Have you ever wondered why some businesses thrive while others struggle to survive, even when offering products or services of similar quality?

The answer may be closer than you think: in the type of customer you choose to serve.

Since 2007, while providing business consultancy to thousands of business owners, I have observed a worrying pattern among entrepreneurs: many are exhausted, working more than 60 hours a week, yet watching their profits progressively shrink. The question I hear most often is: “What is happening to my business?”

The truth is that no matter how efficient you are at managing resources, equipment or costs — if you do not have the right customers, your business is doomed to fail.

In this chapter, we will explore a reality that most business owners ignore: not all customers are equal. There is a fundamental difference between having many customers and having the right customers.

You will discover:

• Why focusing on your best customers is more profitable than simply chasing volume
• How to identify who your ideal customers are versus those who drain your energy and resources
• The profitability formula that connects price, the right customer and efficient management
• Practical strategies for redistributing your focus and transforming your customer base

The company as a network of resources

A company can be seen as a network of resources (labour, equipment, facilities, direct and indirect costs and other fixed expenses) that need to be organised effectively to produce products or services to be sold to potential customers. 

Now, let's suppose, for example, that in the industry your business operates in, the ideal profitability to aim for is 15%.

What does that 15% mean?

It means that if you manage all of your company's resources effectively, for every £100 your business sells, £15 will be kept as profit. As a business owner, you also mustn't forget that, depending on the country you operate in, your company still has to pay corporation tax on the profit it generates.

In the case of the United Kingdom, for example, corporation tax is 25% on the profit generated (for companies with annual profits above £250,000 – rate applicable for 2024/2025) and, if you distribute the profit after corporation tax as dividends to yourself, you will also need to pay dividend tax on that distribution as an individual, which varies between 8.75%, 33.75% and 39.35% – Dividend Tax Rates (2024/2025).

Now, as well as managing the company's resources efficiently, you also need to charge your customers an ideal price. The ideal price is an amount that allows your business to make a profit after paying all the costs and expenses required to deliver a given product and/or service.

These are all the ingredients that you, as the business owner, can control to some extent. You can, for example, set a budget for your labour, reduce your fixed costs, control marketing investments and so on. These points are widely discussed in the business world.

However, there is one point that is fundamental and usually overlooked by most business owners: the customer.

You can master every aspect of your business and it can all become worthless if you don't focus on the right customer. Your customer is your source of revenue. They must be the perfect match for your product and your business; otherwise, you will be aiming at the wrong target, and that can cost you your business.

The point I am trying to highlight here is this: no matter how good you are at managing your company's resources, your business will still fail if you don't have the right customer.

The right customers are always willing to pay a fair price. Having a sustainable business means having a business where the relationship between the price you charge your customers, the number of customers you have and the way you manage your company's resources results in profit.

What I have learnt as a business consultant is that many business owners focus on the number of customers rather than the quality of the customer.

They basically focus on the revenue formula, which is the number of customers times the price.

However, business owners must not forget two important things: which resources are used by each customer, and what other benefits each customer can bring to contribute to the success of your business.

A customer you think is a good customer, and whom you are charging a fair price, may be draining your company's resources without you realising it. One way or another, as a business owner you must be certain of the contribution each customer brings to your company individually.

There is nothing wrong with being used to focusing on the number of customers. 

That is indeed important, but having the right number of customers is not the same as having the right number of the right customers.

We usually celebrate when we win a new customer, but the right customer is the one who will leave a positive contribution to your business.

In addition, as a business owner you have to work out your customer's real value. What I am saying is that you have to calculate the customer's spend (revenue) and that customer's lifetime. At the same time, you have to calculate the customer acquisition cost and the individual cost of that customer. The individual cost means how much of your company's resources they consume.

To keep your business's doors open, the total value your customer brings to your company minus the total cost they consume from your company must be a positive contribution.

Let's now look at the fundamental differences between a good customer and a bad customer.

Price : The right customer is the one who understands that the price reflects the value of the product or service. They value the quality, the benefits and the results you deliver. They see your service as a solution to their needs, not as a mere cost. 

They are willing to pay more because they trust they will receive something that genuinely solves their problems or improves their life. This type of customer, as well as being willing to pay the ideal price, can often invest in premium services that add even more value.

They understand that premium services offer important differentiators, such as personalisation, extra support or superior results.

To help you understand better, in my case, at my consultancy firm, my right client is the one who hires my service and understands that the higher price reflects the consultant's experience and knowledge. They are open to paying more because they know the result will be valuable.

