So here I am thinking about nuts and having a good laugh about it too when I come across the brouhaha started by Justin Kitch, CEO of Homestead.

Justin suggests there’s a time and place for firing customers.

The resulting comments are generally not positive, with a few Homestead customers questioning whether they’ll stay customers for long. I can understand customers not being overly impressed with Justin’s comments but he’s not entirely wrong.

First, Justin isn’t talking about Homestead customers specifically (as far as I can tell), who sign-up for a product versus a custom service. The example he uses is from a previous business which did custom software development. If you run a product or web-based service business then firing a client doesn’t make a ton of sense because they rarely get enough access to your company to result in a need to fire them.

The main reason people recommend firing customers is that it costs too much money to support them.

Ultra-difficult customers take up a lot of time, and that costs money. They increase frustration levels and rarely result in as much profit as easier customers, if any profit at all. There’s nothing like losing money on a customer to question the value of that customer…

Bad customers are a problem.

Most companies in the product or web-based service/product businesses use email and support forums to handle customers, or ticketing/help desk software. Many of their customers buy the product as is, and they don’t require lots of handholding. So even if a customer is troublesome, they can be contained without having to fire them. In the service business – like software development – it’s another story.

Doug at Service Untitled does a 3-part series on firing customers reflecting on Justin’s blog post. It’s a great, very detailed read.

Laura Benjamin is going to be holding a free teleclass on how to fire customers today. You should still have time to sign-up!

Andrew Parker wonders about the bad publicity generated by Justin’s comments. Lou Hornick echoes similar concerns in his post Firing customers – bad move… when he writes:

Firing a difficult or abusive customer solves a short term problem (the drain on support resources), but creates long-term unhealthiness in your business. It puts former customers on the street with a never ending stream of terrible things to say about your company, and trust me, when you leave them out in the cold they’re not going to forget. They were probably unhappy to begin with, and now you have validated all of their negative sentiment.

Lou’s not wrong. Fire a customer and they very well might cause a stink-fest all over the place. And in the world of social media when a frustrated customer can get on the front page of Digg and instantly have a huge platform to rant from, you should be concerned about firing a customer. Still, one customer’s impact is typically fairly small.

Lou asks the question, “If you make a business practice of terminating difficult customers, and we all have difficult customers, how long does it really need to go on before you have critical mass of scorned ex-customers generating adverse financial impact?”

I’m not sure anyone, including Justin, makes a habit of firing customers. In my 10+ years of experience in the Web service and software businesses I’ve let a handful of customers go. Maybe less. Most of the time it was mutual, once or twice we weren’t paid and it nearly went to legal action. Shit happens.

Here are my recommendations:

1. Recognize the fact that crappy customers exist.
2. Ensure that you and your staff understand how to handle crappy customers.
3. Demanding customers are not the same as crappy customers. A demanding customer wants an excellent product and excellent service. A crappy customer wants more than that, they’re rude, ignorant and near-impossible to work with. I can respect demanding, but people do take it beyond that.
4. Make sure the fault is with the customer and not you.
5. After all options are exhausted, and it’s clear that the client is much more of a burden to the company as a client than otherwise, fire them.
6. Once you’ve fired your client be prepared for any backlash. It can be mitigated (if necessary) through direct communications with other customers, building positive buzz, responding to negative feedback, etc.