When to Fire Your Clients
By Genesis Davies, Thursday, January 05, 2012
Most of the time, having clients is a good thing for a business, but when things get to the point where a client is more trouble than he’s worth, it may be time to cut him loose.
Every business has had at least one client that was just not worth keeping. These are clients that don’t just require a little help; they are demanding far more than you are willing to give. Unfortunately, if you’re not careful, they can end up taking time away from other clients and pay less in the process. It’s important to know the signs of a bad client and know when to get rid of them.
Signs That Your Client Should Be Fired
No one wants to turn down work, so it can be difficult to know just when to cut someone loose. After all, they’re paying you to do a job, so it seems wrong to tell them you don’t want their money any more. However, for sanity’s sake and the sake of your business, it is sometimes necessary to get rid of bad clients.
Sign #1: They don’t know what they want
Some clients are indecisive, while others will simply change their minds continuously for months. This is particularly common when working for a business where two or three people come up with conflicting ideas for you to work on.
Sign #2: They don’t meet deadlines
When you need information from a client in order to move on and they keep stalling, it can throw off the entire schedule, not only for that client, but for your other projects. Once may be a minor issue, but if the client keeps doing it, it’s time to show him the door.
Sign #3: They think you should always be available
Getting emails at 3 am insisting you respond immediately is a pain in the neck. Getting a phone call at the same time with a problem from a client gets old the first time it happens. Some clients just don’t respect your hours, particularly if you are a freelancer and they feel that you should be available to them at any time of day or night. This is a client you do not want to keep around if they refuse to respect your boundaries.
Sign #4: They don’t listen and then blame you.
You’re the expert, which is why the client is coming to you. However, in some situations, the client may feel that he or she knows better than you and try to tell you how to do your job. When you do things their way, against all logical advice, they blame you for the lousy results. Yet another sign that this client has to go.
Sign #5: They always want more than they paid for.
This type of client can be sneaky because they start out with a legit request, then keep adding to it, using small requests to get more and more from you without paying anything extra. This can go on for a long time, making you feel very resentful toward this client.
Sign #6: They don’t pay on time.
A client that is always late in paying or who pays only when she gets paid is not a good one to keep around. If you can’t arrange for on time payment, you’ll need to fire them.
How to Fire a Client
Knowing that you need to get rid of a client is one thing, but actually doing it is another. There are a few ways to go about firing a client you don’t want to work with anymore.
Raise your rates.
This is a great method to go with because if the person does agree to your new prices, it will actually be worth it, but in most cases, you want to raise your rates enough that they will balk and go find another sucker to work with. Many difficult clients are interested in getting the lowest prices possible and will continuously whittle you down, so jumping the price up should work to get rid of them.
Tell them you’re busy.
If you have a client that you just can’t handle anymore, you can tell them you’re just too busy to take on their next project. This works in all cases because you will simply block them out. If they ask how far ahead you’re booked, make it a few months in case they attempt to book later.
Start billing for everything.
When it comes to clients that just keep adding little tasks to the main one, you can end up doing a lot of extra work and not getting paid for it. Let the client know what your new limits are and then stick to them . . . bill her for every extra task. It shouldn’t be long before she either leaves or stops adding the extras.
Sometimes enough is enough. When your blood pressure rises just thinking about a specific client, it’s probably best to walk away from them. This can be harder than it sounds, particularly if you have a very persistent person that you’re working with, but in the end it’s worth it. You will free up more time to work on other projects that pay better and you’ll be free of a lot of stress, which can also drag you down if you aren’t careful.
