Why not ALL customers are good for business

Andy
So why do you start with that and what is the biggest myth in business?

Ange
Well, the biggest myth in business is that all customers are good for your business and that you should say yes to all work. But you know what? It’s just not true. Not all customers are good customers.

Andy
Yes. Interesting. But aren’t we supposed to be grateful that the customer has chosen us and our business?

Ange
Well, actually, no. It’s important that we’re selective about who we work with.

Andy
Yeah, it’s. There are so many terrible customers out there. I was just chatting with a trade business owner the other week who was complaining about a customer that he had, you know, they’d been working with this customer for months across multiple jobs, and she was an absolute pain in the butt. She was demanding and he was always struggling to keep her happy. She expected him to complete every job on the same day, and she always even threw in extra work that she expected to be completed as well. She wasn’t very friendly either. She was quite rude about her requests, and even though he was really great at invoicing quickly, she dragged the chain paying the invoices. Often questioning the costs and asking for a breakdown. Mm. You know what? I felt so sorry for this guy, and I can’t believe he put up with this. It wasn’t until we broke it down what exactly he was doing on these jobs and his right hourly rate, and we talked through what she was expecting of him. You didn’t take long, and I quickly realized he was making no money from this work. And he didn’t even realize.

Ange
No way. Meaning he literally did the job and broke even?

Andy
Yes. Not even one job. He was doing many jobs and he was making no profit at all. It’s crazy, right?

Ange
Oh, such a sad story. But it’s such a common problem for tradies.

Andy
But what’s worse? This tradie keeps saying yes to doing more work for this woman.

Ange
You know what? Tradies are just missed a nice guy. They just wanna keep everyone happy, but it’s sadly at his expense.

Andy
Yeah, but that’s the problem, right? It’s like they just don’t get it. You know, more often than not, I’m talking to trade business owners that tell me they’re just too busy to take on any more clients yet they aren’t making money with the customers that they already have.

Ange
Yeah. It’s interesting that when you first start your trade business, they’re just so green, right? They’re super excited and let’s be honest, perhaps maybe even just a little bit desperate for work. So it’s really normal, I guess, to say yes to every single customer.

Andy
Yeah. I mean, I’ve even put up a garden shed back in the day for a customer. I was at this customer’s house and had finished the job I was called there to do, and when I said to her, is there anything else I can do for you today? She responded with, yes, I’ve got a garden shed that I bought from Bunnies, you know, to put up. Can you do that for me? I said, I know. Um, we don’t do garden sheds. We’re plumbers, but you wouldn’t believe it. She begged me to do it. She said, I’ve been ringing everyone. I’ve rang the handyman and no one wants to help me out. She was pleading with us, so I just caved in and I said, well, if you’re happy to pay our hourly rate back then, it was $80 an hour and there’s two of us, we’ll give it a go. We can put it up for you. Mm-hmm. . And right then and there, things start to go downhill fast. The challenge we had, I dunno if any of you out there have tried to build a shed and followed the instructions, it’s an absolute nightmare. It’s worse than Ikea, between the two of us we thought we were gonna get it done within four hours, but eight hours later, it still wasn’t complete. I remember thinking to myself, what the hell have I done here? You know, worst of all the customer started to get antsy with me thinking we were taking the piece. Because we’re taking so long. Oh, so it went from the customer being happy just for it to all go or sour. Unbelievable. At the end of finishing the shed, we did okay. The job was not amazing, but the customer just wasn’t really happy with paying the money to put it up. So it cost her around about $1,280 to get this thing built. She even said at the end of that, I wouldn’t even have bought this bloody thing if I knew it was gonna be so expensive to build.

Ange
Right? So totally my point. You stepped out of what your trade profession was, like plumbing, to do a handyman job, and as a result, the customer ended up super unhappy. But it just goes to show that when you need to make money, you’ll literally do anything.

Andy
Yeah, maybe not everything. .

Ange
Well, what I find difficult with this is that it’s a pretty common story to hear a trade business owner finish a financial year, see an accountant, only to be told that they made little or no profit. It just kills me. They’ve just worked so hard. What are they doing wrong?

Andy
It’s the parental theory. It’s the 80/20 rule. If you haven’t heard of it, look it up. Basically it means 20% of your customers are profitable and the remaining 80% are perhaps break even or sending you backwards.

Ange
Yeah, right. It also means that once you’ve been in business for like 3, 5, 8 years in, if you actually stop to think about it, perhaps you are still working with some of those customers back from when you first started your business. Customers that at the time were good for business, but this many years in, are perhaps no longer making you money. Perhaps your expenses have gone up and you haven’t adjusted your pricing and they’re no longer profitable or definitely not fun to work with, but typical tradie, you are Mr. Nice guy, and keep saying yes to their work.

Andy
Yeah, you’re exactly right. No wonder you finish the end of the financial year with very little profit. You know, I understand you need more customers to build your business, but what’s important is learning how and who to say yes to and who to say no to. Especially now that you are only a few years into business.

