Ditch the D-grade customers!

Andy
Hell yeah.

Ange
Hey, before we get into today’s show, why don’t you come and meet Andy and I, in person at Lifestyle Tradie Live this May.

Andy
There is a better way to run a trade business if you know the right structure and systems. Register now by heading to lifestyletradie.com.au and get your ticket today.

Ange
Yes, we are coming to a capital city near you. This is an event for every trade business owner who wants to change chaos to control, get back their time and make more profit.

Andy
Go on, you know, you deserve more freedom. Now let’s get on with the episode. Hey, hey, hey, and welcome back to another episode of The Tradie Show.

Ange
Hey, everyone. Lovely to be here with you again this week.

Andy
It sure is.

Ange
I reckon we get straight into it with no faffing around.

Andy
Okay. Let’s do it.

Ange
But before we do, let’s just get into a little book review.

Andy
Ah, I thought you said no fluffing around.

Ange
This one’s a bit different.

Andy
Okay. So what have we got this week?

Ange
Well, this week’s book is The Boomerang Effect by Tim Reid, which is all about helpful marketing. You guys have perhaps heard us interview Tim on this podcast in an earlier episode.

Andy
Yeah, it was a great episode because all trade and contracting businesses need help with marketing, don’t we?

Ange
Yep.

Andy
Well, we had Tim at our recent Reignite & Reunite members only event in Brisbane, and he absolutely killed it. He’s such a great guy and he definitely knows his stuff.

Ange
Yeah, he sure does. His book is all about utilizing helpful marketing. It takes you through different marketing tactics you can use like video and blogging and social media to basically connect with your ideal customer to ultimately decrease your cost per lead.

Andy
Yeah, it’s a really great read and that’s coming from me. I don’t always read that much. I’d rather listen. But as you all know, marketing is an activity that you just can’t put in the two hard baskets. If you want to be a successful business, you need to learn how to love marketing and learn how to best connect with your customers, and hence work with the ideal customers for you.

Ange
True, true. So who is your ideal customer? How can we talk about that in more detail in today’s episode through the lens of what we call the A B C D customer types.

Andy
Well, I’ll have to say that was a pretty sick segue Ange. Yes, customers. One of my favorite things to talk about, you know, the amount of D-grade customers I’ve had to deal with in my time, does my head in, it’s been absolutely ridiculous, but these days I just can’t wait to kick them to the curb, baby.

Ange
Agreed. We’ve certainly learned some lessons in business that we definitely do not want you, our listeners to repeat.

Andy
But I bet they are doing what we were doing back then in their business right now, and they don’t even know about it.

Ange
Alright, so we just need to actually slow down a little bit and need to explain what this actually means.

Andy
Okay. Let’s get into it.

Ange
Yeah. So let’s go back to the beginning. I first wanna give the listeners a bit of concept of what we’re talking about. Like think back to when you first started your trade business. We call this the startup phase. You basically said yes to every single job that was offered your way. Fair?

Andy
Yeah, the idea was just to make money. So we said yes to everything.

Ange
Right, and that’s okay when you’re first starting out, to you, it didn’t matter if the customer wasn’t very nice or if the work was challenging, so as long as you got paid, you were happy. Right?

Andy
Yeah. Yeah, I think back then, that’s pretty fair, insane.

Ange
So let’s fast forward a few years. Imagine you’ve been in business now for two, five, maybe even seven years, and guess what? You are pretty solid now with the flow of work, but perhaps at the end of the financial gear when you meet your accountant. You are left wondering why you aren’t making much profit. Perhaps you’ve made a little bit, maybe you’ve broken even, or maybe you’ve even gone backwards and there could be lots of reasons why this has happened. But an important one to consider is your actual customers that you are working with. So if you stopped to think about it, you’re probably still working with those really annoying customers that you helped way back in your startup phase, and you’re still saying yes.

Andy
Yeah, they’re the ones that we don’t always like that are a little bit disrespectful of our time. They take forever to pay and all.

Ange
Or they actually don’t pay at all.

Andy
Or they always sink it too expensive.

Ange
So why do you still work with them and why do you keep saying yes?

Andy
I guess we’re just conditioned sometimes as trade business owners to never say no to work. So we take on whatever we can, but you know, you don’t want to let down anyone. You just wanna make sure that you are, do it. You’re staying in your lane and you’re doing your thing, and we wanna make money. But a lot of businesses don’t realize at the end of a job, if they’ve made money or they haven’t made money.

