Some of the Most Profitable Deals Are the Ones You Never Make

Tuning in from Jackson Hole, Wyoming, and surrounded by some of the most valuable real estate in the country, I've been thinking about a strange lesson I've learned in business:

Sometimes making more money requires becoming willing to turn money down.

That sounds backwards.

Especially when you're building.

In the beginning, almost every opportunity feels important.

A new customer calls?

Take it.

Someone wants a discount?

Make the deal.

A project doesn't quite fit?

Figure it out.

Someone wants something outside your normal scope?

Say yes.

Revenue is oxygen when you're starting.

I understand that.

But eventually, if you're building a serious company, the question has to change.

It can no longer be:

“Can we make money from this?”

It has to become:

“Should we?”

That one question can save you an extraordinary amount of money, time and frustration.

Revenue Can Lie to You

Entrepreneurs love talking about revenue.

“We did $5 million.”

“We crossed $10 million.”

“We're on pace for $20 million.”

Great.

But revenue by itself doesn't tell me whether you have a great business.

I want to know what it took to produce it.

How much profit remained?

How much working capital did it consume?

How difficult were the customers?

How much management attention did it require?

How many employees were needed?

How predictable was it?

How much liability did you accept?

Did customers pay on time?

Would you want another $10 million of the exact same revenue?

That last question is important.

Because sometimes the worst thing you can do is scale something that's already broken.

Bad revenue multiplied is still bad revenue.

Sometimes it's just a bigger headache.

Every Dollar of Revenue Has a Personality

This is something I've learned over time.

Not all dollars behave the same.

Some revenue arrives predictably.

Some has to be chased.

Some comes with healthy margins.

Some disappears into labor.

Some creates referrals.

Some creates complaints.

Some customers respect your team.

Others consume your team.

Some projects create credibility.

Others create distractions.

Some relationships open doors.

Others keep you trapped in rooms you've outgrown.

Put two $100,000 contracts next to each other and they may look identical on an income statement.

Operationally?

They could be completely different businesses.

That's why sophisticated companies don't simply ask:

“How much revenue can we generate?”

They ask:

“What kind of revenue do we want?”

Calculate the Headache Margin

Here's a metric you'll probably never see in an accounting textbook.

I call it the Headache Margin.

Take a customer.

Now think beyond their gross revenue.

How many emergency calls do they create?

How many unnecessary meetings?

How often does your team have to redo work?

Do they pay late?

Do they constantly expand the scope?

Do they respect boundaries?

How much executive attention do they consume?

How much stress do they create internally?

Would your best employees be disappointed if you signed ten more customers exactly like them?

That's useful information.

Because there's an invisible cost to complexity.

Your accounting software may not show it.

Your employees feel it every day.

Your Best Employees Are Watching Who You Tolerate

This is where bad business can become expensive very quickly.

Imagine you have an exceptional employee.

Responsible.

Professional.

Hardworking.

Great with customers.

Then you repeatedly force that employee to deal with a customer who is disrespectful, unreasonable or impossible to satisfy.

Eventually your employee starts asking:

“Why does the company tolerate this?”

If the answer is:

“Because they pay us a lot of money,”

you've communicated something to the team.

You've told them revenue outranks standards.

Be careful.

You can replace a bad customer.

Replacing an extraordinary employee may be much harder.

Sometimes protecting your team means being willing to protect them from revenue.

Opportunity Cost Is a Real Expense

Here's where this gets even more interesting.

The cost of a bad opportunity isn't only what it costs you.

It's what it prevents you from doing.

Suppose your company can comfortably serve 50 major customers.

You're currently serving 50.

Ten of those customers are low-margin, difficult and outside your ideal profile.

Then the perfect customer appears.

High margin.

Great fit.

Strong reputation.

Potential long-term relationship.

But your team is overloaded.

Now those ten mediocre customers have become incredibly expensive.

They aren't simply consuming capacity.

They're occupying the seats your best customers could have taken.

That's opportunity cost.

And it rarely appears neatly on a financial statement.

Empty Capacity Isn't Always a Problem

Business owners hate empty space.

An unused office.

An open appointment.

Available production capacity.

An employee with extra time.

So we rush to fill it.

But sometimes temporary capacity is exactly what allows you to capture a better opportunity.

Think about a great restaurant.

If every table were permanently occupied by customers paying half price, the restaurant might look incredibly busy.

But would that make it a better business?

Of course not.

Utilization without economics is vanity.

Being busy isn't the same as being profitable.

And being full isn't the same as being optimized.

Create a Customer Scorecard

Here's something practical I'd encourage every established business to do.

Score your customers.

Not emotionally.

Objectively.

Look at:

Profitability.

Payment history.

Growth potential.

Strategic value.

Referral potential.

Team impact.

Operational complexity.

Scope discipline.

Communication.

Long-term potential.

Then identify three groups.

Your A customers are the ones you would happily clone.

Your B customers are profitable relationships that may have room for improvement.

Your C customers consume disproportionate resources relative to their value.

Then ask:

Why are our A customers A customers?

Where did they come from?

What characteristics do they share?

What did they buy?

Why did they choose us?

What industries are they in?

What problem were they trying to solve?

Now your marketing gets smarter.