Ange
Right. So let’s talk about that for a moment. So for all your listeners, have I told you to name one of the customers that you really like, like someone who’s respectful. They keep the lines of communication open, they’ve got money to spend, they wanna spend it with you, and they pay their invoices on time. So I want you to see that guy. Can you see him? Yeah. Well, let’s call that guy Adam. If I told you that you only worked with Adam type of customers, I bet you’d be pretty happy, right?

Andy
Definitely. I have a lot of Adam customers. One of them owns quite a few high end apartment buildings in the eastern suburbs. Not only does this customer give us plenty of notice on jobs, but he’s super, super friendly. He always pays on time and wants to make sure we are happy working for him. Can you believe that Ange? A customer who cares, that you enjoy working for them, that is absolutely awesome when you can find someone like this. I mean, as a result, we treat this guy like a VIP because he, to us, he is, he’s bought me bottles of red wine and even bottles of vodka. He’s an absolute legend.

Ange
God. Wow. Isn’t that normally us buying gifts for our customers?

Andy
Yeah. That’s right.

Ange
That’s a problem. Hey, not all your customers are like Adam, and at the other end of the spectrum, I bet you can think of a customer that you currently work with that you don’t really like. Like they aren’t very nice. They’re really demanding. They expect you to drop everything for them. They argue over every invoice and they take thirty, sixty, ninety, a hundred and twenty days to pay. And you go back for more. I bet you can see that guy, can’t you? That’s Doug. We don’t like Doug.

Andy
No, we don’t like Doug. Doug’s a bit of a dick.

Ange
But when you actually stop and think about your customers, it’s pretty quick to work out who are your Adams that you want to work with, and who are your Dougs that you don’t wanna work with.

Andy
We’ve been through so many good and bad customers in our plumbing business, Dr. Drip. We even rate our customers to weed out the bad apples. We call it our A B, C D customer review.

Ange
Yeah. We’ve shared a copy of it actually in the show notes. You guys should check it out.

Andy
The purpose of the A B C D customer review is to give every customer a rating based on how likely they are to have the money to spend, pay their invoices, and how much you like them.

Ange
Yeah. It also gives you the opportunity to avoid working with a bad customer and be way more selective.

Andy
That’s exactly right.

Ange
So to explain the ABCD customer review, let’s visualize a pyramid. A’s at the top, at the peak, B’s underneath that. And then C and D are the bottom, forming the base.

Andy
Ange just wanna point out here, it’s a podcast. I can’t see the triangle you’re making with your hand, but it is a beautiful pyramid. .

Ange
So hey, A is at the top, right? So A stands for awesome, B is better. C, these customers could be better. And D, these guys are dreadful. We don’t wanna work with these guys.

Andy
Yeah, we’ll call ’em Dougs.

Ange
Yep. . That’s so bad.

Andy
Yeah. So for instance, A-grade customers at the top of the pyramid are the Adam we were talking about earlier. Those customers who you really like to work with, they are awesome. We want more Adams.

Ange
Yeah. And equally D is at the bottom of the pyramid. The Doug type of customers that don’t treat you very well and are pretty much lucky to pay their invoices. These guys are dreadful and we actually wanna get rid of these and avoid working for others.

Andy
Let’s go back to the 80/20 rule. If you actually stop to work it out. I would put money on it that your current A and B customers would equate to approximately 20% of your revenue and work. And your C and D customers would equate to the remaining 80% of your revenue and work.

Ange
Hmm. But what we want to talk about is how to flip that so that you only work with A and B customers, and that we cut out the C and D.

Andy
The trick is to move your customers up the ranking system, not cut them out yet.

Ange
Right. That’s right. We need to move D to C, C to B and B to A. Literally, you’ve gotta move them up the line. And if they don’t wanna move up, then we need to talk about how to move them out.

Andy
Definitely. Yes, that is correct.

Ange
So it’s important that you don’t drop them like a hot cake because that one customer could be worth a huge amount of money to you like a hundred grand, 200 grand. And you have to consider replacing the revenue before you can move them on.

Andy
That’s exactly what one tradie I know did.

Ange
Really? What’s that?

Andy
So let’s call him Steve O. Cause I love the name Steve O. You know everyone’s a Steve. If you don’t know someone’s name, you call him Steve O. We had a conversation about the fact that his current work was all D-grade customers and they wouldn’t budge. Mm. So before I knew it, he told them he didn’t wanna work with them anymore. And he literally called me the next day to say, Andy, I need to market fast. I don’t have any work. I was like, are you kidding me, mate? Now I’m not recommending anyone out there do this. The work was worth $400,000 to him and he lost it all by choice overnight. It seemed absolutely crazy. In the end though, guess what? It all worked out. We built him a plan to get him A-grade customers and he went in hard. I personally wouldn’t recommend dropping any customers the way he did, but hey, you know what? He is going great guns now and he will never look back. Looking back on it, the best thing for him.

