Saying “No” To Revenue

Most of my recent conversations with clients and other CEOs have been dominated by discussions about labor shortages. (Supply chain is a close second.) I’ll bet that everyone reading this has been affected in small or perhaps large measure. Whether it is your favorite restaurant cutting hours, your home-remodel project stuck in purgatory or your inability to fully staff your operations at work, you can see and feel it.

One CEO with staffing problems recently said, “But I can’t turn down the work!” Hmmm… When is it acceptable to turn down revenue?

The folks I coach either create or are accountable for a budget (revenue minus expenses). Many of you are as well. If you’ve been in the business world for more than a decade, you’ve probably missed plan a couple of times. It’s not fun. But there are circumstances when trying too hard to meet a revenue or profit target is folly.

Start with the obvious one, crossing legal boundaries. Selling your new defense gadget to the Chinese army won’t cut it. But there are much tougher calls than that. 

When do you turn down revenue?

I worked with a company years ago and there was a “revenue enhancement” consulting firm engaged as well that I respected. The head of that firm said to me, “Regardless of what these people say, the CEO believes that any revenue is good revenue.” That can be a career limiting belief!

Here are a few reasons you may want to turn down revenue.

It doesn’t fit your strategy. A good friend who is in the wealth management world worked for a large firm that had clearly identified standards for new customers, including a minimum investable amount. His boss, however, pushed everyone to grab virtually any client who could fog a mirror. They ended up with a stable of clients that they were poorly equipped to serve, and an expense ratio per client that was way out of whack. 

The customer is abusive. We’ve all seen the poster, “Don’t work with assholes!” What if one of those assholes wants your product, but you know that he’ll abuse your salespeople, frequently return product, arbitrarily take discounts for “marketing programs” and pay his bills late. Do you want his money?

Low margin business. When your net margin is below zero, you won’t make it up on volume. I’ve seen companies take negative profit business hoping that they will somehow turn the customer to profitability later and establish a more “strategic” relationship. They usually don’t. If the business is not profitable, do you really want the revenue?

You are unlikely to meet their needs. An old Burger King commercial jingle went, “Hold the pickles, hold the lettuce, special orders don’t upset us.” Maybe so, but customers with frequent special needs may be frustrating for your team and unprofitable. In a tough labor environment guaranteeing delivery or project completion in a timeframe that you don’t know that you can meet may do tremendous damage to your reputation and prevent you from ever serving that customer again. Would you be better off turning down the work at this point?

It’s hard to say no to revenue, but sometimes it is the best choice. What have you recently said no to?

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