Instead of asking for “more leads,” you can ask for:

More people who look like our best customers.

That's a very different objective.

Growth Should Increase Your Standards

Something I've been thinking about as Flores Marketing Firm continues growing is that success should give you the ability to become more selective.

Not arrogant.

Selective.

There's a difference.

As we've gained experience, built stronger relationships, expanded our capabilities and entered larger opportunities, I've become increasingly interested in fit.

Can we actually create meaningful value here?

Do we believe in what we're being asked to accomplish?

Does the opportunity fit where we're taking the company?

Can we execute at the standard we expect from ourselves?

Is this a relationship both sides will be proud of?

Those questions matter more to me today than they did years ago.

Because the objective isn't simply building a larger customer list.

It's building a stronger company.

Learn the Difference Between a Big Check and a Big Opportunity

They aren't always the same thing.

A large check can distract you from an enormous opportunity.

Imagine someone offers your company $500,000 for a project completely outside your strategy.

It's complicated.

Requires new employees.

Consumes leadership attention.

Creates legal exposure.

And after the project ends, none of those new capabilities matter.

Meanwhile, your core business is growing 50% and needs attention.

That $500,000 may be the most expensive money you've ever made.

Business owners need to become good at asking:

“Where does this lead?”

Some opportunities create dead ends.

Others create highways.

Choose carefully.

The Best Deal Sometimes Protects the Next Deal

Saying no creates room.

Room for better customers.

Room for innovation.

Room for your employees.

Room for strategic partnerships.

Room for leadership.

Room for the opportunity you don't know is coming yet.

That's why mature businesses increasingly optimize for more than immediate revenue.

They optimize for optionality.

Having cash creates options.

Having capacity creates options.

Having a strong reputation creates options.

Having great relationships creates options.

Having a talented team creates options.

Having the ability to say no creates enormous options.

Desperation destroys negotiating power.

Optionality creates it.

Your “No” Makes Your “Yes” More Valuable

There's something else interesting about selectivity.

When you'll work with anyone, there's nothing particularly special about being your customer.

When you have standards, the relationship changes.

This is true with hiring.

Partnerships.

Investments.

Customers.

Even your calendar.

Scarcity isn't about pretending you're unavailable.

It's about genuinely protecting limited resources.

Your time is limited.

Your team's capacity is limited.

Your reputation is limited.

Your attention is limited.

Your capital is limited.

Deploy those resources carefully.

Every yes is secretly a no to something else.

Make sure you're saying yes to the right things.

Audit What You're Tolerating

Here's an exercise worth doing this quarter.

Ask yourself:

If this customer approached us today, knowing everything we know now, would we still accept them?

Do the same thing with:

Vendors.

Employees.

Software.

Partnerships.

Meetings.

Services.

Projects.

Processes.

Even entire divisions.

If the answer is no, don't automatically eliminate it tomorrow.

But investigate.

Why are we still doing this?

Because it's profitable?

Because it's strategically valuable?

Because there's a contractual obligation?

Or simply because we've always done it?

Companies accumulate things.

Customers.

Processes.

Expenses.

Obligations.

Eventually, someone has to clean the garage.

Don't Fire Difficult Customers. Fix Bad Economics First.

There's an important distinction here.

A demanding customer isn't automatically a bad customer.

Sometimes demanding customers make companies better.

They expose weaknesses.

They force higher standards.

They push you to build capabilities you should have built anyway.

Before ending a relationship, ask whether the problem is actually the customer.

Maybe you priced the work incorrectly.

Maybe the scope is unclear.

Maybe expectations weren't established.

Maybe your communication failed.

Maybe your process is inefficient.

Maybe the account needs different leadership.

Fix what you own first.

Then evaluate the relationship again.

That's business maturity.

The Goal Isn't Fewer Customers

It's better economics.

Better relationships.

Better outcomes.

Better fit.

Better use of resources.

There are companies with thousands of customers that should have millions.

And companies with hundreds that should probably have fifty.

There's no universal answer.

The objective is understanding which customers make your business better.

Then intentionally finding more of them.

Build a Business That Can Afford to Walk Away

That's what Jackson Hole has me thinking about.

Some of the most valuable things in the world are valuable partly because they're limited.

Land.

Time.

Access.

Attention.

Capacity.

Your company has limited resources too.

Don't sell all of them to the first bidder.

Build cash reserves.

Build recurring revenue.

Build a strong pipeline.

Build demand.

Build your reputation.

Build multiple acquisition channels.

Build relationships.

Build enough strength that you're never forced to accept terrible economics because you desperately need the next check.

Because one of the greatest milestones in business isn't when you can finally afford to buy something.

It's when you can afford to walk away.

Walk away from the wrong deal.

The wrong partnership.

The wrong customer.

The wrong opportunity.

Not emotionally.

Not arrogantly.

Strategically.

Because sometimes the opportunity that changes your company can only enter after you finally make room for it.

Some of the most profitable deals you'll ever make are the ones you have the discipline not to sign.

Build Better Revenue, Not Just More of It.

If your business is ready for its next stage and you want a marketing and growth partner focused on attracting the rightopportunities—not simply more noise—apply to work with Flores Marketing Firm.

Let's build growth worth keeping.

— Corey Flores
Founder, Flores Marketing Firm