Payment reliability : Having customers who pay on time is fundamental to having a good business. You don't want to chase your customer 100 times to get them to pay. How many hours of your time, or your finance department's time, are you spending chasing bad customers for payment? 

Customers who don't pay on time carry an extra cost. Are you measuring that extra cost? Having customers who pay on time is essential to the financial health of any business. When payments are late or not made on time, the impact goes far beyond cash flow. It can generate extra costs and compromise operational efficiency.

Value : When the customer understands the value of the product or service you are offering, you keep the chances of losing them to the competition to a minimum. A good customer is one who understands and values what you are offering. They don't just look at the price; they weigh up the benefit the product or service brings them.

They recognise the added value of the service beyond the price and understand that quality, service and results come at a fair cost. A good customer is willing to invest in what genuinely solves their pain points or needs and takes a long-term view, seeing the positive impact of what they are buying.

The bad customer, on the other hand, doesn't understand or value what you are offering. For them, price is the only relevant factor, and that undermines the relationship. They focus solely on cost, without considering the benefits the service provides. They usually don't value the time and effort invested in delivering the service either.

 In my experience, every bad customer tends to complain, even when the product or service delivered is of high quality. To make matters worse, this customer can be more demanding, yet unwilling to pay for something better.

Priority : Some customers are good customers, but they don't allow you to organise your workflow the way you want. They never respect your deadlines and always call at the last minute, pressuring you to prioritise what they demand on their timetable. They usually disrupt the way you organise your resources. 

You must be ready to deal with these customers. You need to make sure you have a system for handling their last-minute requests. You may even need to allocate specific resources just to deal with these customers. Is it worth it? Sometimes yes, usually not. Make sure you know who they are.

A good customer understands that you have an organised workflow and respects your processes. They allow you to prioritise tasks in a logical and healthy way, which improves productivity and the quality of your deliverables. They plan their demands in advance and communicate them clearly, and they understand that every task has a deadline and respect your schedule.

In addition, they trust your process, know you are working to deliver the best result, and are flexible when the unexpected happens, as long as communication is transparent.

The bad customer, on the other hand, has the habit of treating every demand as urgent, often with no real need. They disregard the way you organise your work, creating stress and compromising the quality of your deliverables. 

They don't plan their demands and expect you to always be available to serve them immediately. They also ignore your deadlines and priorities, often interrupting other important tasks. They force you to work in a disorganised way, setting aside important priorities to meet their “urgent” demands. This can lead to delays, mistakes and even damage your relationship with other customers.

Respect: Respect is a positive feeling. It's when someone makes you feel important. Respectful people usually admire your qualities and treat you well, no matter what. 

A disrespectful customer is one who treats you or your staff badly. You don't need them. You should be ready to politely ask them to leave.

The way a customer treats you and your team says a lot about the kind of relationship they are willing to build with your business. 

A good customer respects you and your team, regardless of the situation. They treat everyone with courtesy and professionalism. They show patience and understanding, even when the unexpected happens, and they provide constructive feedback, helping to improve the service. 

This is a customer who contributes to a more positive and productive work environment. They help build a relationship of trust and collaboration, and they are more likely to become a loyal customer and even refer your services to other people.

The bad customer, on the other hand, can be arrogant and disrespectful, treating you and your team inappropriately. This type of customer doesn't value the effort involved in the work and often behaves in a toxic way. 

They are arrogant, demanding special treatment without justification, and always take an authoritarian stance, speaking rudely or disparagingly. They make excessive demands, often outside the agreed scope.

 They blame you and your team for any problem, even when they themselves have contributed to the situation. And worst of all, they don't accept feedback or negotiation, preferring to impose their own will.

 Disrespectful customers can create a draining and demotivating work environment in your company and, consequently, generate internal conflict and affect your team's productivity. I have seen customers cause emotional harm. 

Often, they cause more emotional damage than the profit they bring in.

Referrals and testimonials:  Your customers are not obliged to recommend your business to friends, family or anyone else. However, I am sure that when you keep your customers happy, they will recommend you to others. People love to talk. For better or for worse. Make sure you have customers saying good things about you. 

The difference between a good customer and a bad customer is also directly reflected in how they interact with your brand outside the commercial relationship. 

The good customer not only values the work you do, but also recognises the positive impact it has had in solving their needs. Because of this, they become an advocate for your brand, referring your services to other people. They leave positive reviews or testimonials that strengthen your reputation. They trust your company and come back to do business with you. In this way, the good customer helps you attract new customers with no additional marketing costs. They increase your credibility in the market through recommendations and positive reviews.

