Most small business owners hang onto every customer like their life depends on it.
It doesn’t. You need to start firing customers.
Your loyalty to the bottom 10% of customers — the ones who drain your time, your team, and your margins — is costing you more than you may realize.
Let’s talk about how to spot them, what they’re really costing you, and why letting them go might be the most profitable decision you make this year.
Not All Revenue Is Good Revenue
We’ve been taught that more customers = good business. But that’s not universally true. There are two kinds of revenue: profitable and unprofitable.
Your worst customers occupy the latter category and will undoubtedly:
- Argue about pricing or nickel-and-dime you;
- Take twice as long to serve as everyone else;
- Disrespect your boundaries or your team;
- Pay late or screw with your cash flow;
- Derail your focus with custom requests that don’t scale.
The Real Cost of Serving Your Bottom 10%
These customers:
- Distract you from your best clients;
- Burn out your team;
- Break your processes with constant exceptions;
- Drain your energy and derail your strategy.
All of which have costs.
Consider Client A who pays $1,500/month and takes 12 hours to service.
Another Client B pays $1,200/month and takes 3 hours.
Who’s actually more profitable? Which kind do you want to scale up and which do you want to wean yourself from?
Identifying the Bottom 10% doesn’t need to be complicated. It’s often pretty intuitive.
Ask yourself:
- Who do I dread hearing from?
- Who always needs “just one more thing”?
- Who pays the least but demands the most?
- Who’s outside my ideal client profile?
- Who would I not take on today?
This isn’t about personality. It’s about fit, friction, and focus.
Getting Precise: Use Activity-Based Costing
To go beyond gut feel, use activity-based costing (ABC) in your accounting. ABC tracks actual revenues earned and resources used — like service hours, admin support, or endless follow-ups — and ties them to each client.
It forces you to assign costs based on where the firm is expending resources. It’s a more accurate approach than traditional costing, especially in service businesses.
Allocating Overhead Fairly
Some of your costs can’t be attributed to a particular customer or project. Think about the infrastructure it takes to stay open for business — rent, software, insurance, admin salaries, even the breakroom coffee. These costs aren’t tied to specific clients but still have to be covered.
To fully cost a particular customer or project, we add an assigned amount of overhead to their other costs.
To assign overhead fairly, pick what you think is the most appropriate in your instance from these two most common, practical options:
Flat % of revenue – Easy, but simplistic.
Hours-based – More hours = more overhead. Probably better in a service business.
The goal isn’t perfection. It’s reasonableness. You know your business. Use a method you can repeat, compare, and make decisions from.
Letting Go Makes Room for Better Business
Some argue that if a customer covers their variable costs, like materials, direct labour, or delivery expenses and contributes anything to overhead, they’re worth keeping. That’s fine if they’re easy to work with.
But if they’re needy, disorganized, or toxic, that thin contribution isn’t worth the drag. That mindset traps you in scarcity mode, like clinging to a leaky boat, assuming you can’t replace them.
The truth? You usually can.
You just need the courage to replace them with a better-fit customer, one who brings higher margins without the chaos.
When you trim your bottom 10%, you free up time, energy, and resources to serve your best customers better, or welcome new ones who fit.
The Head Fake: You’re Not Really Firing Customers
Here’s the head fake, a nod to Randy Pausch’s Last Lecture.
This isn’t really about firing customers.
The smarter move? Add a PITA premium; a “Pain In The Ass” surcharge.
For high-friction clients, raise the price until the margin justifies the hassle.
If they stay, they’re finally worth it. If they leave, you just freed up your time and sanity.
Either way, you win.
Are you ready to start firing customers? Ever audited your customer base?
You might be surprised how much time you’re spending on the wrong ones.
Do the math. Make the call.
Letting go isn’t failure. It’s focus. The best businesses aren’t built by pleasing everyone. They’re built by serving the right ones, well.
Need help firing customers, reach out
