Don't be afraid to drop bad fit customers.

Since tax season is upon us, I recently had a chat with my CPA. She is co-owner of one of the largest accounting firms in my area and I've done business with her for over two decades, so we discuss business strategy in addition to going over the numbers. This year, she mentioned they were planning to rationalize their customer base, eliminating those who tended to provide incomplete records right before critical deadlines. She saw these clients as problematic to her business for two reasons: they overloaded resources and their behavior increased the probability her team would make a mistake.

There is a parallel in the electronics manufacturing services (EMS) industry. Ask any longtime industry CEO and they will say 80% of their issues come from 20% of their customer base. Why do EMS companies keep bad fit customers? There are a number of reasons:

A one-size-fits-all approach can lead clients to your competition.

Recently I had an under-the-slab plumbing leak. I’ve been using a plumber who has deliberately kept his business small for over three decades. He is responsive, but complex jobs often take longer because he doesn’t have all the tools the larger plumbing firms carry in their vans. He also doesn’t have their overhead, so for most jobs he is more cost competitive. I called and he walked me through shutting off the water at the meter because he couldn’t come until the next day. Part of my childhood was spent in Florida, so I applied my post-hurricane water management skills while I was without running water.

Sadly, when he arrived, he was unable to determine the source of the leak. Watching the meter spin, he mentioned it was a big one. He recommended a water leak detection firm. Its voice mailbox was full, however, and said it sometimes took a couple of days for them to return calls. My plumber reassured me he would come back after we found the leak. I got on the computer and found a water leak detection firm that operated 24/7. Fifteen minutes later they were at my house and 30 minutes after that we knew where the leak was. They were able to cut a hole in the wall and cut off the bad pipe so I could have water in the rest of the house. They couldn’t fix the leak until the next day, and it would likely involve more demolition to reroute the pipe, so I had a decision to make.