Ange
Right. What if I told you That not all customers are created equal and that you should be saying no to some.

Andy
I’d definitely be saying, tell me more, baby.

Ange
Okay. So with all of your customers for various reasons, there’ll be some that you love to work with and some that you hate to work with. So today, let’s chat about how you rank your customers so that you know exactly which customers fall into which category. And hence what to do with them. Let’s talk specifically about this A, B, C, D customer type.

Andy
Yeah, and let’s start, we’ll kick it off with the best category to be in, and that is the A-grade customers, you know, these guys are what we call Awesome. They’re respectful, happy to go along with your professional suggestions and advice. They have a heap of money to spend and they’re willing to spend and they pay you on time. Overall, you just love to work with these guys because they’re just super nice people. They’re agreeable and they trust your opinion. There’s none of that haggling or negotiation on price with these guys. They just accept what you tell them. They are the dream customer.

Ange
Yeah, so these guys are seriously the dream and definitely do what you can to hold onto them when you’ve got them. The next level down from that is what we call B-Grade customers. These guys are better as in they’re better than C and D, but they’re not your top tier worthy. Right. So they’re good to work with. They’re respectful of your time. They do have money and are willing to spend it with you. And they mostly pay on time. They’re your regular run of the mill customers who you rarely have an issue with.

Andy
Yep. And then we’ll go down to that next level down baby. We’re heading into C-Grade. They could definitely be better. I mean, these customers are okay to work with sometimes. Sometimes they’re respectful of your time, processes and advice, but a lot of the time they just don’t have the money. They negotiate really hard. They push back on invoices and they drag their feet when it’s time to pay you.

Ange
Absolutely. And that leads us into this last level, which is the D-Grade customers. So do you wanna take the lead on this one, Andy? Considering your absolute distaste for them?

Andy
Hell yeah, because these guys are absolutely dreadful, to be honest. Sometimes, quite often, I call them dogs.

Ange
You’ve obviously been burnt one too many times by these guys.

Andy
Well, you’re right, Ange. These guys are terrible to work with. They’re rarely respectful of your time and will screw you around even with appointment times, they never pay on time. You probably spend more time chasing them than actually making enough money when you’re on site. Then by the time you finally do get paid, you haven’t even covered your cost and you look back on it and you think they’ve sucked the absolute life out of me.

Ange
It’s just given me this vision of calling them like the Dementors, you know, like in Harry Potter.

Andy
Oh, I’ve never been a Harry Potter guy, to be honest. It’s just never been my gig.

Ange
I know it’s such a random thought process. Hey, but it must have flashed up on TV or something for me to even think about it. But when you said Dementors, that’s like the visual that I just saw was this black image just trying to suck everything out of you as a human.

Andy
Yeah, right. Sounds good.

Ange
I know that’s heavy.

Andy
So, okay, move on.

Ange
So do you have any stories about D-Grade customers for the listeners so that we can kind of get a show or a feeling about what this category really means?

Andy
Oh, I’ve got a thousand of them. Absolutely. Better, I’m gonna call this customer as you know, I always call her Mrs. Jones because apparently I always use this name in all of my stories, which I do. So Mrs. Jones called us up asking for a price to get a couple of taps in her house replaced. What should have been our first red flag was she wanted a price over the phone. But guess what? We still went ahead and after pushing back about not giving a price over the phone and taking her through our process of our $55 diagnostic fee, she finally agreed to a day and a time for us to do the work. Our plumber gets there and guess what? She’s not even home.

Ange
No way. You’re joking. Keeping in mind here that Dr. Drip does follow a process where we call and text the customer with the trades person’s ETA, so that she should have known that you were actually gonna show up when you did actually show up.

Andy
Yep. She definitely did and I think the boys rang only 20 minutes before, but guess what she said? I’m just around the corner and she turns up half an hour later and then she complains she had to leave work and she doesn’t even have time to be here, you know? So our team just keep pressing ahead. They suss out the work, they give her a price, and she starts to google the cost of the taps we’re gonna purchase or we’re about to put in her place because she thinks that she wants to purchase a tap instead to save some money. So going around and around in circles and she finally agrees to go with the work. But when it comes to paying at the end, she flat out refuses and said she was never told she had to pay at the end of the job. And you know, our boys are trained really well and they know that every single time we collect the money on completion. But when a customer literally just keeps pushing past you, slams the door, gets in the car and drives away, what are you meant to do? You know, we had these guys standing there going, oh my God, this lady is crazy. And it took us about two months. It was only a couple hundred bucks, but she did pay, but we black banned her, we’d never work for her again. It was such a waste of time, but it’s not even the time. It’s the amount of energy that everyone puts into trying to chase these things. It was seriously shocking.