Ange
I remember that we actually had a similar story with Dr. Drip, right?

Andy
Yes, very true. I think everyone out there has some stories around. It was a while back now, you know, we’d taken on a new building in the city. There were approximately 150 units in this complex. The onsite manager was a superstar, a great lady, and we really liked her. All the team loved her, but there were some issues. She was a bit of a tight ass, always questioning what we charged and crimping on every little thing. Not only did we bend over backwards to make her happy, we would literally drop everything for this lady. Middle of the night, middle of the day, you name it, we would do it. We proved to her over and over that we were the best business to work with, but even still, she was always looking at our pricing and saying someone else quoted her less for the job. Wow. We always got the work in the end, but she made sure we knew someone was waiting in the wings to take over if we didn’t price match, like seriously. It wasn’t until I went back and I looked over the numbers and I realized when it came to profitability, we hardly made much profit with this lady. We were just scraping at breakeven. For a customer who was so demanding yet had so much work, it seemed impossible that we weren’t making a profit from her. It was more likely also that because we were giving her such great service, we were losing money in other areas of her business. As I said, we would drop everything for this lady. So I took it upon myself to start increasing the pricing so we could start making some decent money. I know that if I went to her and asked for more money, it would’ve been a no, but guess what? The next minute I got a phone call, your prices have gone up, Andy. She was unbelievable. She told me I can’t pay that much money and I have someone else that can do the work. I thought we had such an incredible relationship with her. I told her, you know what? You can shove your fricking work. I don’t wanna work for you anymore. She was absolutely shocked and just couldn’t understand why.

Ange
Yeah, that’s crazy. But it’s so right. The money just didn’t stack up and they were definitely A-grade customers.

Andy
Yeah. Even though I actually liked her, the work was rubbish, so we had to walk away. You know what? It was just the best thing to do for our business.

Ange
And you know what? That is a super important lesson for all you listening out there. What’s great is that you can take a look at this in your own business and in the guide in the show notes, we’ve actually shared with you our ABCD customer review to help you rate your own customers. And I absolutely suggest you take a look at it.

Andy
I know some of you are thinking stuff like this, my business needs all the customers it can get. I’m not gonna start turning away people. And mate, I’m not. What I am telling you to do is focus on more Adams. .

Ange
Yes. More Adams. Your A-Grade customers.

Andy
Yes. And what I don’t want you to do is waste your valuable time with D-grade customers. They suck up all your time and resources.

Ange
And make no little money.

Andy
I was guilty of this too when I first started Dr. Drip, I said yes to anyone and ended up breaking even on a lot of jobs because I didn’t even know what I didn’t know. This is where a lot of business owners build their businesses up on the wrong customers and it always ends bad.

Ange
Or being paid to put up a garden shed .

Andy
Yeah, exactly. So if you’ve been in business for a while now, jobs are rolling in, but you’re just not profitable, you’re just scraping a profit, then you need to consider who you are working for.

Ange
That’s right. Even if they repeat customers, if they’re not making you money, then why are you still working for them?

Andy
We need to stop thinking that it’s okay because they give us a lot of work. It’s not okay if they’re costing you money. That’s the opposite of what your business really needs.

Ange
Totally. What your business needs is more A and B, great customers.

Andy
So with so many trade businesses competing with each other out there, it’s seriously tough to attract A and B customers. You need to be super smart with your marketing and showcase your authority in the marketplace.

Ange
Yeah, that’s right. Dead right. You need to be highly professional, and what I mean by this is all your business touch points need to be relevant. They need to be useful and really high quality. Your website, your social media pages need to be regularly updated with professional images. Your copywriting needs to be professional and top-notch customer reviews, and clearly highlighting your products and services that you provide your business is streamlined and systemized with watertight processes. So no matter which one of your tradies show up on site, the same level of quality and professionalism is met every single time.

Andy
I know it sounds exhausting, right? But we’ve already given you the tools to do all of this. You can head to our website, lifestyletradie.com.au, and head to our free resources. You’ll find guides on how to do everything from how to make your social media sing, how to hire great staff, how to introduce systems into your business, and how to convert high quality quotes to cash. Every single guide is free and literally just waiting for you to download and use it straight away. Even if you think your trade business is the best on the block, I guarantee you’ll find at least one or two helpful tips in these guides.

Ange
Yes, all the information in these guides are based on our experiences with Dr. Drip and thousands of our Lifestyle Tradie crew. So check it out.

Andy
Guys, that’s us done for today. Don’t miss next week’s episode. It’s our season finale and we’ve been saving the best for last.

Ange
That’s right. We’ll be joined by Kerry Pottharst, Olympic Gold medalist and she’s on TV show SAS Australia, and she’s gonna be joining us to share her experiences of being a top athlete.

Andy
She’s so inspiring and a great friend of ours here at Lifestyle Tradie and I can’t wait to chat with her.

Ange
See you next week. Bye.

Andy
Catch you!