How to Handle Problem Customers

The Startup Help Desk

In this episode we answer questions about handling problem customers. If you make money you have customers, and if you have customers some of them will cause problems for you. We are here to help! In this episode we answer questions including:

• What should you do if a customer plans to compete with you?
• How do you handle abusive customers?
• Should you let customers invest in your company?

All of these questions were submitted by listeners just like you. You can submit questions for us to answer on our website TheStartupHelpdesk.com or on X/Twitter @thestartuphd - we'd love to hear from you!
Reminder: this is not legal advice or investment advice.
Q1: What should you do if a customer plans to compete with you?
Lots of people are planning to compete with you. Don’t spend too much time worrying about it. Focus on creating happy customers. If you do that, then your competitors are in big trouble.
If they really do copy you, you can cut them off as a customer; however, this should be a minor consideration.
An additional item to consider: if your startup's differentiation (i.e. the unique value you offer customers) is something that can be easily replicated, you will need to demonstrate why your team has the skill set to maintain your advantage. Otherwise, you may find it challenging to stand out amongst your competition when fundraising.
Q2: How do you handle abusive customers?
Sales requires tons of conversations like this. Err on the side of finding a way to build healthy dialogue vs. pulling the plug on the customer!
Troubleshoot: listen to Gong calls and figure out what the issue is. Does your sales team have everything they need? Are you training them to navigate tough conversations like this? One of the critical customer-facing skill sets that you want to hire for is the ability to persevere in challenging conversations and stay focused on the goal.
If it’s clear the customers are being abusive and your team is navigating the conversations deftly but to no avail…is the persona right? You may be talking to the wrong stakeholder at your customer’s organization.
Q3: Should you let customers invest in your company?
“No” is a good place to start. Strategic investments like this are dangerous, as they close doors for you. If a customer is willing to hold you hostage today, imagine what they will do as an investor!
One of the primary risks is that they may limit the customers and types of opportunities that you can pursue, as those outcomes could be counterproductive to this customer’s priorities. Furthermore, this customer could get information about your business that gives them an advantage over your other customers. Thus, it is preferable to avoid a strategic investment like this.
If they represent a significant portion of revenue for your business, it is critical to approach this tactfully. Start by suggesting that you evaluate the opportunity during your next fundraise. Consider other options, such as warrants and convertible notes.