Ange
I’m actually just exhausted hearing that story because it just went on and on and on For something that was only a couple hundred bucks. It should have been really quick.

Andy
Are you talking about the story going on like I just took too long and I’m boring as batshit or you talking about her just went on and on and on.

Ange
It just sounds exhausting. I think this sounds exhausting.

Andy
And I’ve got a thousand of those stories and too many tradies these days, they still work with these types of customers because they feel like they have to. It’s absolutely crazy. You know, there’s so many tradies out there that have built their whole business around C and D customers, and they can’t work out why they just hate what they do. And, um, We definitely gotta make sure we’re better than that.

Ange
Totally. Sorry to interrupt the episode today, but there’s something really exciting happening. And I know you are chomping in the bit to tell our listeners more about it, aren’t you Andy?

Andy
Yes, I am. And after the shit show of the last few years of lockdowns and all that crap, we are touring the country again with a Lifestyle Tradie Live event. Hell yeah.

Ange
Yeah. So other than your bald head, what can our listeners expect to hear and see?

Andy
Ooh, wow. That is a little bit rough. But yes, you’ll see how to go from chaos to control. I’d like our listeners to think of it like an in-person, intimate podcast episode.

Ange
Oh yes, exactly. We are real people, you know, we don’t just live in podcast land.

Andy
Yeah. Listen, if you’re really sick and tired of working super long hours, or you wanna get off the tools, scale the business, sell the business, I just wanna work on your business and not in your business, then Lifestyle Tradie Live is definitely for you.

Ange
You know what? If you truly wanna make more profit or gain back your time to spend it with family and friends, or maybe take that six week camping trip you’ve been putting off, then tell your wife or business partner to come along to Lifestyle Tradie Live in a capital city near you because you know what? Nothing changes if nothing changes. Take this first step to really set your business up for success. You’re going to love it.

Andy
Go to lifestyletradie.com.au and register today. Tickets are limited. So guess what? Only 12 months later, she gave us a call again. Asking for some more work. What do you reckon we said?

Ange
What’d you do?

Andy
Go, dammit. No, she was a D-customer. We couldn’t make it. We’re really sorry, Mrs. Jones, you have to find someone else.

Ange
Yeah, Shaka. We don’t wanna be working with those guys, but we’re actually getting ahead of ourselves. We just need to take a second and share with the listeners how they need to work out which customer category they’re in with regards to A, B, C, and D. And then we can talk about what to do with them.

Andy
Yeah, but you know what? Getting rid of the D-grade customers is the best bit. I feel so good when you can just say, damnit.

Ange
Yeah, absolutely. Totally agree. But you know what? This is how we wanna ensure that you make money, like make profit inside your trade business. We need to get back to how to rank them. It’s important to figure out where your customers sit within this A, B, C, and D customer types. We’re basically overarchingly looking at your customer database with a couple of things in mind. What I’m about to list off is really important guys, so listen up. Firstly, what market segments do you work with today? What I mean by that is, is it residential, strata, commercial, industrial, real estates? Who is it? And then which of these spend the most money overall, and specifically, where do you make the most profit? Also, which of these has the highest average dollar sale? Then you want to look at the individual customers within these categories and ask yourself, which is the easiest to deal with? Who is the easiest to sell to? And in general, who do you really wanna work with overall? By putting your customers in order according to that criteria, you can then say, All right. Mrs. Jones, she’s a hundred percent a D-Grade customer cuz she’s only spent 200 bucks and what an effort and pain in the butt she was anyway. But Sam, the property manager for X, Y, Z strata company, spent 80 grand with us over the last three months, which had a decent profit margin. And he’s already introduced us to Fiona, the other property manager is a delight to deal with and therefore he is our A-Grade category. Make sense?

Andy
Yeah, it does take a bit to think about, but it definitely makes sense.

