to pay for the losses accrued in serving the bottom clients.”
As gym owners, you have all worked with these types of clients.
Michalowicz’s solution: “Get rid of them. Fast!”
His rationale is this: “If you remove your worst unprofitable clients and the now-unnecessary costs associated with them, you will see a jump in profitability and a reduction in stress, often within a few weeks. Equally important, you will have more time to pursue and clone your best clients.”
Do we recommend you go out and fire 25 percent of your clients tomorrow? Of course not. But it’s food for thought that can certainly inspire you to focus on attracting more of your ideal client. And even more importantly, it should help you be more selective when choosing who you’re going to work with in the future.