Firing Difficult Clients is Good for Business
Business owners understand (or will find out soon 😊) that client relationships can be complicated. Good clients allow us to provide them with our expertise and services, listen to strategic advice, and work together with you and your company to grow their business. On the other hand, bad clients can be toxic and challenge our mental, financial, and professional well-being.
Some common triggers of a bad client are:
- Refusal to provide the information you need
- Questioning everything you do for them
- Late or no payment
- Taking up too much time
- Unhappy or problematic attitude
- Criminal intentions
- Constant price haggling
Too often as business owners, especially startups, we may just deal with the nightmare client because this is all part of business and they are paying the bills. The customer is always right, right? Well, actually no, this is not true.
Aren't we leaving money on the table when we fire a client?
Yes and no. Although clients are how businesses generate revenue, every client does not represent profit. Check out these examples:
- A client signs up for a $300 service that usually takes 2 days to complete. We ask for required information to complete the job. We send multiple email requests, phone calls, and chat messages, but it takes 6 weeks to receive the information. After 6 weeks, we have begun other projects due to a lack of response, but the client wants to prioritize their service. The result is that a $300 service has taken time and resources away from good clients which means we are losing money on the original deal as well as our current project.
- A client agrees to a contract in the Spring. A common business practice is to begin prep work as soon as possible. The client does not pay their invoice until the Fall. Two things have occurred here:
- The accounting team is unable to manage cash flow since the close date and execution dates are 6 months apart.
- The operations team cannot properly schedule the resources needed to complete the project.
- A client is running a business that requires licensing and regulations. Your company must work within these regulations, but the client prioritizes revenue over compliance. Similar to criminal proceedings, your company's involvement can result in both financial and legal ramifications.
It is very important to look at the client relationship as a whole and not just revenue for the company.
When should we fire a client?
We have a seminar, "Turning Problem Clients into Dream Clients", that provides techniques for managing difficult clients. When these techniques fail, then we need to strongly consider firing the client. Below is a checklist to use when considering firing a client:
- Morale - Is the client affecting those working for the client in a negative way?
- Negative Revenue - Is the company making or losing money in the deal>
- Respect - Is there still mutual respect between the company and the client?
- Square peg; round hole - Is the client still a good fit for the company's goals?
- Unhappy - Is there anything the company can do which will make this client happy?
Is firing a client difficult?
Choosing to fire a client can seem like a huge task, but doing it the right way can help make things a little easier. Here are a few tips to fire a client professionally:
- Review the contract. This should outline the expectations of both the business and the client. Reference it early and often to be sure everyone is aligned with the "agreement".
- Never do anything out of emotion. Emotionally charged conversations are generally bad for business.
- Report what you have completed. Provide as many details as possible including ongoing tasks, pending tasks, payment terms, and termination date.
- Send out a professional letter or email. Although generic arguments such as personal reasons or a different direction are okay, it is better to be specific about the termination.
- Send a final follow-up. A termination email is good for ending the relationship; a final follow-up is good for future business.
- Look for a replacement client. It's never too soon to begin prospecting for a client to replace that lost revenue.
Consider your client’s temper and behavior when explaining the termination. The firing provides enough stress; let's limit the reasons they have to try to hurt your business.
What are the next steps?
At BizUp, our first order of business is to try to improve the situation with bad clients. When that process becomes too emotional or too expensive, we have a playbook that we follow to make sure that everyone leaves a termination situation with respect.
Firing bad clients will relieve you of unnecessary stress and create the time and energy you need for those dream clients who are waiting and in need of your services. Dream clients make work not feel like work. This allows you, your team, and your business to provide the best possible products and services to those clients that value your company.