The Client Who Was Doing Everything Right (And Still Going Broke)
Last month, a client walked into my office exhausted. He’d been working 14-hour days, his Google reviews were stellar, his team was busy, customers were happy. But when I looked at his books, the truth hit hard—his profits were shrinking every quarter.
“Jitesh, I don’t understand,” he said. “I’m treating every customer like royalty. I’m giving them everything they ask for. What am I doing wrong?”
That’s when I told him something that changed his entire business: “You’re losing money because you’re treating every customer the same.”
He looked at me like I’d lost my mind. “But Jitesh, customer toh bhagwaan hota hai, right?”
Wrong. And this myth has destroyed more Indian SMEs than bad marketing ever could.
Let me explain.
The Myth of “Customer Toh Bhagwaan Hota Hai”
We’ve all heard this phrase. It’s drilled into us from day one of doing business in India. Treat every customer like God. Bend over backwards. Do whatever it takes to keep them happy.
And you know what? It’s terrible advice.
Here’s the truth: Not all customers are equal. Some customers will make you money, give you peace of mind, and help you grow. Others will drain your energy, kill your margins, and leave your team burned out.
If you’re treating both types the same, you’re not being a good business owner. You’re being foolish.
Research shows that in most businesses, 80% of your profits come from just 20% of your customers. That means the majority of your customers are either break-even or actually costing you money. And if you’re spending equal time and energy on all of them, you’re ignoring the people who actually pay your bills.
So let’s get smart about this. Let me break down the three types of customers every business owner must understand.
The 3 Types of Customers Every Business Owner Must Know
Type 1 — The Best Customer
This is your dream client. The one who:
- Pays on time (sometimes even early)
- Respects your pricing and margins
- Gives you honest, constructive feedback
- Doesn’t create unnecessary stress for you or your team
- Comes back for repeat business
- Refers other customers to you
- Leaves you 5-star reviews without being asked
These customers are your profit engines. They’re the reason you’re still in business. They understand the value you provide, they respect your expertise, and they treat you like a partner, not a vendor.
And here’s the thing—most business owners take these customers for granted. They’re so busy firefighting with Problem Customers that their Best Customers don’t get the attention they deserve.
Big mistake.
Type 2 — The Problem Customer
You know exactly who I’m talking about.
This is the customer who is never satisfied. No matter how much you deliver, it’s never enough. They constantly ask for:
- Extra discounts (even after agreeing to a price)
- More deliverables (outside the scope)
- Last-minute changes (that throw off your entire schedule)
- Free consultations, free revisions, free everything
They pay late. They argue over every invoice. They’re rude to your team. And worst of all? They still leave you average reviews because “something could have been better.”
Here’s the brutal truth: You are losing money on these customers. Even if they’re technically “profitable” on paper, when you factor in the time, stress, and opportunity cost, they’re destroying your business.
Type 3 — The Smart Customer
This is the interesting one.
The Smart Customer will negotiate with you upfront. They’ll ask tough questions. They’ll compare you with competitors. They’ll push back on pricing.
But here’s the difference: Once you deliver value, they recognize it.
They’ll appreciate the quality of your work. They’ll give you honest feedback—not to complain, but to help you improve. They’ll become loyal if you prove yourself. And over time, many Smart Customers turn into Best Customers.
The key is knowing how to handle them in the beginning. Don’t over-promise. Don’t give away the farm just to close the deal. Set clear expectations, deliver on them, and earn their trust.
Why You’re Losing Money (And Don’t Even Know It)
Let me ask you a question: Where are you spending most of your time?
If you’re like most business owners I work with, you’re spending 80% of your energy managing Problem Customers. You’re constantly putting out fires, redoing work, negotiating invoices, and apologizing for things that weren’t even your fault.
Meanwhile, your Best Customers—the ones actually keeping you afloat—are getting 20% of your attention. You’re so busy dealing with chaos that you’re not nurturing the relationships that matter.
And your Smart Customers? You’re probably over-discounting to close them because you don’t have a clear positioning or pricing strategy.
This is the customer profitability trap. You think you’re being a good business owner by saying yes to everyone. But in reality, you’re running a charity, not a company.
