Do You Have Too Many Customers?

What do you think is better, 100 customers or 200 customers? It might actually be the lower number, and I’ll explain why.

Let’s say that a small business provides landscaping and maintenance services for both businesses and for residential customers. Most of the customers are within a reasonable driving distance from the main office, and the total amount of customers they have is 200 (50 businesses and 150 residential customers). In order to serve their customers the business has 10 employees and several business vehicles.

After reviewing the amount of services provided to each customer, the owner realizes that it is either unprofitable or only slightly profitable to service a small residential customer, especially if they are more than 15 miles away.

Furthermore, the owner realizes that if an employee performs work for a business customer it tends to be much more profitable because only several are being serviced in one day for a total of eight hours of service performed. For residential customers, only four hours of service is performed after factoring in travel time, plus there are additional costs of travel. Also, the work for business customers tends to be steadier and provides overall higher revenue.

What is one possible solution? The owner may decide that it makes sense to only service business customers. By decreasing the number of customers from 200 to 100, it means that 50 more business customers were acquired, while discontinuing service to 150 residential customers. If each business customer usually receives $5,000 of services per year while each residential customer receives only $1,000, then revenues will actually increase by 25%, while actually decreasing costs.

All you have to do is substitute the type of business with your own, such as computer consulting, printing, medical practices, all types of contractors, and you will get the same results. I believe that serving too many customers even leads business owners to feel that they are busy all of the time without having anything to show for it.