The bad customer, on the other hand, tends to focus only on problems, often ignoring the efforts your team has made to serve them. They don't value the service and can become a detractor of your brand. They complain constantly, often in an exaggerated or unreasonable way, and they speak badly about your company to other people, damaging your reputation. They leave negative reviews even when the problems have been resolved, and they are never satisfied, regardless of the quality of the service.

It is very common these days for customers to write testimonials, especially on your company's social media channels. You can ask your good customers for testimonials.

Energy and stress:You know a good customer is a good customer as soon as they come to speak to you. When they call you or meet you in person, you instantly feel happier. A bad customer will always make you feel bad. Now, do you want to have happier days? Select your customers.

 Customers who make you happier will always reduce your stress level. Stress is a silent killer and you should avoid having customers who make you more stressed. The good customer respects you and your team, contributes to a positive environment, is committed and loyal, and consequently increases your motivation. Working with customers who respect your professionalism creates happiness and a sense of achievement, reducing stress and making work lighter and more enjoyable.

The bad customer creates a toxic environment and increases the emotional strain on you and your team, generating fear and insecurity. A negative customer or person can make you doubt your work and your abilities, increasing stress and reducing your self-confidence.

Learning: I don't know about you, but I have learnt the vast majority of what I know from my clients. I teach them as much as I can because that's who I am, but I always learn from them too.

 I have learnt a great deal from them. How many lessons have I learnt when they shared with me the problems they were facing in their businesses? To me, that is priceless. 

Make sure you have customers to learn alongside.

Customers are often the best teachers a professional or business owner can have. Working with them offers valuable learning opportunities, not only about the business, but also about people, markets and challenges that help shape skills and knowledge over time.

A healthy relationship with customers allows a constant exchange of information. 

While you teach your customers about your products and services, they share their experiences, challenges and perspectives, enriching your view of the market.

As I said earlier, customers frequently raise specific problems they are facing. Listening to these accounts not only helps you find better solutions for them, but also allows you to anticipate future demand and improve your services or products.

Dealing with different types of customers helps you develop empathy and understand a variety of points of view. This is essential for building a customer-centred business and creating more meaningful connections.

Let's now put together a table comparing the characteristics of a good customer and a bad customer.

Comparison: good customer vs bad customer

The strategy of concentrating on your best customers

If you, as a business owner, are determined to concentrate on your best customers to improve your company's performance, I suggest you apply the action plan below:

1. Carry out an analysis of your current customer base
2. Choose the attributes you consider relevant to identify good and bad customers
3. Categorise each customer as: best customers, good customers or bad customers, according to the chosen attributes
4. Prepare a plan/campaign to concentrate your time, energy and resources on your good/best customers

You need to make sure you only keep customers who have the highest possible number of good-customer attributes. The price is the most important attribute. No matter how the other attributes contribute for each individual customer, your ideal customers must always be willing to pay an ideal price. Otherwise, the formula will never work.

The aim of this strategy is to increase the proportion of best customers (the most profitable customers, aligned with the strategy) over time.

This involves “training” or “educating” good customers and eliminating or reducing dependence on bad customers.

After 12-24 months of applying the strategy, a redistribution of the customer base is expected. This way, the percentage of best customers increases, while the proportion of bad customers decreases.

Example of customer redistribution

Initial situation:

• Best customers: 10% → These are the ideal customers, willing to pay the ideal price and delivering high profitability.
• Good customers: 70% → Customers who have potential but don't fully meet the characteristics of an ideal customer.
• Bad customers: 20% → Customers who are not willing to pay the ideal price or who generate more costs than benefits.

After 12-24 months of focusing on the best:

• Best customers: 20% → Increases due to the retention of ideal customers and the conversion of good customers into best customers.
• Good customers: 70% → Remains stable, as they continue to be a significant part of the base.
• Bad customers: 10% → Reduced due to being eliminated or no longer receiving focus.

The main goal of this strategy is to increase the company's profitability. Focusing on the most profitable customers reduces costs and increases revenue. At the same time, you, as the business owner, will reallocate your company's resources more effectively. Efforts will be directed towards the customers who generate the most value for your business. The secret is long-term sustainability. An ideal customer base is more stable and resilient.

Conclusion

I am sure that once you pay attention, listen and concentrate on your best customers, you will dramatically increase your chances of improving your company's financial performance.

I am not saying that your other good customers are not important – you should treat all your customers well. What I am saying is: treat all your customers well, but treat your best customers in a special way and make sure you offer them the best customer service ever.

“Concentrating on your best customers is not just a smart strategy – it is a fundamental business necessity that can determine the success or failure of your company.”