Just Say No

Why not all business is good business: seven CEOs on the sales they refused to make, plus 20 good reasons to think twice before closing a deal

Laura Koenig Young, a sales manager for Leegin Creative Leather Products, in San Antonio, once sent a dozen red roses to a buyer for a large department-store chain. An attempt to nudge an order? No, more like condolences. Young was declining the chain's repeated requests for Leegin's handbags. As Young recalls, the recipient of the flowers called back in shock. "I've never been turned down and received a gift," said the buyer.

Not all rejected suitors take the news so gracefully. Recently, a chain-store executive chastised Young. "Are you telling me you're not going to sell to me?"

"Yes, ma'am, that's what I'm saying. I want you to know how flattered I am that you're interested in our product," Young said, taking a breath. "But we have a commitment to our specialty stores so that they can have a chance to compete."

Leegin's president, Jerry Kohl, has guided the women's brand division to $24 million in sales in five years. He concedes, "When we say no, they think we're arrogant."

Admittedly, it's tough to say no to any customer, especially when your company is young. "What if there isn't a next sale?" a voice whispers, usually in the dark of night and usually when you're worrying about next week's payroll. But all sales are not equal. It's good business to turn away sales that aren't profitable, for example, or those that conflict with long-term goals -- assuming you're clear about the margins you make on each sale and where you want to take your company. Forget the customers from hell -- we all know that, relatively speaking, they're the easy ones to lose. Jerry Kohl turns away customers others would kill for, sales that look perfectly good in theory. And he's not alone. Here's a sampling of other successful chief executives who have said no.

Phyllis Apelbaum: "The truth was, we were too small to fulfill that contract."
Phyllis Apelbaum, president of $6.5-million Arrow Messenger Service, in Chicago, had been in business but a few years when she received the opportunity of a lifetime. A company she knew well was setting up package-pickup points nationwide. Would Arrow like to be its Chicago vendor? The contract was worth a cool $500,000.

That was 18 years ago, when Arrow was still a start-up. "I can remember it as if it were yesterday. Tossing and turning and tossing and turning, thinking, 'How can I make this work?" Apelbaum recalls. "The truth was, we were too small. I went back and said, 'I appreciate the opportunity. We're not the right vendor to do this.' It was very painful to turn away the largest piece of work that had come my way. But I knew in all good conscience that we couldn't do a good job for them in the time frame they needed to have it done."

Still, Apelbaum concedes, when you're first starting out, "it's so hard to tell anyone, 'I'm not going to do your work." But she's a firm believer in manifest destiny. "When you turn business down for the right reason and in the right way, very often it will come back to you."

She did, and it did. A few years after the fateful $500,000 question, Apelbaum got to bid on another large contract. Neiman Marcus was coming to Chicago and needed a courier company. Apelbaum's anecdote was a great selling point. She convinced the department store that she understood what it took to service a big account and even offered the other company as a reference. "It was a great selling tool," she says.

Tom Golisano: "We probably know just enough about that kind of a sale to be dangerous."
Every month, Tom Golisano is faced with a recurring temptation: should his payroll-processing firm, Paychex, in Rochester, N.Y., jump into the health-insurance business? "We're contacted by major insurance companies and brokerage firms all the time," he says. Handling the employee deductions would be easy enough. And he admits there's a "desire within the company" to add the service.

Still, Golisano resists. "We don't know anything about insurance sales, or we probably know just enough to be dangerous." Health insurance, he notes, "is a very volatile product, and we don't have a lot of expertise within the company to be a competitive force over a long period of time."

The company's mission has changed little in 25 years, and for good reason. Despite 215,000 payroll clients, generating $300 million in revenues, Paychex owns just 4% of the market. "We feel that the best strategy for us is doing more of what we're doing instead of extending ourselves into areas that will make our lives unnecessarily complicated," says Golisano.

Charlie Broadway: "If the sale is too easy, that's a red flag that says these people probably don't have any money."
"Sometimes the customers you can make the most margin off of are the most risky," says Charlie Broadway. Broadway is president of Spartan Forest Products, a lumber broker in Greensboro, N.C., which in its first five years sprouted from $723,000 in sales to $12.6 million.

Broadway is talking about the prospective customer who calls out of the blue looking for a price. "If I quote him high and he wants to buy it anyway, that's a red flag that says these people probably don't have any money." He continues: "Either they can't buy from someone else because other suppliers have perceived the risk too, or their credit's been cut off. I'm not nave enough to think they're calling me because they love me."

Broadway learned the hard way. He's been the victim of nonpaying customers so often that he took out indemnity insurance. "I probably should have fire insurance along with the credit insurance, I've been burned so many times."

Betsy Wiersma: "The customer couldn't focus on anything but 'Do it, do it, do it."
Betsy Wiersma knows all about projects that can get out of hand. Her nine-year-old company, $1.5-million Wiersma Event Marketing, in Indianapolis, once put on a city festival for 30,000 people. Wiersma's clients range from large corporations to the mayor of Indianapolis, who, being a politician, tends to think big -- so big that Wiersma's take on one event amounted to a grand $13 an hour. Yet Wiersma won't cut off her government clients -- they are good payers, and there are intangible rewards, notably, "having the mayor love you."

She draws the line, however, with would-be customers who can't (or won't) define their business goals. Last summer a large corporation all but begged Wiersma to take on its trade-show booth. It was a major show, and no doubt the budget was sizable. "They couldn't focus on anything but 'Do it, do it, do it," recalls Wiersma. The corporation didn't want to talk details: it wouldn't define what it wanted the show to accomplish or how much traffic it expected the booth to generate. Its attitude was "Read my mind," Wiersma says.

Another company might have jumped at the challenge -- and the money -- but Wiersma knew better. The repercussions of an ill-planned project would have overshadowed any monetary gain.

Janet Taylor: "After looking at the margins, I thought, 'Why am I doing this?"
Motorola Cellular was a profitable and steady customer of Taylor Management Systems, a $10-million company in Des Plaines, Ill., that contracts out software developers and technicians to large corporations. "We support Motorola Cellular's entire help desk," says Janet Taylor, president of the 12-year-old company. "This same division said, 'We really want to outsource our telephone operation' -- a bank of live operators. We said OK."