When, Why, and How to Fire That Customer
Posted on October 28, 2007
Not every client can be your favorite. That's what Debra Brede, an investment adviser and owner of five-person D.K. Brede Investment Management in Needham, Mass., used to think about one of her most demanding customers. For 20 years, the woman showed up at appointments with bags stuffed with every slip of paper connected with her investments—proxy statements, annual reports, dividend notices—expecting Brede to go over each one with her. Brede did. She wanted to offer good service, and this woman had a $1 million account. That's a healthy amount for Brede's company, which has about $1.7 million in revenues each year.Then, as part of Harvard Business School's Owner/President Management Program, Brede took a class in which the professor stressed the importance of evaluating the profitability of each client. Brede spent two months doing just that. It turned out that even with a million-dollar balance, this client wasn't a winner. She spent a lot of time with Brede and her staff, but because her holdings didn't change much, she paid virtually no fees. Brede discovered she was losing money on the arrangement. Says Brede: "I was shocked."
Brede calmly told the woman she would have to start paying for the time her account required. That only infuriated her. Then Brede made a tough call: She asked the woman to take her business elsewhere. "Most people are not looking to get more than they pay for," says Brede. "But there is a group of people who will take and take with no respect for my time or my employees' time."
Yes, breaking up may be hard to do, but when a client is costing you money or making you crazy, it can be a smart move. Severing unprofitable or exhausting relationships can, after the initial fallout, boost your company's revenues. Brede cut the cord with about a dozen of her 650 clients between late 2005 and early 2006, freeing her to devote more time to bringing in new business. Profits rose 25% last year, compared with about 9.5% in each of the past few years.
Of course, you don't want to let a profitable client go if losing that revenue could sink you. And no one is advocating firing clients just because they are demanding or you simply don't like them. This situation demands objectivity.
That means it's time for a coolheaded assessment of your clients—how much you're bringing in from each, as well as how much each really costs your company. Clients who aren't cutting it should be candidly and unemotionally presented with options for improving the relationship. Such conversations can get ugly, so be prepared: Your client may balk, wheedle, or fire you. Be ready to let go. "Entrepreneurs have this horrifying sense of scarcity, that the customers they have are the only ones in the world," says G. Richard Shell, professor of legal studies and management at the University of Pennsylvania's Wharton School. "That is not true. But [firing clients] takes courage."
The first step is to do the math. Calculate the annual revenue from each customer and the cost of serving them, adding such factors as the costs of materials and the cost of returned or rejected products. "Not a lot of companies do that," says H. David Hennessey, a professor of marketing at Babson College. "And that's a mistake." The amount of time you and your staff put into a customer relationship or making a product counts, too.
Brede found that the average cost of her staff's time was about $56 per hour. That included salaries, benefits, and bonuses for employees working 1,610 hours a year. She calculated her own time at $300 an hour. To figure out how much clients actually cost her, Brede estimated how much time it took to do common tasks—a full explanation of a client account statement, for example, took 30 minutes—and asked employees to record every action they took on behalf of a client. If clients referred others to her, Brede attributed the first year's revenue from the new client to the referring one. The process took Brede about two months. The results surprised her. A number of clients with accounts of more than $1 million—supposedly the most important ones—were either marginally profitable or costing money.
It is far harder to quantify the toll an abusive client takes on your psyche. Some of the costs of working with a tough client are represented in the dollar value of rejected products or the extra time your staff spends with them. But you should also ask your close friends and family if problems with a troublesome client are affecting your personal life. Not sleeping well, dreaming about clients, obsessing about them, finding yourself repeatedly writing the "you're fired" speech in your head, and dreading calling them are all signs that a client is taking too big a toll, says Shell.
To get the whole story about your clients, speak candidly with your employees. Is dealing with a bad client's behavior cutting into the time your staff should be spending with other customers? Have any employees considered leaving the company because of a difficult client? Has there been abusive behavior? "The customer is not always right," says Justin Kitch, CEO and founder of Homestead Technologies, a 139-person, $16 million Menlo Park (Calif.) company that provides Internet services to small businesses. "That is the most damaging statement that has been made in business." Kitch says he instructs employees to be polite to unhappy customers but makes it clear they shouldn't "roll over and accept abusive behavior." He says clients cross the line when they begin personally attacking the customer service representative or use insulting language.
