Breaking Up Is Hard to Do: When and How to Let a Customer Go
In the quest for growth, many businesses adopt the mantra that the customer is always right. But after years of leading customer success teams and now overseeing a business unit with P&L responsibility, I've learned a difficult truth: not every customer relationship is meant to last forever.
Some customer relationships, despite everyone's best intentions, may actually be holding your business back.
The Misalignment Challenge
During my time leading customer success at a Fortune 500 technology company, we encountered numerous customers who didn't align with our evolving go-to-market strategy. These customers often consumed disproportionate resources, generated minimal margins, and pulled our product roadmap in directions that benefited few other clients.
Identifying and addressing these misalignments isn't about being callous—it's about making deliberate decisions that serve both your business and your broader customer base.
The Customer Fit Assessment Framework
Before making any decisions about customer relationships, it's critical to perform a thorough assessment using these key dimensions:
1. Strategic Alignment with Go-to-Market Strategy
Start by evaluating how well each customer aligns with your current and evolving go-to-market strategy:
Are they in your target industries?
Do their use cases match your product's core strengths?
Will they benefit from your strategic roadmap?
Customers who fall outside your strategic focus may become increasingly difficult to serve as your product and services evolve to meet the needs of your target market.
2. Customer Margin Analysis
Understanding the true profitability of each customer relationship is essential:
Calculate all costs associated with serving the customer (COGS)
Include implementation, support, and maintenance costs
Compare against revenue to determine actual margins
This analysis often reveals surprising insights—some of your largest revenue customers may actually be your least profitable when all costs are considered.
3. Resource Consumption Assessment
Beyond direct costs, consider the opportunity cost of resources dedicated to each customer:
Engineering and product development time
Support ticket volume and complexity
Customer success management hours
Executive attention and firefighting
These opportunity costs can be substantial when challenging customers divert resources from strategic initiatives that would benefit your broader customer base.
4. Logo Value Consideration
Some customers provide value beyond direct revenue:
Industry recognition and reputation benefits
Reference potential for prospective customers
Strategic market positioning
Industry insights and product feedback
A customer with exceptional logo value might justify lower margins or higher resource allocation if they genuinely help you attract and retain other customers.
Check out my template for assessing this value. (coming soon)
Turning Poor Fits into Value-Add Relationships
Before proceeding with a breakup, explore whether the relationship can be salvaged:
Margin Improvement Opportunities:
Evaluate pricing adjustments at renewal
Consolidate or eliminate custom features
Transition to newer, more efficient product versions
Adjust service level agreements
Expectation Reset:
Clarify support boundaries and escalation processes
Establish more realistic implementation timelines
Define product roadmap influence parameters
Set communication cadences that work for both sides
In my experience, some of our most challenging customer relationships were transformed through honest conversations about expectations and boundaries. Sometimes, a reset is all that's needed.
The Art of the Customer Breakup
If you've determined that parting ways is the right decision, how you handle the separation matters tremendously:
1. Contract Review
Start with a thorough legal review:
Understand termination clauses and notice periods
Identify any breach risks or penalties
Prepare data transition requirements
Document all compliance obligations
2. Executive Involvement
Having a senior leader involved in the process is crucial:
Demonstrates respect for the relationship
Conveys the strategic nature of the decision
Provides authority when discussing alternatives
Prevents the account team from becoming scapegoats
3. The Breakup Conversation
The actual conversation should be:
Direct but compassionate
Focused on mutual best interests
Specific about transition support
Appreciative of the relationship history
I've found that framing these conversations around your company's evolving direction—rather than customer shortcomings—preserves dignity while still being honest.
4. Transition Support
Offer meaningful transition assistance:
Provide data export assistance
Recommend alternative solutions
Allow reasonable time for migration
Maintain support during the transition period
Successful "breakups" can result in the customer returning under different circumstances or even sending referrals later because of professionalism during the separation.
Here is a template for having that conversation. (coming soon)
The Organizational Benefits
When handled properly, parting ways with misaligned customers can yield substantial benefits:
Resource Reallocation: Teams can focus on customers who align with your strategy
Improved Morale: Staff burnout decreases when challenging relationships end
Product Focus: Development resources concentrate on features with broader impact
Enhanced Reputation: Professional separations can actually build respect in the market
Margin Improvement: Overall profitability increases as you focus on better-fit customers
Conclusion: Strategic Customer Portfolio Management
Building a sustainable business requires viewing your customer base as a portfolio that needs active management. Just as investors rebalance their portfolios, businesses must occasionally reassess their customer relationships.
The most successful companies I've worked with regularly evaluate their customer base against their strategic direction, making deliberate decisions about which relationships to invest in, which to restructure, and which to gracefully conclude.
Breaking up can indeed be hard to do—but when executed with care and professionalism, it can lead to better outcomes for everyone involved.