Here’s what happens when you don’t segment your customers:
- Your margins shrink because Problem Customers demand discounts
- Your team burns out because Problem Customers create unnecessary stress
- Your Best Customers leave because they feel ignored
- Your Smart Customers go to competitors who position themselves better
- You work harder every year and make less money
Sound familiar?
What to Do Now: The JMAC Customer Segmentation Framework
Alright, enough diagnosis. Let’s talk about the cure.
Here’s the exact framework I gave my client (the one from the intro), and it increased his profit by 40% in just six months.
Step 1: Audit Your Current Customer Base
Sit down with your customer list. Yes, all of them. Create a simple spreadsheet with three columns:
- Profitability — How much margin are you making?
- Ease of Working — How much stress do they create?
- Repeat Potential — Will they come back? Will they refer others?
Be honest. Don’t let emotion cloud your judgment. That “big” client who’s been with you for five years? If they’re constantly demanding freebies and paying late, they’re a Problem Customer. Mark them as such.
Step 2: Categorize into Best, Problem, Smart
Go through your list and label every customer:
- B = Best
- P = Problem
- S = Smart
You’ll be shocked at what you discover. Most business owners realize that 60–70% of their stress comes from just 10–15% of their customers.
Step 3: Create a Service Tier System
Now that you know who’s who, it’s time to treat them differently.
For Best Customers:
- Give them priority support
- Check in regularly (not just when you want to sell)
- Offer them exclusive deals or early access to new services
- Ask for referrals (they’ll gladly give them)
For Smart Customers:
- Deliver exceptional value
- Educate them on why your pricing is what it is
- Show them case studies and results
- Nurture them into becoming Best Customers
For Problem Customers:
- Set firm boundaries
- Standardize your service (no custom exceptions)
- If they push back, let them go
Yes, you read that right. Sometimes the best business decision is to fire a customer.
Step 4: Train Your Team on This Framework
Your team needs to understand this system. Teach them how to:
- Tag customers in your CRM (B / P / S)
- Use different communication scripts for each type
- Escalate issues based on customer type (Best Customers get immediate attention; Problem Customers get standard process)
This isn’t about being rude or unprofessional. It’s about being strategic. Your Best Customers deserve your best. Your Problem Customers deserve your boundaries.
Key Takeaways
Let me make this crystal clear:
- Not all customers are equal—stop treating them like they are
- Identify your Best, Problem, and Smart customers using the audit framework
- Focus 80% of your energy on Best + Smart customers—they’re your future
- Set boundaries with Problem Customers—or let them go
- Train your team to handle each customer type differently
- Use your CRM to track and manage customer categories
This isn’t theory. This is what separates profitable businesses from struggling ones.
FAQ
Q1: How do I identify a Problem Customer early?
Red flags include constant price negotiation after the agreement is signed, scope creep demands, disrespectful communication with your team, payment delays, and unrealistic expectations despite clear agreements.
Q2: Won’t I lose revenue if I let go of Problem Customers?
Short-term, maybe. Long-term? You’ll save time, reduce stress, refocus energy on profitable customers, and actually increase profits. My client lost 10 customers but gained 40% more profit. Do the math.
Q3: Can a Problem Customer become a Best Customer?
Rarely. If they show genuine willingness to respect boundaries and pay fairly after you set clear expectations, maybe. But don’t waste energy trying to convert them. Focus on finding more Best Customers instead.
Q4: How do I set boundaries with Problem Customers without damaging my reputation?
Be professional, clear, and firm. Deliver exactly what’s agreed upon—nothing more, nothing less. If they leave a bad review, respond professionally and factually. Your Best Customers will see through it. And frankly, you don’t want more customers like them anyway.
If you’re a business owner in Bangalore, Pune, Surat, Ahmedabad, Mumbai, Hyderabad, Chennai, or Delhi NCR, this applies even more to you. The Indian SME market is hyper-competitive, and margins are tight. You can’t afford to lose money on the wrong customers.
Segment smartly. Focus on the right people. Protect your margins. And watch your profits grow.
Because here’s the truth: The world gives you gyaan. We help you implement.
If you want to connect with me directly and talk about how to fix your customer profitability problem, write to me at jiteshmanwani@gmail.com.