How Firing Customers Grew My MSP

By Cort Ouzts, POS Nation

In the early stages of any business, there’s one initial goal. Get as many people as possible to know the business exists — and more specifically, get as many customers as possible. Brand awareness grows your potential customer base. The more customers you have, the more trusted you are, which leads to even more customers. And of course, more customers means more profits.

In the point of sale industry, however, taking on as many customers as possible can quickly backfire. As the CEO of POS Nation, I experienced this first-hand, learning that firing — or rather, being more selective about — customers led to substantial growth.

The History Of POS Nation

When I started at POS Nation in 2013, the mindset was, “I hope we make payroll this week”. Like many small businesses and startups, we were in a stage of our life cycle where we were spending money much faster than we were growing sales, and to compensate, our daily sales goal was to get cash in the door. It didn’t matter how crazy the prospect was or how ridiculous the requests were. If we could get cash in the door, we pursued it.

While this strategy met our needs at the time, we failed to foresee the long-term impact of onboarding not-so-ideal customers to our platform. Customers that we should have passed on turned out to be the most frequent callers to our helpdesk because our product didn’t meet their exact needs. When the helpdesk couldn’t resolve their issues, the customer called their sales rep. Instead of selling, our sales reps would then turn into customer service reps having to listen to the frustrated customer complain about our solution. The customer then left poor reviews; the helpdesk became frustrated because they couldn’t make a customer happy; the sales rep became jaded about what they were selling — you see the cycle here. We made payroll, but did we grow the business?

Vetting Customers Based On Demographics

After pulling the numbers over time, we started to see trends within customer demographics. Not surprisingly, our product is more successful with specific demographics and industries. At that point, we realized it was time to become more targeted. Reviewing sales data by customer type was easy enough — but for each customer type we also looked at the average number of calls to the helpdesk, the average review rating the customer gave after installation (i.e., 3 stars or 4.5 stars), and the likelihood of future repeat business from that customer. Reviewing all this data helped us develop a true lifetime value that encapsulated not only revenue but also the expected cost for each type of customer. While identifying the characteristics of “the perfect customer” was helpful for the marketing team, finding the characteristics of our “bad” customers proved just as helpful.

For example, we found that salons and spas were a business type that we spent a lot of time trying to reach. But after looking at the analytics, we learned that:

• Our close rate for salons and spas was significantly lower than all other industries
• The limited number of salons and spas who did use our solution averaged more calls to tech support more than any other group
• Because our techs weren’t as practiced with our salon and spa software, the technical support calls took longer
• Over time, our salon and spa customers opened new locations at a much lower rate than any other industry

Looking at this data allowed us to “fire” salon and spa customers. Why waste time catering to a nonprofitable industry when our efforts can be spent elsewhere? Exclusively focusing on the most valuable industries saves time internally and allows the business to grow.

From High Turnover To Industry Experts

When we were less selective about who we worked with, our “bad customer” base was at an all-time high. These customers were abusing tech support and being difficult to deal with through non-realistic requests. Boundaries weren’t set, and although our technical support team tried their best, they could never make these customers happy.

At this time, turnover within the technical support department was incredibly high. Not many employees were willing to stick through the difficult time of transition due to being treated inappropriately by customers. And on top of that, technicians had way too many industries to learn. They were spread too thin among a widely diverse customer base, not allowing them to improve or gain expertise. Simply put, we were a jack of all trades, but master of none.

Our decision to fire bad customers didn’t occur overnight. We gradually shifted our thinking from selling anything to selling the right thing. When we did this, customers loved our product; they rarely needed technical support; they left us positive online reviews; they referred us to their friends; our sales reps had more confidence because of all the positive feedback — you get where this is going.

Now that POS Nation only works with industries and customers who make sense for our product, we are proud to have a full team of technicians and sales reps who are experts in our top industries. Because we only work with the same types of customers over and over, we have learned the ins and outs of these industries and have become true consultants. This not only helps build trust in our business, but it helps our team growing on a professional level.

While it doesn’t necessarily help you meet payroll for the week, firing customers can help businesses develop a scalable platform primed for future growth.