Review a Customer for Real Profitability

Added 2026-11-06

A customer with good revenue may be quietly eating your margin.

I want to review one customer's real profitability: [customer, contract value, deliverables, known costs]. Work it out: 1) separate direct and service costs and list the easily missed ones — communication, rework, customization, collections, management time; 2) allocate indirect cost by hours or resources used, and say on what basis; 3) compute real gross margin and the payback of acquisition and maintenance cost; 4) name the hidden draw on team capability and scheduling; 5) give three options — raise price, reduce scope, exit — with the cost of each; 6) mark which numbers are estimates and how to fill the gaps.

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How to use

Counting only delivery hours will never tell you whether the customer is worth keeping.

Try tweaking it

Have it state how the hypothesis could be falsified before discussing execution.
Split the plan into a one-week testable experiment.

What you should get

A small testable experiment with a failure threshold
Costs, risks, and what needs outside confirmation

Common mistakes

Asking for a "full business plan" and getting unverifiable optimistic assumptions.
No failure threshold, so you never know whether to continue.

How to check the output

There is a clear failure threshold, testable within a week.
Costs, assumptions and risks are listed separately.

Where it works

Good for: turning business assumptions into a small testable experiment with a failure threshold first.
Watch out: for pricing, contracts and legal points, treat output as a draft needing professional review.