Once you've identified troublesome clients, however, it's worth trying to patch up the relationship. The cost of acquiring new clients is so high that you don't want to "pull the trigger too fast," says Doug Williams, a Vancouver (Wash.) small business consultant. Present problem customers with ways to improve the situation, ideally in a face-to-face meeting. Are the clients unprofitable? Encourage them to buy additional products or services. Ask them to buy products in greater bulk or lengthen your lead time. Or suggest they find other suppliers for the lower-margin products or services they get from you.Ryan Gerber, president of RGI International, an 18-employee Cleveland business that helps big companies with corporate events and trade shows, successfully rehabilitated one of his big clients. Gerber says the customer was disorganized and failed to meet deadlines, causing employees to readjust schedules and chase around after late information. Employees complained, but Gerber thought the client was worth keeping because it had been a customer for years, was in other respects appreciative of his employees, and paid its bills on time.
When Gerber calculated how much he was making from the client, he found that net margins for that client were running about 10% to 15%, compared with an average of 35% for other, better organized customers. Gerber came up with new guidelines for the account, including additional fees if the client didn't meet deadlines, and charges for extra work not specified in the contract. He pushed his employees to communicate more clearly with the client about the information they needed and deadlines. The customer has become more efficient, and margins on the account are 30% to 35%. "Yes, they were disorganized," says Gerber. "But we needed to change how we interacted with them."
Brede, too, says that although she has had to fire some clients, she has improved arrangements with about 40 others. One client suffered from what she calls the Cramer Effect: Every time he
saw Jim Cramer pound his fist about a stock on CNBC's Mad Money, he would call Brede and ask if he should own it. Her staff was constantly checking his holdings, assessing how the new stock would affect his asset allocation. Brede finally suggested the client put a small share of his money into a discount brokerage account, where he could make frequent, less expensive trades without her advice. The client balked—"I thought I lost him," says Brede—but then he did as she suggested.
Some situations, of course, can't be remedied. If the client has legitimate gripes about your product or service, explain how you are addressing them. And if you sense the problems may stem from bad chemistry, consider making a different employee the main contact on the account. But an abusive client cannot necessarily be transformed. "Going into therapy with your clients is a very unlikely scenario," says Wharton's Shell. "The truth is, people don't change."
Joshua Zerkel would certainly agree. In 2003, he started Custom Living Solutions, a San Francisco company that organizes homes and businesses. As a startup, Zerkel had a client who accounted for 80% of his revenues. "She was very demeaning toward me and treated me like the hired help," says Zerkel. The customer once sent him to buy her boyfriend an iPod, and another time demanded that he break into her home through the kitchen window to get some forms she needed photocopied. After a few months, Zerkel ended the relationship, despite her pleas. "If you are thinking about the client all the time, you have to get out," says Zerkel. "Sometimes it is that visceral." He had promoted his business mostly by word of mouth, and by the time he fired her, other clients had started to come in.Before you cut the cord with a profitable client, you'll need to be sure you can survive the financial hit. Often that means making up for lost sales by redoubling efforts to bring in new business. Back in 2003, Trish Bear, president and CEO of I-ology, a 22-employee, $1.6 million Scottsdale (Ariz.) Internet strategy company, knew that one customer just had to go. The client, a $7 billion corporation that accounted for 24% of revenues, was constantly dissastified, requiring Bear to attend meetings two to three times a week. The client also rejected many of Bear's proposed strategies. The customer paid in 60 or 90 days, when Bear needed to be paid in 30 days. To prepare for a split, Bear told her staff to do pretty much whatever the client wanted, which allowed her to steer clear of all those meetings. She used the extra time to recruit new business. Six months later, Bear had landed a number of new accounts, and revenues were up 33%. "All that time and energy I had spent on resolving conflict was now spent on getting new customers," she says. When the client's contract came up, Bear didn't renew it.
It can also help to do some role-playing to practice the conversation you intend to have with the client. "That may help you uncover things so that you are better prepared," says Shell. He suggests consulting with a lawyer if you have any doubts about your legal obligations to a customer.
