6 Ways to Identify Toxic Customers -- and How to Respond

By Rieva Lesonsky
The other day I was talking to an old friend who had just quit her job. Her sense of relief was palpable as she explained how her boss, although he was a great guy, kept piling on tons of work, setting unrealistic deadlines and creating constant "emergencies." Worst of all, though she routinely ran herself ragged meeting his demands, he never offered any additional rewards like a pay raise, more benefits, or even a day off.

"You had a toxic boss," I said. That conversation got me thinking. As small business owners, we don't have a boss -- we have many bosses. Our customers are in charge, and sometimes, their demands become just as unreasonable as those that my friend's boss was making on her. If that happens, you've got yourself a toxic customer.

How do you know when your customers turn toxic? And when should you cut them loose? Here are some warning signs.

1. They take advantage of you. Toxic customers often start out quite normally. My friend's toxic boss was a perfectly nice guy. Because they're nice and friendly-at least in the beginning of the relationship-you may start doing extra work for them for free or as favors. While the normal customer would be grateful for this, the toxic customer starts taking advantage of your generosity and begins to not just expect, but demand, ongoing favors and freebies.

2. They can't make up their minds. Indecisiveness is a hallmark of toxic customers. Whether it's the B-to-B client who asks you to revise a proposal 25 times, or the customer at the beauty salon who's not sure what she wants her hair to look like, but is sure she doesn't like how you cut it (and re-cut it, and re-re-cut it), the toxic customer waffles and wavers, dragging one transaction out for what seems like a lifetime.

3. They're never satisfied. Because they constantly change their minds, toxic customers are never satisfied. That means work is redone over and over (to slightly new specifications each time), all for the original price. Products are returned or exchanged dozens of times, leaving you with unsellable merchandise on your hands.

4. They suck up a disproportionate amount of time. Toxic customers typically pile on emergency, rush requests-which is fine at first, until you slowly realize everything is "urgent." Redoing work, changing orders at the last minute, or rushing to meet crazy deadlines takes up extra time, making you and your staff less able to serve other, more stable customers.

5. They make your employees crazy. Toxic customers are hard to work with. Their unreasonable demands can push even the mellowest employees over the edge. As the business owner, it's your job to step in and rectify the situation, or you could end up driving your best team members to quit.

6. They cost you money -- or at least, they don't make you much money. In today's economy, many business owners are terrified to bid farewell to any customer-even a toxic one. But if you run the numbers, you'll likely discover that the return you get on that toxic customer is out of proportion to the effort you put in. Add in the intangible cost of your and your employees' mental health, and the ROI is even less.

If you can't afford to totally cut the toxic customer loose, it's time to sit down with him or her and institute some new rules. Start charging premiums for rush work, if you aren't already doing so. Craft very specific contracts and stipulate a limited number of revisions or adjustments to a project before the client incurs additional cost.

If your toxic customer won't accept your new rules, take that as a sign that it's truly time to let him or her go. I promise you, new business will be waiting in the wings. Think I'm crazy? My friend who quit her job already has several new projects lined up.

This post originally appeared on OPEN Forum, an online community that provides small business owners with expert insights and connections that can help them run their businesses.
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Flickr photo courtesy of eek the cat, CC 2.0

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