How to select customers and when are you big enough to do so?
How to select customers and when are you big enough to really do it? Or is it more about being comfortable as an entrepreneur to choose one over another?
Many larger organizations are choosy about their customers. I’ve met many sales people over the years who have very specific target customer companies. They will not offer their services to everyone – often companies like mine – who are simply too small and thus unattractive. It’s a strategic call. You cannot be everywhere.
I used to take this personally. If you read this post, you can probably figure out why. However, through my own experiences as an entrepreneur, I’ve come to understand why selectiveness and targeting is actually very smart.
First you sell to anyone and almost anything
In the early days, you are willing to sell just about to anyone. In fact, I remember times when I offered my services even for free just to get a strong reference! So wrong, never do that!
What happened in one particular case that stuck to my mind. I needed a reference and offered to do a case for free. This organization did not commit one bit to the project. In fact, they did a parallel project about the same thing at the same time without telling me making me look like was on some shandy business.
It created tons of extra work for me just to try to get them to commit to schedules, to promises, to goals and to the outcome. But they just did not take it seriously. I think, because they were not paying me anything.
The end result was I spent tons of time for nothing and called it off mid case to save my reputation. Obviously I did not get a good reference either. That was my first point of selection: no work for free.
How to select customers?
How to select customers is a big issue for entrepreneurs. Every budding entrepreneur can feel the worry we share about the finances lasting. During the first years I spent so many sleepless nights worrying about bills, being scared of losing our home even. At the time I was heavily investing my own money into a really risky project. That experience is still very raw in my back bone and makes me anxious about selecting customers and losing business.
However, the finances will only last when you invest your time to customers who are worth it.
For me this is customers who we can work with in a longer run, customers who offer us bigger projects, customers who pay their bills and customers it is just a pleasure to work with.
And let me emphasize, a customer who does not commit to pay their bills as agreed in the contract is not a good customer no matter how big of the opportunity might be. It’s the real cashflow that makes a customer good at the end of the day. Many big customers tend to think it is ok to use small suppliers as a free bank. That for me feels like a disrespectful attitude and if you read this post to the end, you’ll understand what that means.
But, about the great customers because those are still the vast majority and more fun to think about!
If they spontaneously recommend you further or give you leads to chase, well that is just amazing. Those customers are for keeps! I once had a customer who brought me more new business than I managed to bring in myself! I’m still friends with her and have very fond memories of our partnership together. I think you can recognize yourself dear!
Saying no to a potential customer
Saying no to any customer is daunting. I’m always worried they may not ask again. It doesn’t take me a lot to fall back on that insecurity of finances lasting. But I’ve learned, that for your business to grow, you must be more selective about customers. Every company simply does not make a good customer.
Many times it’s actually not about the contact person at a particular company. We have many customers who we’ve met over the years during their employment in other companies until finally, we get to work together. Often times the company has a different goals, lack of resources or something along those lines. So remember, saying no is not necessarily saying no to a person, but saying no to circumstances.
My key selection criteria for new customers
I have key selection criteria for new customers. This includes which accounts are attractive to my business and which opportunities are engaging to me personally. My selection criteria is not necessarily that black and white, because good, trusting and appreciative relations with the people at the customer organizations are far more important to me than any black and white selection criteria. I’m always willing to bend my rules for good people and good causes I care about.
(1) Our target audience are “modern growth companies”
We’ve defined our target audience as modern growth companies. Modern comes from their attitude, mindset, willingness to try new tricks and openness to take risks with those new tricks. Growth is obviously important for us since we work in a niche specializing in HR content marketing for employer branding & employer image as well as recruitment marketing and designing company culture to support changes in the business strategy. Companies are not investing on these (at least in Finland) unless they have growth related needs.
I also find the term “modern” to cover people in those companies thinking in a modern way about a partnership with suppliers like us. The traditional thinking tends to be quite patronizing. It’s going to have to be a mutual win-win. We’re not into customers who treat us with lack of respect and think we somehow need their business.
(2) The size of the company and the size of the opportunity
However, since this is a business, I have financial obligations to many places. I care deeply about my cashflow. Therefore, one selection criteria is the size of the opportunity. Unfortunately, the smallest cases are often more expensive. The margin falls short because the customer usually needs a lot more help, the project takes longer than anticipated because of the lack of their own resources and they also tend to ask for discounts. So it can be tough to make such a case a profitable one.
We all know also that sales costs are higher when we need to look for new business on a continuous basis, so it makes sense to go for bigger and more long term accounts in order to get the security of a continuous cash flow. For a long time we sold one off projects only and had no visibility for the longer run. As a result, we were not able to hire more people and were always pushing our limits either selling or doing the projects.
However, if the small companies can be less profitable, so can the large corporations:
- Usually there are a lot more people involved with less or little internal understanding what they have bought from us and for what reason. People in bigger corporations tend to also change a lot more, so people come and go in the longer projects causing additional informational needs. This has forced us to include new phases into our service processes, which make the projects more expensive to produce to large corporations.
