When To Say NO

May 1, 2007
p class="style1" Sometimes you meet unscrupulous people in life. Sometimes they're your customers. From time to time every service company encounters

Sometimes you meet unscrupulous people in life. Sometimes they're your customers. From time to time every service company encounters a customer that calls them a crook after they've performed a service for them, because so-and-so said it could be done for less. How do you handle these people?

The tendency is to tell them to take a hike. They agreed to a transaction and now they want to back out after you've solved their problem, after you've incurred costs. If you do, you're certainly justified in your actions. The customer in question will never call you again, but that's probably okay by you. The problem isn't who they won't call, it's who they will call.

The Stakes Are Higher
Right or wrong, customers who are mad at you are going to call their friends and their neighbors. In days past, this may have been bad enough. Today, it's worse.

One individual was so incensed by a furnace manufacturer that she started a website dedicated to documenting her case and slamming the manufacturer. She's had nearly 19,000 hits on this website. She may be right or not. The point is, the Internet has changed the equation.

Internet savvy consumers can quickly build a free website dedicated to the destruction of your company. They can post their version of their experience with you on an electronic mailing list read by thousands. In the past, an irritated customer could tell a few people. Today, they can tell thousands.

Worse, the customer might call the some state regulatory agency that's staffed by bureaucrats with no business experience. Some are motivated by headlines. Some are only motivated by a desire to right all perceived wrongs in the world, whether they fully understand them or not.

Even when you're right, you may lose if the power of the state becomes focused on your operation. Even when you win, the cost in time and attorney's fees makes it a hollow victory.

Why Risk It?
Why risk the bad publicity? Why risk the fight with city hall? Plan for a certain percentage of complaints and budget an amount to handle them. Build it into your pricing.

Analyze past invoices and identify how many jobs out of 100 resulted in a dispute. Either use your average ticket price
or figure out how much it would have cost to settle these on the customer's terms immediately. What percent does that represent out of the total revenues for 100 transactions?

Recalculate your costs to account for customer disputes, increasing your pricing a percentage point or two. Create a "customer care allowance" reserve account and allocate the percentage point or two into this account for every job.

The next time there's a dispute, give the customer what they want, debiting the customer care allowance. When you debit customer care, you debit the full amount of the invoice.

Yes, you will still get mad about the nerve of some customers. Yes, you will still feel like they've stolen from you. But no longer will you chew up valuable time managing disputes. You will minimize the ire some hold against your company. You will lessen the odds that the heavy hand of the state will fall upon your organization.

So when do you say no to a customer, complaining about your pricing? Almost never. Just suck it up and write it off as a cost of doing business. You'll come out ahead in the long run.

Matt Michel is president of the Service Roundtable (www.ServiceRoundtable.com), an organization dedicated to helping contractors prosper. Matt is also the publisher of Comanche Marketing, a free marketing e-zine. Subscriptions are available at www.ComancheMarketing.com. You can contact him directly at [email protected]. Or send your comments to Contracting Business at [email protected].
About the Author

Matt Michel | Chief Executive Officer

Matt Michel was a co-founder and CEO of the Service Roundtable (ServiceRoundtable.com). The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. The Service Nation Alliance is a part of this overall organization. Matt was inducted into the Contracting Business HVAC Hall of Fame in 2015. He is now an author and rancher.