Great Ideas: When to turn down new business

Written by ProfitGuide

One of the most common mistakes is to accept money from anyone who’s willing to pay for your product or service—even a customer who’s not a good fit for your business. But how do you determine when you’re better off steering clear of a new customer? In Outrageous Business Growth: The fast track to explosive sales in any economy, Debbie Bermont, a San Diego-based consultant on reducing marketing costs while boosting sales, suggests several tests to apply:

  1. Your gut says no. This is the most important indicator. If you’re in a new-business meeting at which everything seems to be going well on the surface, yet you have a nagging feeling that something isn’t right, listen to that feeling. Don’t let your head overrule your gut. Chances are that customer won’t pay its bills, or will make unreasonable demands that wipe out any profits you could make on the deal.
  2. The customer doesn’t appreciate the value of what you offer. Your most profitable business will be from clients who appreciate the value you provide, such as your expertise, credibility, service, knowledge, reliability and guarantee. Be wary of a potential customer who chooses you based on price alone, because they’ll switch in a minute to anyone who will undercut your price.
  3. The customer expects you to put time and resources into pursuing the business without any financial commitment on their end. Anyone who’s just shopping around for free advice won’t be a good customer. Determine how much time and energy you’re willing to spend for free before asking the prospect to make a commitment. Giving away too much diminishes the value of your firm and leads the prospect to expect you to deliver more than you would normally offer for a specific price.
  4. The customer doesn’t treat you in a courteous or professional manner. They don’t have to be your best friend. But any customer who constantly questions your recommendations, nitpicks at your pricing or challenges your credibility or judgment isn’t interested in developing a long-term relationship with you.
  5. The customer’s requests are too large for your operation. If a company asks you to provide something beyond your current capabilities, think hard about whether it would be worth it. Assess the profit potential against the costs in capital spending, new hires, training and material. And don’t overlook the opportunity cost of time spent ramping up your capacity instead of pursuing other business. Controlled growth is typically more profitable than a sudden growth spurt if you’re not set up to manage it.
  6. The customer doesn’t share your values. Don’t lose sight of your company’s mission and values, even if it means turning down potential business. Compromising your values to pick up new business won’t lead to profitable business for your company in the long run.
Originally appeared on PROFITguide.com