While visiting a Renaissance Executive Forums Indiana group meeting, Howard Cox stepped us through his process of identifying which customers are eating up our time and gross margins.
We have a tendency to just look at the revenues generated by each customer. It seems that growing our top line numbers is what we need.
But what if that customer is costing more than we're making with them? Making more widgets and selling more services only put us in a deeper hole that gets more challenging to escape.
The answer is knowing how much margin is being made from each customer. There may be reasons to accept making less for special circumstances. We just need to make informed, conscious decisions about our customers to keep our business vibrant.
Special thanks to Tony Hutti, Pamela Carrington Rotto, Andy Skaggs, Eric Howard, Jon van Sliedrecht and Doug Rammel for the insightful discussion.