Maybe You Need to Fire Your Biggest Customer

What’s up, all you beautiful people? So today I want to talk about one of the hardest lessons I’ve ever had to learn. But now that I have learned it, it’s actually one of my favorite things in the world, and it’s going to sound a little weird. Okay, so let me backtrack back. In 2017, 2018, we were scaling escape climbing. We were going from doing about $300,000 a year in top line revenue. And over the course of the next three years, by the end of 2019, 2020, we’d be doing well over $3 million a year. So we were in a really hyper growth phase for the manufacturing company. And during that period of time, one of our primary growth levers was we were trying to pursue larger and larger international distributors for our products.

So the way that our industry would work is you really have three people that you can sell to. You have the backyard boulderers. So these are the people who build little rock climbing walls in their backyard. So the home user, right? Second would be the climbing gym. These big commercial climbing gyms, if you’ve ever been to one of those and you see all the rock climbing holes and people climbing up the walls, we make all that stuff. Okay, so that’s the second customer. The third customer are international distributors. And so the way that they work is you typically have this exclusive license to work with a person who has all the relationships within their country.

So you would have a Denmark distributor and maybe a France distributor, and an Australia distributor and a Japan distributor. And it’s very hard to sell directly to the climbing gyms in those countries. The reason for that being the export cost is so high because we’re dealing with heavy plastics and everything is shipped by the pound. So what ends up happening is these distributors will place very large orders across many different brands that will bring in millions of dollars of holds simultaneously. And then they will go on a road show to the climbing gyms in their country, and they will sell those, rather than us selling directly to the climbing gym or to the consumer with their home wall. Okay, so that’s kind of the dynamic here. One of the largest distributors in the world was in Australia. Australia has a very vibrant climbing community, and we had a relationship with the most exclusive and large largest distributor in Australia.