When it's time to lay your cards on the table, don't be coy. Tell your client you can see your services are no longer meeting his needs. You might suggest another company. That's better than hiking prices until an abusive customer leaves. "There is a manipulative component to that that may come back to haunt you," warns Chip Bell, a management consultant in Gun Barrel, Tex. The last thing you want is an irritating—and overcharged—customer.
Once you've purged your list, be selective about who you bring in. Bear admits she took on everyone at first. "If they had a heartbeat, we took them," she says. Now she focuses on companies with $10 million to $100 million in revenues. She figures companies that size are likely to have a marketing budget large enough to afford her services but are still small enough that they don't have internal staff to do it themselves. They're more likely to pay in the 30-day window she needs, and they don't try to boss her around. And instead of jumping into long-term deals, she now starts new clients with an initial 30-day contract. This "dating period" gives her a chance to identify potential problems and talk to the client about them; it also gives the customer a chance to think about whether her services are really a good fit. If not, Bear says, "We have conversations with them to make sure our assumptions are correct, and then we help them find the right partner." Those conversations are rarely easy, but your company's bottom line and your own mental health may depend on them.Join a debate about nuisance customers.
10 Signs You Should Drop a Client Like a Bad Habit
Leo Babauta | Freelancing Essentials | November 20th 2007
One of the keys to freelance happiness is working with great clients — people you can trust, who you enjoy working with, who are encouraging and motivating and brilliant. Excellence inspires excellence.
On the other hand, having horrible clients is a sure way to make you miserable. They’ll lower your job satisfaction, lower the quality of your work, and in general do very little to improve your career (and more likely, will actually hurt it). None of that is good news for a freelancer.
Our problem, however, is that we tend to stick with a client if we’ve been working with them for awhile, simply because it’s safer, and it’s more difficult (not to mention a little scary) to find new clients. So we stay with bad clients for longer than we should.
Break out of that rut. If you’re staying with clients just because they’re long-time clients, take a look at the following list and consider whether it’s time to look for new pastures. Quick note: I’d recommend that you look for new clients before dropping the old ones, just so that you’ll have enough income coming in.
1. Too critical. While honest feedback can be very valuable, some clients go beyond honesty and just complain too much. They’re never happy, and they make you feel bad about your work. You don’t need that. Working for positive clients is much more satisfying and motivating.
2. Slow payers. Does it take a month or more for a client to pay after you send them your invoice? In this electronic age, payment is as simple as a few clicks in PayPal. It shouldn’t take more than a couple weeks to make a payment, at any rate.
3. Constant new requests. There’s no question that most jobs will require some requests that weren’t made up front … that’s unavoidable in many cases. However, when a client requests round after round of revisions, with new requests each time, he’s more trouble than he’s worth.
4. Too much work for the pay. I’ve done jobs where the pay is low — I’m sure we all have. But for a low-paying job, you shouldn’t expect a huge amount of work. Incredibly, I kept a certain client for almost two years doing low pay work ($45 for a job that took 2-3 hours) only because it was high volume and I needed the money. Eventually I realized that for the amount they were paying me, if the job took more than 30 minutes, it wasn’t worth it. They were asking for too much work for the amount of pay they were giving me.
5. Not enough communication. I’m not a particularly chatty person, so when I client keeps communications short and sweet, that’s how I like it. But there still needs to be enough communication to get the job done right. If the client doesn’t communicate clearly or sufficiently at the start of the job, and give you the proper feedback during and after the job, there is sure to be problems later.
6. No follow-through. Most client-freelancer relationships are two-way streets — sure, the freelancer is hired to do a job, but most of the time, there are things that the client must do as well for the job to be done … and if the client doesn’t do what he’s supposed to do, it can be very frustrating for the freelancer. A client who says he’s going to do something, but then is too busy or too forgetful to follow through with it, can cause headaches for the freelancer. Or perhaps a client doesn’t return phone calls or emails — not a good sign either. Too much of this means it’s time to drop that client.
