Is exiting a business on your mind? Plan for it now

by Ashvini on February 26, 2013 · 3 comments

in Business,Entrepreneurship

My bank from last many years decided to drop many customers(including me) for reasons that are not known. Probably they are winding operations or letting go of unprofitable customers. Recently a TV channel provider decided to reduce the number of services they offered to their former premium customers. It appears strange that in the mad rush to get more customers, a few businesses are exiting business and letting go of their customers.

Why would business like to drop customers?

Business do drop customers from time to time. To an entrepreneur , dropping a customer is unthinkable because in entrepreneurship, having customers is a privilege, forget about dropping them. A business may decide to drop customer maybe because of the cost of servicing them exceeds cost of retaining. Another reason is that the market demand has caused them to exit one market and move to another. Often a business that is spread out may want to consolidate.

Is the business dropping customers or reducing privileges greedy ?

Not necessarily. Based on the market dynamics, business often would like to concentrate more on profitable segments. For example a retail chain selling clothes to all  age group would like to sell it to a particular age group only. A business might decide to move into mass category rather than staying in high end segment.  Thus a business might drop the privileges associated with the segment they are moving out or even let customers go.

What is the best way to drop any unprofitable business?

If you do decided to drop a business or customer, be aware that such a step will affect a large number of stakeholders, including suppliers, customers and employees . It is a good idea to plan in advance, give them enough notice so that they can prepare for the fallout. Business should return their deposits or belongings as soon as possible. Just don’t make do it suddenly and disappear. You would be called as cheater even if you have no intention of cheating.

Communicate well

Most stakeholder do understand business’s need to reorganize. Even they won’t like it but they will eventually understand. It is your job to explain clear reasons for exit or dropping of privileges. Give them alternatives if any.  Thank them for their business. I am sure done in a better manner , it can win your business friends for a long time.

Entering and exiting businesses and acquiring and dropping customers is part of business strategy. However it should not be done in unplanned manner. It is good business to be even polite and open while closing it.

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Zalando May 29, 2013 at 12:15 pm

Exiting a business is not the solution to the problem at all. One must find some way out to deal with the challenges that come time and again while running business. Thanks a lot for sharing the information.

Tim Bonner February 27, 2013 at 11:40 pm

Hey Ashvini

At the present time, I’d hold on to as many clients as I can, if I had any already! Early days…

When I was previously employed, the company I worked for went through a culling process and got rid of a number of smaller clients. They wanted to concentrate their efforts on the medium-sized clients and above.

I was actually impressed with the way they handled it. They went out of their way to suggest an alternative service company to each client and put them in touch personally so there was continuity.

Ashvini Kumar Saxena February 28, 2013 at 5:08 pm

Hi Tim,

As a small business owner we would all like to get as many customers as possible. I think the company that you worked for really did good. Suggesting alternatives and making sure that they are not left out increases the reputation of the company. Who knows one of the client grows big and want to do business again with your company.
Thanks for providing a good example in support of my post. I appreciate it :)

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