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October 10, 2011

The Customer Profitability Conundrum

Customers are the lifeblood of your business. Without them you would have no revenue, no business case, nothing. Unfortunately they are also probably the most difficult part of your company to handle.

Which customers do you keep, which do you turn away? Can you afford to grow quickly or is a slower method preferred? What do you do with that large customer who is no longer ordering as much and not quite as profitable as before? These are the difficult questions you have to answer every single day. But how do you find quick answers so that you don’t send your company into an analytical downward spiral?

Before you can answer questions about customers though you need to be able to answer a few about yourself:

1. Do you know how much your services truly cost?
2. Is it important to you to have the “right” mix of customers?
3. What margins are you looking to make on your customers?
4. Which customers need the most support?

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