Ange
It’s often like the parental principle of 80/20, right? So 20% of your work is your most profitable work, working with your best customers, and 80% of your work is literally just small profit margins or maybe even break even work. That’s why we need to stop and look more closely with our list of current customers. It’s time to be a little bit more ruthless with your time and who you say yes to working with.

Andy
Is it? Is it, is it time now? Is it getting to the exciting part?

Ange
Yeah. It’s time you’re on.

Andy
Woo. Now you’ve got all your customers categorized. You can work on first trying to move your C and D customers up to an A and B customer. There is a process to do this and then, if they refuse to budge, the next best thing is saying a hard no for any more work. Get rid of those suckers once and for all.

Ange
Yeah, exactly. So all the time you’re saying yes to C and D grade customers takes away the opportunity for you to say yes to A and B grade customers, the ones you really wanna work with.

Andy
Yeah. So if Mrs. Jones calls again to do more work at her house, you will politely say, No, sorry. We’re unavailable and perhaps make a suggestion to contact the local tradie in your area. Maybe one of your mates and he can help out.

Ange
Are you actually polite though?

Andy
Oh yeah. No, we are. We’ve always been polite, but through gritted teeth, you know.

Ange
This is why being really clear with your communication about how you work on that first phone call is so important. The potential customer must know that they have to play, pay on completion, for example.

Andy
Yes, it’s a bit cheeky, but I’ve heard a lot of tradies adding on a pain in the ass surcharge to their quote. Um, if they’ve discovered the customer could be a problem after being at their house, you know, the decision is in the customer’s hands and if they want to go ahead with that price. Then at least make it worth your while.

Ange
Yeah, fair enough. Well, there is another option though, right?

Andy
Yeah, there is. I mean, obviously the first one is put enough money on it to make it worth your while, but sometimes you just do not want to work for these people and I think once you get that decision, it doesn’t matter how much money is on that job, it is just not worth the time and the effort and the stress for everyone involved. So it can just be, so Mrs. Jones, we can’t get to that job for another three months, four months, five months, or, you know, there’s always ways you can get out of it. We’ve always been very polite, though. We don’t sort of turn around and go, you’re an absolute nightmare. We don’t wanna work for you. So we’re very good. We’re very good.

Ange
You do need to keep in mind here that if you are telling customers, No, that you need to have some marketing strategies in place to attract other new customers to replace them. You can’t just lose a huge chunk of work without having a plan in place to keep the money coming in.

Andy
The thing is, once you’ve had the serious aha moment about who your D-grade customers are, perhaps you just can’t drop them like a hotcake cake, right? Imagine they’re worth 250 grand or more to your business every year. That’s like three days of work for, you know, one tradie. So you gotta be very careful.

Ange
Yeah, that could be super bad. Don’t just jump the Garner, ditch your D-grade customers. You have to try and move them up first anyway.

Andy
Absolutely. I remember a new member of Lifestyle Tradie learned about this stuff and he was like, I have so many D-grade customers, I’m getting rid of all of them. And we were actually working towards replacing them first before he cut them off. But the next thing I knew when I got a phone call from you and he said, I just had a gut full and I told him to jam it and I don’t have them anymore. And I’m like, holy shit man, that’s like 30% of your work, you know? But we figured out a strategy together and it didn’t take us too long to fill those customers back up with A and B grade customers.

Ange
Oh my God. What a shocker. He really went all in, didn’t he?

Andy
He certainly did. Big time.

Ange
Yeah. So listeners, I really want you to have a good think about the customers you work with and categorize them A, B, C, and D. And to help you out, we’ve actually developed a free download called the ABCD Customer Mix. It outlines the model in more detail with what we’ve been talking about today in this podcast. And it also includes this really simple worksheet that you can use to look at your trade business through the lens of the ABCD customer types. You can grab this from lifestyletradie.com.au on our free resources page, but I’ll also pop it in the link in the show notes too.

Andy
Taking the time to look at who you are currently working with and making a few tweaks, will seriously change the way you do business. So guess what? Do yourself a favor and grab our free download to guide you along. Okay? Another great episode Ange. I think that’s a wrap for today, and we’ll catch you all next week.

Ange
See you next week.

Andy
Subscribe to The Tradie Show, wherever you get your favorite podcasts. Rate and write us a review or for more information about Lifestyle Tradie, head to lifestyletradie.com.au.