Florida CFO Group Blog

Helpful topics from Florida CFO Group's experienced CFOs

Are You Losing Money on Your Biggest Customers? Part III

Part Three of Three Parts: Turning Around Unprofitable Customer

In the third and final part of a three part series on how to recognize if you’re losing money on your largest customers, Florida CFO Group partners Betsy BennettMark Brown, and Jay White discuss turning around unprofitable customers.

Turning around an unprofitable large customer relationship.

Jay: We have some big customers with one of my clients, where we sell them upwards of fifteen or twenty different products. I would say three-quarters of the products that we sell are profitable. So, we’re working with the bottom quarter to begin with. We’ve sent these customers a letter notifying them of a price increase with the understanding we’ll continue the existing price for six months while they find another supplier if they do not want to go with the price increase. In some cases, they take the unprofitable parts elsewhere, but many have accepted the higher price and stayed with us. But, if they take an unprofitable part away, it generally is not that big of a deal as we were losing money on that part to begin with.

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Are You Losing Money on Your Biggest Customers? Part II

Part Two of Three Parts: Factors Impacting Customer Profitability

In the second of a three-part series on how to recognize if you’re losing money on your largest customers, Florida CFO Group partners Betsy BennettMark Brown, and Jay White discuss the factors impacting customer profitability.

Is Customer profitability an issue from the start of the relationship, or does it erode over time?

Betsy: It depends. I think the whole key is that you need to have some mechanism to try and measure customer profitability, either an interactive system that works with your general ledger system or an ad hoc financial analysis that you do on a periodic basis. 

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Are You Losing Money on Your Biggest Customers?

Part One of Three Parts: Revenues vs. Profitability

In the first of a three-part series on how to recognize if you’re losing money on your largest customers, Florida CFO Group partners Betsy Bennett, Mark Brown, and Jay White discuss recognizing if you are losing money on your largest customers and the impact of chasing revenues vs. profitability.

How is it possible not to know you’re losing money on your largest customers?

Betsy: It’s very possible if you’re not tracking finances by customer. For instance, in a service business, you might not track the results of each individual customer relationship in your financial records. So, one might be costing you a disproportionate amount to support, and unless you have other mechanisms other than a general ledger, you’re not going to detect that.

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