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How to Identify & Deal With Bad Customers in Your Business

One of your worst customers has just walked through the door. Instantly, you see your employees’ smiles disappear. This customer is always angry and demanding, and frequently berates your staff for mistakes that aren’t their fault. You give him great customer service, and he’s still not satisfied.

You’d love to show him the door, but, he’s a customer. And the customer is always right. Right?

Toxic customers and clients like this present a serious time and money drain for business owners. Most businesses don’t want to turn away anyone, no matter how difficult they are to deal with. However, toxic customers are often far more trouble than they’re worth.

How do you know you’re in a truly toxic relationship with a customer or client, and what can you do about it? Let’s take a look.

How to Identify a Bad Customer

Customers and clients come in all shapes and sizes. Some of these relationships will be wonderful and incredibly uplifting, while others will be annoying and stressful. Occasionally, however, some relationships on the negative end of the spectrum can slide from annoying to toxic. The 80/20 Rule applies here: 80% of your problems will come from 20% of your clients.

So, how can you tell when you’re dealing with a toxic customer? You can usually tell you’re in a toxic relationship when the thought of dealing with a particular customer causes instant tension and stress. However, look for one or more of these signs to know for sure.

1. Toxic Customers Take Advantage of You

confused lady standing supermarket

In the beginning, your relationship with a customer usually starts off on a good foot. However, a toxic customer will, over time, begin to take advantage of your kindness and generosity. They will start to expect, or even demand, price breaks or other freebies that you don’t generally offer to other customers. They’ll consistently demand that projects be completed by deadlines that are almost impossible to meet.

Another red flag that you’re dealing with a toxic customer is that the scope of your business relationship changes over time. For example, they ask for services or options that are above and beyond what you both agreed to in your initial contract. They constantly want the finished project edited or changed, and they’re never satisfied. They disregard your other commitments and expect your time and attention whenever they need it.

2. Toxic Customers Take Up a Lot of Time

Toxic customers often take up far more time than their projects warrant. For example, they might spend an hour on the phone with you or your support staff complaining about one thing or another. They change their mind frequently, which means you and your team have to invest even more time adjusting to their new demands.

Toxic customers might also want to take control of a project or service. They don’t trust your expertise, they don’t take your advice, and they feel “their way is the best way.” Dealing with their controlling behavior adds lengthy delays to your time frame and siphons off precious resources from other clients.

3. Toxic Customers Pay Late, or Not at All

Toxic customers don’t pay their bills in a reasonable amount of time. They might frequently ask for extensions on due dates, discounts you didn’t agree to initially, or they might even ignore invoices altogether.

4. Toxic Customers Are Abusive to You and Your Staff

When toxic customers don’t get their way, they can become angry and demanding, and sometimes even verbally abusive. They might threaten you with the promise of a bad online review – or even legal action – if you don’t cave to their demands.

Another abuse tactic used by toxic customers is the constant threat to take their business elsewhere. Every customer knows that they can turn somewhere else if a business relationship doesn’t meet their expectations, but a toxic customer threatens this on a regular basis, bullying you and your staff into giving them more. This saps morale and productivity, and might even cause your best team members to look elsewhere for employment.

Toxic customers often expect instant responses to their requests, even when those requests come through overnight, or on weekends or holidays. When someone disrespects the boundaries you’ve put up to separate work and home life, be wary.

5. Toxic Customers Are Unclear About Their Needs

Toxic customers often don’t know what they want. This can lead to a constant tide of changes – from project scope to entire branding campaigns – over the course of a business relationship. Before you take on any new client, get a feel for how in tune they are with their own values and ideals. Ask them to describe their business and what it stands for. If this request leaves them speechless or confused, consider it a red flag.

6. Toxic Customers Are Unethical and Dishonest

A toxic customer might show their true colors by frequently asking you and your team to do things you’re not comfortable with. They might lie, or exhibit other unethical behaviors, to get what they want. They may also try to exploit your business through loopholes in your contract, finding ways to siphon even more time, services, and money out of the relationship.

How to Deal With Bad Customers

It’s important to realize that toxic customers are, for the most part, unprofitable for your business. They sap your team’s time and energy – time and energy that could be used making your loyal customers happy or generating new business.

This is why, once you’ve identified a truly toxic customer, you need to take action.

There are two options available to you. Your first option is to try to save the relationship with good communication and firm boundaries. Toxic customers don’t often change their spots, but if you really need the business, or the prestige that might come from working with them, then it might be smart to talk to them first. Your second option is to fire them. Let’s look at how to handle both of these scenarios.

1. Talk to Them

Start the conversation on a positive note by expressing your appreciation for their business. Next, address the biggest problem you’re having with this customer in a professional and impersonal way. Even though it’s tempting and might feel cathartic, don’t attack them.

Example: Imagine that your customer constantly wants to add new services or features to a project that’s already underway. A professional and diplomatic response might be:

“It seems we haven’t done enough to help you clarify what you need out of this project; I’m sorry about that. Let’s set a time to sit down and talk more about what your expectations are, and what you need.”

Although it might irk you to put the blame on yourself, doing so will keep communication lines open and, more importantly, make your customer more receptive to what you’re about to say next. After this, gently – but firmly – set new rules and boundaries.

Example: “Once we sit down and talk about your needs, we’ll draft a new contract and go over it together. After that, any new requests or changes will incur additional fees and extend the project deadline. My team wants to get this completed for you, and they need the time and space to do that. Does this sound fair?”

Your customer might raise some objections to this, but you need to be firm and direct.

If your toxic customer is a frequent complainer, dealing with their behavior will require a different approach. Constant complaining will drain anyone’s energy and enthusiasm after a while, and the truth is that you and your team simply don’t have the time (or the willingness) to listen to their moaning all day.

