Riddell: The cost of a bad customer

In this time of significant business challenges and given the fact that customers are the lifeblood for every business, is there such thing as a "bad customer?" Are there folks that you would be better off not doing business with in the future? Surprisingly for most companies, if you take a real hard look at a few considerations, the answer is almost always an overwhelming "Yes."

One of the key points of which we need to remind ourselves is that we typically love competition when we are buying and are not too keen on it when we are selling. Included in this love of competition is the desire to capture concessions from a seller every chance we get, to never miss an opportunity to get more for less or even something for nothing. Yet when we are in the selling mode, we conveniently forget that our customers are now also lovers of competition and we vendors are now the receivers of the negotiating pressures.

Most people in long-term business relationships intuitively understand this give and take relationship and recognize that both parties have to get their fair share for the relationship to continue.

From the vendor's perspective this merits constant attention to fair pricing; from the buyer's perspective this is attention to fair value. Both may wax and wane but an ongoing business relationship usually ensures a proper and acceptable balance. Conversations with individuals involved in the process almost always reveal this balanced fairness over time.

For many small businesses and certainly startups, however, there is by definition no historical long-term balance to begin with.

While the best of intentions for a sustainable relationship may be harbored by the vendor, it is important to go into every new transaction recognizing that the long-term business relationship that you desire has to be earned, but on both sides.

Most entrepreneurs understand the earning part from their side. They are well indoctrinated with "the customer is always right" mantra and are fully prepared to go to any length in this pursuit. This lets them reconcile their actions with their internal chanting.

Unfortunately, their best of intentions are easily taken advantage of by unscrupulous business people who view the business world strictly in a win/lose context.

For the well-meaning but unsuspecting entrepreneur, this means that you sacrifice your opportunity for profit while giving your customer significantly more value than he or she initially purchased and with no guarantee or even probability of future opportunities.

Whether in terms of additional products or accessories or added on features of a service, these offerings have value and you have the personal obligation to your future success to ensure that they are treated as such.

Entrepreneurs also typically overlook that the time to "tweak" the product or amplify the service comes with an opportunity cost. While you are devoting your limited time to giving away value, this is the same time that you cannot spend trying to develop new sources of revenue (aka new customers).

You end up spending precious time trying to curry favor with someone who is really just trying to help his or her own business by taking advantage of your misplaced generosity.

The easiest way to remedy this problem is also probably the most difficult for most entrepreneurs. When a customer asks for something more, make sure your respond with a something more cost. Their response will let you know right away if this business relationship has any real long-term potential for mutual success.

John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes every other Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com.