7. Too disorganized. Related to No. 6. We can all be disorganized, and there’s nothing wrong with that. But when the client’s disorganization causes problems for the freelancer, that’s not good. I had an editor who was constantly calling me at the last minute with articles that were due the next day … articles I could have been working on for a week if she had been more organized. She also took a long time to respond to my emails, was constantly forgetting about things I asked her, and had no advanced planning. Now, if she wants to operate that way, that’s completely up to her … but I decided not to let her disorganization be my problem. I dropped her.
8. Makes too many mistakes. Everyone makes mistakes. That’s understandable. But when your client introduces errors into your work, and constantly makes the work become of slipshod quality, that makes you look bad. You have a reputation to uphold.
9. Gossips or makes things personal. Unfortunately, this happens. Clients should be professional, but sometimes aren’t. They talk behind your back, or talk about other people to you, or try to become too personal when things should be professional. It’s OK to be friendly, but gossip and the like are completely unprofessional, and while there’s a tendency to overlook this stuff, in my experience such things can turn around and bite you if you’re not careful.
10. Too emotional or unbalanced. Related to No. 9. Let’s be honest: we’re all emotional from time to time. We’re human, and emotions are a part of life. But in a client-freelancer relationship, emotions can’t get in the way of professionalism. If the client is an emotional rollercoaster, and especially if those emotions (anger, depression, hysterics, etc.) interfere with your work or with your relationship with the client, that’s not a good situation for you. One person I worked with, years back, came into the office with a baseball bat and slammed it on a desk (cracking the glass on the desk’s surface) because he was mad at another person I worked with. I was a few feet from this display of athleticism, and I stupidly tried to get between the two men to stop any injury. That kind of thing is just bad news. Stay away from such unbalanced people, and your job will be much easier.
How To Know When To Fire A Client
Get rid of clients that drain you so you can work on the good ones!
By Tony Donaldson | January 21, 2013
There comes a time in any relationship to know when it isn't working out. In business, it is essential to be able to assess yours and get rid of the clients that drag you down. They all abuse you in some way. Some always beat you up on price or terms, some pay you very late, consistently. Some have unrealistic expectations, e.g. increase the scope of the job "scope-creep" - you know, that 6-shot list that becomes 15?) or want corrected images turned around the next day. I always tell clients about the triad of "fast, cheap and good, you may pick two but not all three".
Whatever it is, and no matter what that client means to you financially, you have to know when to walk away. Bad clients hurt your finances by causing problems with your cashflow (late payments, trying to give you unbillable extra work, paying you below your cost of doing business, etc.). Getting rid of them means you can concentrate on work that you love, the kind that rewards you creatively and financially.
Case in point, a while back I had a client who had been amazing. They had lots of work that I loved, it paid well, everyone was happy. Then things changed. The company was sold, new management started putting pressure on all departments. When one of the designers came out on shoots with me, he reported back that I was being paid a lot of money for not a lot of work. Read my <a href="http://prophotocoalition.com/tdonaldsonppc/story/pablo-picasso-joke-explaining-why-your-work-is-worth-it">Picasso</a> post for why they may have thought that. They paid me a fair half-day rate for photographing their athletes, and sometimes I'd have what I needed in 30 minutes to an hour. The athletes LOVED it. They could let it all hang out for my lens just a couple of times, their best, most cutting edge stuff, then be done and on their way. And they always loved the shots because it showed their current best form in context in an amazing image.
The client started asking about why I charged them for a half-day and didn't spend a half-day shooting. My response was that this was an athlete that they paid a lot of money to ride for them, and that this was their best (and riskiest) tricks at the time. Why would I ask an athlete to keep going for no reason? If he fell and broke an arm, they'd be paying him for NOT riding, and he'd fall 6-8 or more weeks behind in contests, etc. That won them over about 90%. But at one point, one of the designers asked me about the equipment I was using. I told him. The company went out and bought the same basic gear I had and sent the designer out to one of my shoots. I knew what was going on. I let the guy stand next to me, told him how to set the camera (accurately), gave him pointers. He went back with his images, I sent my images in, and I never again saw that camera out on a shoot with me again. Cameras don't shoot people, people do. It was crystal clear that the eye behind the camera, the years of experience, were the reason the images were worth what they were paying.