These guys were doing ten $15 million a year of import and they were one of the largest climbing wall manufacturers out there. So the way that this relationship would work is they would go and they would build climbing gyms for the different owners, right? They’re the builders that would make it and then as they’re consulting with the owner, they would suggest the different hold companies and the different packages. They would put it all together into one shipping crate, and then they would ship it across the ocean at discounted rates. And so that was part of their value proposition. And we were very fortunate, as we were going from 300,000 up to 3 million to get a relationship with these guys because they were doing, I think, if I remember correctly, around $500,000 a year with us, just us alone. So within a year and a half, they accounted for over what our revenue had been just in the prior year. So this was a very big win for us as part of our rapid growth. The problem, there was many problems with this model.
Number one is to make the distributors model work, is that you have to give them extreme wholesale pricing because they have to carry the cost of getting this thing across the ocean. You’re typically dealing in foreign currencies, and so that’s a little bit weaker than the american dollar. And so all these things add up. So while this person is putting in a $500,000 top line revenue order, our margins on that were actually quite low compared to if we were selling directly to a consumer or retail environment at a climbing gym just down the street. So while we were doing a ton more revenue, we weren’t necessarily doing more profit. Now, here’s the thing is, they made up a massive portion of our overall revenue. But these guys, because they had such a lock on their market and because they were such a big, important customer to us, they pushed us around to no end. They were driving these deals that just weren’t sustainable.
They were calling our shipping manager at all hours of the night. They were always stressing us out because they were like, where is the order? Where is the order? We’re like, we don’t know. It’s on a ship in the middle of the Atlantic Ocean. It’ll be there when it’s there, or in the middle of the Pacific Ocean, rather, not the Atlantic. And we’re like, we don’t know because, like, once the thing, once the trip goes onto the boat, it’s really kind of a black box. You don’t know when the thing’s getting there, unfortunately. So they were causing us so much stress and anxiety, and they were causing my shipping manager to start to have, like, nervous breakdowns. And it got to the point where I got a call from their, got from their vp at like 03:00 a.m.
and I was like, no, I’m not doing this anymore. And we sat down, we had a really hard conversation internally about what to do because they were such a big, important customer to us, we couldn’t fathom the idea of cutting ties. We thought we were dependent on them, that we simply needed them to continue growing. But it got so bad, it got to the point where finally we made the decision and said, you know what? No, enough is enough. We’re not going to do this anymore. It’s more important that we’re taking care of our people, that they’re in a good working environment, that they enjoy, that they’re not stressed out, and that we are working with customers we like to work with. And at the end of the day, like, we don’t work with assholes and we were working with assholes, so we fired them. We fired our biggest customer who was doing so much revenue with us that it was more than we had made in the previous year just on their own.
It was wild, right? So firing them was one of the most terrifying things that we ever did because overnight our, our numbers just plummeted and we’re like, how are we going to make this up? How are we going to stay on the trajectory to hit our goals with this? Well, a couple interesting things happened. Now that we were no longer wasting time and energy fulfilling these orders at lower margins, no longer spending time and energy answering all the different emails that they were sending to us, and no longer having to get into the weeds and the minutiae with the phone calls and all the stress and everything that came with it, we suddenly had more time and bandwidth to go out and find better customers, to put more time into those customers orders so we could fulfill those orders even faster. So instead of having half a million dollars of product being pumped through our line and causing a delay to all of our other customers, now we didn’t have that. Now we were able to fulfill even more quickly to our current customer base, which meant they knew we were able to fulfill really fast. And so when they had urgent orders, they were coming to us. Ooh, very interesting. Now we have the gift of hindsight to be able to look back and say it all worked out because within six months, we had not only recouped that lost revenue, but our profit margins, like, tripled. It was wild.
And it all came from the idea of firing our best customer, or rather, just firing your most painful customers. Let’s not call them best because they weren’t our best. They were our biggest, but they weren’t our best. They were the most annoying. They’re the ones that take up all the time. And from that time, we get the least amount of leverage. So I share this because today I fired in one of my coaching programs, I fired a client. I was like, I’m not working with you anymore.
You’re just too difficult. It’s just not worth my time. It’s not worth my energy holding your hand, trying to drag you up this mountain. I’m not going to argue harder for your, for your potential than you argue for your limitations. And I just said, this isn’t a good fit for me. Sorry. And I let them go. And nowadays, when I fire customers, I get really psyched because I know it’s the right decision.

Unequivocally. I don’t, I don’t second guess, I don’t hem and haw. I just know this. If this is in alignment with who I am, if I’m not psyched to be working with you, I’m not going to do it right. That’s a much harder decision to make 5678 years ago when I was new around the game. And it’s like, oh, I don’t know if we can live without this. And I share this with you because I have the gift of hindsight. I have the gift of being higher up and a little bit more perspective on my journey.

Now, I hope this gives you a helpful frame to understand that if you have a customer you’re working with that you don’t love serving, it’s okay to fire them. It’s okay to let them go. There is no such thing as a customer that is so important, so valuable that you can’t afford to walk away. And if you do have one of those customers, well, you need to work very hard to remove that as the equation because that will make you very vulnerable, makes it very hard to grow, and it will create a very stressful dynamic where you have no leverage, no power in the relationship. Think that’s what you want, is it? No. Okay. I wanted to share that with you. Go fire your worst customer today.

I want you to go look at your customer list and ask yourself, who’s at the bottom? Who’s in the bottom 5%? Maybe it’s worth cutting them. Maybe go through that mental exercise and ask yourself, what would my life look like if I cut these people who take up 80% of my time, only account for 10% of my profit, and get rid of them and go focus on getting the better clients who are easy to work with, they have higher margins, they do what they say, they follow through, they’re easy to work with you. Like serving them. Go find those people. Your business is going to thrive. That is the secret to maximizing your return on life. So that’s going to do it for me. I’ll catch you guys in the next episode, but until then, stay hyper focused, my friend.