When Saying No To Customers Is The Right Thing To Do

by Ryan Thompson August 14, 2017

When to say no to a customer
Soon after we launched TaxJar, we were contacted by an eCommerce business who wanted to know more about what we offered. They were using a competitor and were intrigued to see a new name in the market.
We didn’t have a sales team at the time, so I took the call. It was a fairly routine call until they told me about their volume. Their sales were in the tens of millions, around $30M the previous year.
I nearly spit out my coffee.

Up until that point, TaxJar’s target customers were eCommerce merchants doing less than $1M per year. Our product, support, and onboarding were all geared towards providing a great solution for SMBs. We had a multi-channel solution that worked better than anything else in the market, and early signs were all positive. We were growing into a real business, and I had a feeling that bigger things were around the corner.
I was ecstatic because this was part of our long-term plan. We knew if we mastered the experience for our current customers that we could slowly start to support larger and larger merchants. But in the back of my mind I knew it was too early. We just weren’t ready. Heck, we didn’t even have a pricing plan to accommodate a customer of this size.
I got our head of product, CTO, and CEO (pretty much the entire company at that point) on a call to figure out how to win this customer. The call went something like this:
Me: “This is huge guys! We have to make this work, it’s the biggest customer we’ve ever seen. How much should we charge them?”
But I was met with these responses:
CTO: “I don’t know if our back-end can can support this volume. It’s not likely, but what if our entire system slows down or stops?”
Product: “We know what we need to do to support large customers like this, but we haven’t done all of the required work yet. What if this impacts all of our other customers?”
CEO: “We’re not going to take this risk. Let the customer know we’re not ready yet, and we’ll reach back out when we’re confident we have the right solution for him.”

Despite my initial excitement, we agreed that saying no was our best option. We’d worked way too hard to get to where we were. We didn’t want to risk it all. This decision set a precedent for our company that has played a huge role in our success.

When to Say “No”

Saying “no” to a prospective customer may sound taboo, but at TaxJar we still do it regularly. This is certainly not because we’re somehow exclusive or because we’re rejecting the philosophy that the customer is always right. We do it because we’ve learned a couple of really valuable lessons. First, we never chase the next big customer before we’re ready. And second, as a result of the first lesson, we’ve stayed focus on delivering value to our customers.
I remember being nervous to call the customer back. I hated the thought of turning down business. I called him and was honest. I told him that as badly as we wanted to work together, we weren’t equipped for this level of scale yet. I said we’d be back in touch when we were confident we had a great solution for him.
Six months later, we were ready. Through lots of testing, we knew we could scale to enterprise sized customers. So I reached back out to the customer. Frankly, I assumed he was gone forever. I shared that our system was thoroughly tested for his level of sales, and that we were confident that we had a great solution for him. To my surprise, he said he was patiently waiting for that call, and soon became a happy TaxJar customer.
This all could have gone differently. We could have chased the customer; we could have sold the customer that we were a perfect match from the start. It may have worked out just fine, or it could have ended badly. Instead, we learned an important lesson that has since held true time and time again: Being fully transparent about our features and roadmap is what leads to long term growth, even if it means turning away customers in the short term.
Abiding by this lesson, TaxJar  now has over 9,000 customers that are using us monthly to manage sales tax for their businesses, including merchants selling well over $100M online including brands like Coca-Cola, Dell, and Microsoft. We’re the fastest growing sales tax platform in the world, yet we turn away customers on a weekly basis, only because we don’t know if we’re ready to provide the right experience for them. (If you’re wondering how we can support such big names but have to turn others away, it’s due to the perverse nature of sales tax. Some businesses have very specialized needs that we just aren’t equipped to support yet.)
Even more, we now have a constant funnel of customer prospects who are telling us exactly what we need to support them. And, we diligently track each of these requests, and each of these prospects. This turns into a prioritized list of features, which becomes our roadmap. Just as importantly, we aren’t chasing features and distracting our team away from our decided priorities.
Thanks to our customers, we know exactly what we need to deliver to support even larger, and more complex merchants. We’ve proven to ourselves that it’s more important to get these features right than to chase the next deal.  
Though it was a hard lesson for me to swallow, sometimes saying “no” right now so we can work on a solution that totally supports our customers is the right thing to do.
Do you have experience saying “no”? Or saying “yes” to a customer when it wasn’t the right time? We know your mileage may vary, and would love to hear about it in the comments.

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