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We here at Lombard believe that winning customers is only part of building a successful business. The more important question is whether those customers are contributing positively to your profitability. A client who generates regular sales may appear valuable, yet the time, resources, discounts, administration, and support required to serve them could mean that the relationship is delivering little profit or even costing your business money.

Many businesses place considerable emphasis on increasing turnover and attracting new customers. While sales are essential, revenue alone does not provide a complete picture of commercial success.

Some customers are more expensive to serve than others. They may require frequent revisions, extended meetings, urgent requests, lengthy payment periods, or significant after-sales support. If these costs are not properly understood, a business can spend considerable time servicing customers who contribute very little to the bottom line.

Revenue Does Not Tell the Whole Story

A customer who spends €10,000 with your business may initially appear more valuable than one who spends €2,000. However, the larger customer may require considerably more time, staff involvement, delivery costs, or additional services.

For example, a customer generating substantial revenue may negotiate heavily on price, regularly request changes outside the original agreement, or require extensive account management. Meanwhile, a smaller customer may place straightforward orders, pay promptly, and require minimal support.

The more profitable customer may therefore be the one generating less revenue.

Understanding this distinction is essential for businesses that want to make informed decisions about where to focus their time and resources.

The True Cost of Serving a Customer

Calculating customer profitability requires looking beyond the invoice value. Businesses should consider the full cost of delivering products or services and maintaining the relationship.

This may include:

• Staff time involved in preparing and delivering the work

• Materials, stock, or production costs

• Delivery and transport expenses

• Customer service and administration

• Discounts and special arrangements

• Revisions, rework, or additional requests

• Time spent chasing overdue payments

• Management involvement in resolving issues

Once these factors are considered, the actual profitability of a customer may look very different from the original sales figure.

Are Your Prices Covering the Work Involved?

One of the most common reasons customers become unprofitable is underpricing.

A business may have agreed to a price several years ago when costs were lower and the scope of work was smaller. Over time, wages, materials, energy, insurance, and other operating costs may have increased, while the original price remains unchanged.

Long-standing customers can be particularly easy to overlook in this regard. Businesses may be reluctant to review prices because of the strength of the relationship, even when the current arrangement is no longer commercially sustainable.

Regular pricing reviews can help ensure that charges reflect the actual cost and value of the work being provided.

The Impact of Scope Creep

Scope creep occurs when a customer gradually expects more work than was originally agreed.

This can happen through additional meetings, extra revisions, expanded requirements, urgent requests, or informal tasks that are not included in the original price.

Individually, these requests may seem minor. Over time, however, they can consume significant resources and reduce the profitability of the relationship.

Clear agreements, defined deliverables, and a consistent approach to additional work can help businesses prevent small requests from becoming a major drain on resources.

Payment Behaviour Also Matters

A customer who pays late can create financial pressure even if the work itself is profitable.

The business may have already paid staff, suppliers, and other expenses associated with delivering the service, while waiting weeks or months to receive payment.

Late payments also create administrative costs through credit control, follow-up emails, phone calls, and ongoing account management.

Customer profitability should therefore consider not only how much a customer pays, but also how reliably and promptly they pay.

Not Every Unprofitable Customer Should Be Lost

Identifying an unprofitable customer does not automatically mean the relationship should be ended.

There may be strategic reasons for retaining a customer. They may provide valuable referrals, offer opportunities for future work, or have the potential to become more profitable following a pricing or service review.

The important point is to understand the position clearly before making a decision.

Possible actions may include:

• Reviewing pricing or contract terms

• Reducing unnecessary service requirements

• Charging separately for additional work

• Improving payment terms

• Streamlining communication and delivery

• Negotiating a more sustainable arrangement

In some cases, a small change can turn an unprofitable relationship into a worthwhile one.

Focus Your Resources Where They Create the Most Value

Every business has limited time, money, and staff capacity. Spending too many resources on low-margin customers can prevent the business from investing in more profitable opportunities.

Reviewing customer profitability can help identify which relationships deserve greater attention and which may need to be managed differently.

This does not mean treating customers purely as numbers. It means ensuring that the business has the financial capacity to continue delivering a high standard of service while remaining sustainable.

Make Customer Profitability Part of Your Regular Review

Customer profitability should be reviewed periodically rather than only when financial pressure appears.

By examining revenue, costs, time commitments, payment behaviour, and margins, business owners can gain a clearer understanding of where their profits are actually coming from.

The most valuable customer is not always the one who spends the most. It is often the one who provides a healthy return while using resources efficiently and maintaining a sustainable working relationship.

Understanding this distinction can help businesses improve pricing, focus their efforts, and build a stronger, more profitable customer base.

If you would like to discuss your business, contact us on or email richard@la.ie or visit la.ie.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur.

This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.