That kept the relationship happy for a while. Then they tightened the screws again. This time, trying to cut costs on relicensing images for a trade show. A colleague who also shot for the company asked for my advice and help because the company had offered her about ten cents on the dollar of what the licensing was worth. I went to bat for here and negotiated a fair deal for both sides. Two weeks later, the same company employee called me to offer me the same ten-cents-on-the-dollar deal. We talked for a bit, and I said that we should simply agree to disagree on this one, and that they shouldn't use my images for this trade show and related ads, etc. She said, "Well...". Ok, now I knew what had happened. I said, "You already printed it and placed the ads, didn't you?" I was livid. She admitted it. I had her cut me a check for the full rate that I would have started my negotiation at, then said that that would conclude our relationship. I read the writing on the wall and knew that this relationship was no longer beneficial.
And it HURT to do that. They were a lucrative client, and one that I had enjoyed working with. As well as all their great sponsored athletes. It was a short-term financial hit, but a long-term gain in that I've since been able to concentrate on my other great clients, and have had the time to pursue other new ones that I like.
Don't be afraid to say no to a client, and don't be afraid to walk away from the job or the client if it is unfair to your business. You need to fill your client roster with ones that respect you and can offer you work that you love. Then everyone wins.
Why You Should Fire Some Clients
BY ERIKA NAPOLETANO | November 28, 2012
Straight up: Some clients suck. With 2012 winding down, now's the time to give your company's health (and your sanity) a boost by cutting the duds from your client list.
"When you work for yourself, there's a natural tendency to try to be all things to all people, which often turns out to be counterproductive," says Stephen Denny, author of Killing Giants: 10 Strategies to Topple the Goliath in Your Industry. "You have to be willing to know who you are, who you're not and whether a client's needs--and values--align with yours."
Deciding whether to fire a client and lose business or keep a client and lose your sanity can be nerve-wracking (and I know this firsthand). But, really, where's the tough decision there?
We've all done it: chosen revenue over peace of mind. Never really works out that well, does it? When a client's needs and values don't align with yours, it's time to cut them loose, reclaim your sanity and focus on building a base of people you love doing business with.
There's an added upside: Great clients rarely refer you to bad clients. By firing the bad ones, you're actually building up a smart network for future referrals. So, how can you tell if a client is truly zapping your sanity or if it's just a temporary condition?
If you're complaining to your friends over after-work drinks, stop long enough to consider the cause. "Is it about the client who stresses you out when you simply see their name in your e-mail inbox?" asks Jason Womack, author of Your Best Just Got Better. "Your work is to curate your network--that's where your next opportunity will grow from."
He's spot on. The folks who probably need to go are the ones you dread seeing pop up in your inbox. When you identify the people who never send thanks, good news or new business your way, it's time to fire them from your client list. Your inbox should be a delivery mechanism for awesome.
"The key to business success is organizational health. In turn, organizational health depends on values consistency," says Jim Franklin, CEO of Boulder, Colo.-based SendGrid. "First, you need to identify your values. We call them the four H's: honest, humble, hungry and happy. We hire and fire employees, select vendors, customers and shareholders based on this values system."
The overall health of your business, whether you're a company of one or 1,000, is what matters most. You can't take care of your audience when your company is a wreck because you let some bad eggs through the front door.
Categorizing somebody as a bad client is "really about self-respect and professionalism: what you're willing to put up with and still be able to stand tall," says Merredith Branscombe, founder of Denver-based Leap! Public Relations. When your organization's ability to stand tall is compromised by any one person or entity, you have to cut that client loose. You can't be a values-based company if you let your values get shelved.
