Not all customers are good customers. Unfortunately, some, regardless of how much you charge for your services, do not add to your net profit. Let’s look at an example from the service industry:
So, you are the manager of a local CPA firm. You have three large clients, but you are determining if each of these clients is creating a profit for your firm, or if one should be eliminated. This is a tough decision to make, and there are lots of pieces of the puzzle to review. Let’s look first at the revenue brought in to the firm for each client.
Customer A: $25,000.00 in revenue
Customer B: $32,000.00 in revenue
Customer C: $37,500.00 in revenue
A. You might be looking at this, thinking, "why would we eliminate any of these customers? Look how much revenue they are bringing in to the firm?" But remember, there are other things we need to consider.
B. What are some of the things to consider?