When building a productized service business, it is very easy in the early days to just take any customer that comes along.
You need revenue and growth, it seems crazy to turn down people willing to pay you money for your service.
But based on our experience plowing through the “early days” of Work Hero, it has become crystal clear that we should be turning down some potential customers. These are some things to look out for if you are wondering whether or not to sign somebody up to your service:
- They try to negotiate your low-cost service. This is trouble. I have no problem with negotiating prices in general, but the idea of your recurring service is that it’s already a great deal for them- much better than they could get by hiring contractors, and if you are offering unlimited plans like we are, there is often a limited profit margin to begin with. So if they are starting off with asking for your $150 service and asking to get it for $100, bending to their desires will be a never-ending headache. Just say no to the negotiators.
- They tell you they only want to use your service for one month. For productized services, this is a bad fit. If they are only in it for one month, it is unlikely that you will be able to impress them to the point of them continuing with you after that month. In addition, they will milk that month for everything it’s worth, and take up a lot of your time.
The problem is, their mindset is going to be “I’ll try to get everything I can for this month”. We recently had a customer who did this, and sent us an extraordinary amount of edits, and expected everything to be done quickly and all at once, while overloading our inboxes and sending several text messages. Insist on the subscription up front, and be clear that you want to form a long term relationship instead of doing one-off tasks.
- They have a story. I learned this from my days as a real estate investor and managing tenants. People will sometimes call or email with a story about how their business isn’t doing so great now, but will do better in the future. They will then ask for a deal or a discount on your services. The problem is, the story will continue, and they will often turn the tables and make you into the bad guy if you don’t conform to their wishes. Stories are bad news, and these are not customers you want to work with. Ever.
- They are impolite. The first few exchanges will tell you everything about what kinds of interactions to expect from them. If someone acts demanding, or impolite, or is simply not grateful, this will likely turn into a lot of unhappiness and stress for you and your business. If this level of negative behavior happens early on, it will definitely continue- and your staff will be dealing with the end result- complaints, negativity, and demands. This will lead to burnout and will cost you, both emotionally and spiritually.
- They want a high-touch service. If you run a productized service business, you will no doubt run into this customer. They sign up thinking that you will be answering their calls at all hours of the day, get on Zoom calls when they don’t understand something, and then get frustrated when communication is mostly through written communication.
This customer is often (but not always!) of the boomer generation. In their time, “you get on a call to solve problems!” Our solution of using Loom videos to explain things won’t work with this customer. Better off avoiding them altogether instead of wasting a lot of time on the phone with them.
We have learned a lot of lessons, and no longer take on any of the above types of customers. It can be a struggle, as you build your monthly recurring revenue, to take on anyone who comes along. But this strategy will always, every time, come back to bit you as you come across these 5 customer types.
Figure out your ideal customer, and avoid the temptation to go for quick money over long term strategy and company principles.
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