- Big corporations tend to be poorer payers. They require way longer payment times and some of them quite blatantly use the small service providers as a free bank. It can be intolerable, if a big chunk of your planned cashflow is delayed months and months. It does not make that account attractive anymore.
If you buy services in your work, do you think about who you are buying those from? Like really think about it?
I find that sometimes the employees in bigger corporations making decisions on buying or accepting invoices or developing these processes are not able to understand what that means to a smaller company. So far we’ve not had to put our services on hold. I always try to bend over backwards for our customers, but I will not hesitate to press the “on hold”, if necessary. If the cashflow sucks we have to focus on compensating the missing cashflow with new projects for customers that do pay.
Smaller accounts on the other hand tend to be more loyal – especially when you handle the affairs directly with the owner of the business. They also pay their invoices on the due date because like me, they care about their social reputation.
When we make customer related selections and sales plans, we’ve realized we need a good mix of both the small and loyal and the bigger with long term opportunities for the growth and the cash to flow. You just have to take action to make sure it’s a healthy combo for all parties involved.
(3) The opportunity to ideate and do things differently
This is my personal motivator. I get huge kicks out of customers with whom we can test new ideas, even bold ideas and just do things differently in the sake of finding a better way to help them get results. I love when I see the customer becoming inspired, learning something from me and there is a mutual respect for each others roles. It’s such a reward! I’m happy we have many customers like this. They are the juice to my breakfast!
(4) The characteristics of the contact people
This is not just me. It obviously goes both ways. But it is a very important factor for me.
I once wondered how come I have the most fantastic customers. I realized it’s because they can tolerate my personality, maybe even get excited and inspired because of it, and we just have so much fun working together!
I simply don’t get business from conservative people, because I’m a little bit on the unconventional side, if you like. However, sometimes it happens that the person that made the deal is not the person you end up working with.
You always want the best for your customer so you make sure you deliver what you promised. Sometimes it requires for me to step out and put a person in with a more suitable in personality to meet the expectations of the customer or then I just deliver. Sometimes we decide not to continue business once the project ends. And usually they won’t even ask once the project ends.
This is such a personal business. As an entrepreneur I have the luxury to choose the same way customers have the luxury to choose who they do business with. And I make those choices because I want to be motivated, inspired, appreciated and willing to put 200% to a customer project. I want that for myself and for my employees.
I want us to exceed customer expectations. And when I realize at best it will be 100%, I will make my decisions. Simply because I cannot commit into something that will not make me feel good anymore.
(5) If the potential customer clearly knows better
There have been occasions where it becomes evident in a sales meeting that the potential customer knows better. Sometimes it’s also true and I have no problem admitting if I feel I cannot help. If I know who can, I’m happy to connect.
How to make sure we will not continue partnership
I want to highlight what I’m about to say is not intended to disrespect anyone I’m working with or have worked with. But, I am an entrepreneur who pours their heart and soul into the delivery. I take my job very personally. This benefits the customers, because we tend to give way more we charge for, and we always look out for their backs. But we don’t have to do this. It’s a choice. It’s a gift. It’s a reward for great customers and great customer relationships.
We are in a position (here in Finland) where we have earned a voice and trust in a large network of people with either decision power or networking power. This puts our customers in a good position. We have recommendation power. We work very hard for this, it has not come for free, and it requires us to pay it back to our networks. But we are willing to always use it for the benefit of our customers – even if they are not paying for it.
Working with entrepreneurs and entrepreneur led small companies like mine comes with their pro’s and con’s. We tend to always do a lot more for our customers, really care about them because our business and our reputation are on the line. The likelihood of a paid employee, particular in bigger organizations to commit the same way, is just much smaller because they do not carry the same risks than the entrepreneurs and they do not see the entrepreneurial risks on a daily basis through their nearest manager.
Unfortunately sometimes a customer breaks the trust and hurts my feelings. And it has consequences. When the trust is broken, I won’t pour my heart and soul to that customer anymore. They will always get what they paid for, but not more.
How to break that trust
- Treating my employees bad
- Treating me bad
- Being disrespectful to us
- Not delivering on promises
- Blaming us for things that happened at the customer end. We will most likely take the blame, but it will hurt our relationship.
- Not paying bills – and acting like it is the customer right
We look for inspiring, motivational, value driven, yet fun projects with our customers
It is super important for me, that the work we – me and my team do is inspiring, motivational and fun for us all. I can tell you that working in an entrepreneur led small business is not easy for the employees. I wish not to extend that lack of comfort and clarity with work that lacks inspiration and motivation and the fun element.
We can do routine work, that’s ok even if it doesn’t fit my personal working style very well (it’s a weakness), but when the trust is broken, a customer loses a lot of the add on extra’s they would have gotten and got before. This is sincere from me. I’m fine with a customer choosing a cold corporation over us. For us, it’s personal.
I think you are big enough to select customers when you can notice a pattern in between which customers create value for you and which they eat it. You start to select when you can afford it.
What are your experiences as an entrepreneur? When do you make selections or do you? Do you find it painful like me, even if it’s necessary?