This is perhaps a question that is a little deeper than it first appears. It is definitely a question worth asking in respect of your business. The obvious answer is that it is the people that buy products or services from you… so let’s dig a little deeper.

The Good Customer

They make you smile and make you happy. They appreciate the service you give them and are really important to your business, but be cautious of taking them for granted. Depending on your business you may find that many of your good customers have similarities. This could be several things from age, through to location, through to size of business. It is a good thing to take the time to understand your good customers and know more about them and why they like to buy from you. This information can be very powerful to enable you to find more future customers like them. Take the time to find out more, by creating a dialogue with them. The cheapest customers to service are generally those you already have, so ask yourself – is there anything else that they can buy from you? Are they just using you for certain products when there may be other items that you sell to them – and again, don’t take things for granted – they may not even realise that you sell other products of interest to them.

Good customers are regular and can be very loyal, and this is one of the reasons it’s easy to take them for granted. If you don’t give them your attention then you risk losing them, or allowing them to drift away. New customers are not all that easy to find, so always make sure you look after the customers that you have – make sure they are still as happy as ever and show them your appreciation.

The Bad Customer

We all have them! They can take up a lot of your time which can certainly be disproportionate to the sales and profit they may bring. They may always be late paying invoices, and always want a cheaper price. Sometimes you may have a bad customer because you always try to say ‘yes’ to everything that they ask for, and you end up struggling to provide something that is not your core business or skill just in an effort to give them what you think they want. The bad customers can be distracting you and taking your time away from looking after the good and profitable customers.

They may buy in small quantities, meaning that in real terms the cost of doing business with them far outweighs the revenue they generate. And when you have done all of that, they may still not be satisfied despite all your best efforts.

The 80/20 Rule

Over the last 30 years it has amazed me just how many times this rule has applied whenever I have done customer analysis. In a B2B environment it’s regularly the case that 80% of the profit is generated by just 20% of the customers… Or put another way you could easily be spending only 20% of your time on the ‘Good’ customers that bring in the majority of your profit.

It is extremely worthwhile doing an analysis of your customer base and really digging down into those numbers to fully understand your spread and importance of different types of customer. It could be that you, or your employees are spending the majority of their time looking after the least profitable customers.

I remember in the early years of one of my businesses that we were so worried when we lost our largest client through no fault of our own. Analysis showed that they accounted for over 25% of our sales but whilst they provided bulk sales it was at a low profit margin so they only accounted for 7% of our profit. They also accounted for a lot of administration time and took 60 days from month end to pay. In reality our fears were allayed as we used the employee time gained to open a lot of new accounts and the following year our turnover was similar but we actually made more £ profit – so they actually did us a favour in taking their business elsewhere.

I would always say that really understanding your customers and your numbers is an extremely worthwhile piece of analysis that can ultimately reveal large opportunities.