So, what do you do? When your toxic customer starts complaining, redirect the conversation to one that’s more productive. Ask them how they want to fix the problem, or what ideas they have for moving forward. Putting them on the spot forces them to shift their thinking into a pattern that focuses on a solution. If they don’t have any ideas, they’ll likely change the subject.

What to Do About Bad Behavior
If your toxic customer is the type that regularly walks all over your staff – or, worse, verbally abuses them – then it’s time to put an end to this behavior. Your business needs talented employees far more than it does an abusive customer, no matter how much they’re spending.

Explain that your staff deserves basic courtesy and that you won’t tolerate any more abusive behavior. Be very specific about their behavior, citing examples and presenting proof (emails or recorded calls, if possible) of what they’ve said.

Your customer might get defensive at this, and your relationship might end right there. This is a risk you will have to take. You are the first line of defense for your team, and they deserve to have a working environment that’s healthy and free from hostility.

Talking to abusive customers might not be worth your time at all, so think carefully about the severity of this person’s behavior and whether or not you think the relationship is salvageable. In most cases, you’re better off letting them go.

2. Fire Them

Firing a customer is never easy, and it’s important to think carefully about the repercussions.

First, look at your business’ financial stability. Will firing this customer affect your finances in a negative way? If you only have two clients right now, and one of them is toxic, then you probably shouldn’t fire them, no matter how annoying they are – not until you have a steady stream of new clients coming in.

Next, look at the long-term repercussions. If your toxic customer happens to be someone with a great deal of prestige in their industry, it might be worth putting up with some bad behavior simply to say that you’ve worked with them; the relationship might lead to bigger and better clients down the road. However, some clients aren’t worth the trouble at any price. This is a situation only you can assess.

Last, look carefully at your contract, if you have one. You might need to talk to a lawyer if you want to walk away. This expense, and the stress of having to break a contract, might not be worth it.

If you do decide to fire your customer, you’re going to need plenty of patience and diplomacy. You must end the relationship gracefully so that the customer doesn’t take steps to damage your business’ reputation online or cause other problems down the road.

Start by thanking them for their business.

Example: “We really appreciate that you gave our business a try.”

Next, assign blame to yourself. This will convince the customer that the fault is ultimately yours, and that they’re not being personally attacked. Yes, this will rankle, but remember that your goal is to send them on their way gracefully and preserve your business’ reputation in the process.

Example: “Some of the requests you’ve made recently fall outside what we’re able to offer right now. We’re not capable of meeting your needs, and I’m sorry about that.”

Next, resolve the situation by offering a full or partial refund, depending on what you’ve already delivered. This will, of course, result in financial loss for the time and energy you’ve already put into this customer, but think of it as an investment. You’re investing in your business’ reputation by making the customer feel like they’re winning and you’re losing.

Example: “I don’t want you to have to pay for anything you’re not happy with, so I’m going to issue a 50% refund on last month’s work.”

Last, offer them other solutions that will meet their needs, and apologize again.

Example: “Again, I’m really sorry that our team wasn’t able to live up to your expectations. You might want to try [product/service/competitor] since they might be a better fit for what you’re looking for.”

Firing a customer gracefully and diplomatically is not easy. It’s especially difficult to put the blame on yourself when the fault is entirely theirs – and then issue a refund for work that you and your team completed in good faith.

However, firing a toxic customer will free up your time and energy to focus on your other customers who are the lifeblood of your business. You’re making an investment – in yourself, your team, and your business. Firing a toxic customer gives you more time to invest in the customers that keep your business thriving.

In Person, Over the Phone, or Email: Which Is Best?
unhappy customer complainingYou have three options when it comes time to firing your client: in person, over the phone, or through email. The option you choose will depend on your personality and your experience handling difficult conversations.

First, put yourself in your client’s shoes. If you were going to receive bad news like this, how would you like to be told?

A conversation in person might be more heated and personal than an email exchange, but it gives you the power to use body language and tone to soften your message and hopefully end things on a more positive note. Using email gives you some distance from the situation, but it also makes the conversation more impersonal, which might further infuriate your client. There are benefits and disadvantages to each option.

Whichever path you take, try to choose the one that’s best for your client.

Challenging Customers Are Not Toxic Customers

It’s important to realize that a challenging customer is not the same as a toxic customer. A challenging customer might have very high expectations that, so far, you’re not meeting. They might have valid reasons for being unhappy.

Challenging customers are just that – challenging to work with. However, they don’t cross the line in terms of their demands and behavior, and they don’t take pleasure in causing you and your staff stress. Once you have done everything in your power to put things right for a challenging customer, they will often become one of your best customers.

Toxic customers, on the other hand, will usually find something else to complain about, or someone else to berate; there is no pleasing them. Do what you have to do to please your challenging customers, and get rid of the toxic ones.

Final Word

I’ve been self-employed for almost 20 years and have had my fair share of toxic clients. Early in my career, I didn’t have the confidence to send these clients packing, and as a result, they drained considerable amounts of time and energy that could have been spent on my rock star clients.

I eventually learned how to recognize a toxic client early on. In my business, they often start the relationship with unreasonable demands or unethical requests. When I spot them now, I politely turn them away without a twinge of guilt.

It doesn’t matter what business you’re in, you’re eventually going to run into people who seem to delight in making you and your staff miserable. It’s not easy to sever ties with these customers, but your business will be better for it.

Do you have experience with toxic customers? How did you handle the situation, and what do you wish you’d done differently?

Heather Levin
Heather Levin is a writer with over 15 years experience covering personal finance, natural health, parenting, and green living. She lives in the mountains of Western North Carolina with her husband and two young sons, where they're often wandering on frequent picnics to find feathers and wildflowers.

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