So, get ready to thin your company's herd -- and not just as a one-time New Year's gift to yourself. We'd all do better if we stayed on the lookout for the warning signs of bad business relationships. Because some people suck -- but it doesn't mean they have to suck the life out of your company.
Erika Napoletano is the head redhead at RHW Media, a Boulder, Colo.-based company that solves hard marketing problems and gets people unstuck and on their way to being awesome.
5 Signs It’s Time to Break Up With Your Client
by Adelaide Lancaster, July 3, 2012
If you’re just getting started with your business, you probably can’t imagine what a significant challenge it can be to get rid of clients. Starved for revenue and eager to build a testimonial bank, you’re probably willing to all but give away your services to any interested party. (Or maybe you are!)
But, as any established entrepreneur will tell you, not every client or every project is a good one—or even worth your time. In the best-case scenario, you see these less-than-ideal clients coming anddecline those projects before even getting started. But even the best of us seem to get ensnared with unsavory people and bad projects from time to time. And when you find yourself in this position, it’s time to break up and move on.
Of course, firing clients is easier said than done, which is why people often avoid it for far too long. But it’s an important skill to have—and, once you’re comfortable with the idea, it’ll keep your business much healthier in the long run.
The first step is, of course, knowing when it’s time to part ways. Read on for a few telltale signs that it’s time to break up, plus tips on avoiding similar situations in the future.
1. You’re Not Doing What You Want to Be Known For
It’s easy to get involved with work that you “can” do, but don’t necessarily want to be doing. A client asks, you say yes—it’s the path of least resistance (and it probably pays).
But, instead of accepting every project, it’s important to consider what you want to be known for, and how you can do as much work related to that as possible. After all, most all businesses grow through word-of-mouth referrals, so undesirable work tends to beget more undesirable work. And working on those prized projects will do just the opposite!
That said, it’s not a great idea to leave clients in a lurch the second you determine the work to be less than ideal. It’s important to fulfill the commitments you’ve already made—but that doesn’t mean you need to sign up for the long haul. When you see that your client’s needs are and will continue to be out of your sweet spot, that’s a good sign it’s time to use that “it’s not you, it’s me” line.
Next Time: When new or existing client asks you about a project, take note of whether or not you’re excited about the initial inquiry. If you find yourself saying, “Well, I guess I can do this,” it’s probably a good idea to pass.
2. You’re Over-Accommodating Them
Part of your job as an entrepreneur is to establish a set of systems, rules, and policies that help you to produce the best work you can—that’s what sets you up for success. However, some clients don’t care how you do business—they want things done their way, on their time, on their budget, thank you very much.
While the occasional favor that pushes your boundaries shouldn’t wreak too much havoc, you need to be careful about consistently yielding to pushy or over-demanding clients. Lots of seemingly small accommodations—pulling all-nighters to meet their deadlines, for example—can actually get in the way of your doing a good job for this client and for your others.
If you’ve had to ask yourself if the client is really worth the trouble they cause more than once, it’s probably worth planning an exit strategy and freeing yourself up for potential clients who are a better match for your style.
Next Time: Be wary of those clients who always seem to have a “special” request or those who put undue pressure on others to meet their needs. Also take the time to educate new and prospective clients about your policies and the rationale behind them. Once you’ve done that, be honest with yourself about which of your policies really matter and impact the way you work (your non-negotiables), and be consistent in how you handle “exceptions to the rule” among your clients.
3. You’re Not Earning What You’re Worth
It’s important to audit your clients from time to time. Think about how much time you spend on them proportional to how much they pay you. Is it in alignment? You’ll probably find for at least one or two, it’s not. For some reason, the least lucrative work seems to take a disproportionate amount of time—but that shouldn’t be the case. If you find yourself in this situation, it’s time to raise your prices, off-load time-hungry clients, streamline your operations, or do all three.
Next Time: Be sure to scale your deliverables in accordance with the budget. If a client can only pay for half of your proposal, then they only get half of your proposal. Also make sure to put limits on the total percentage of your time that less-lucrative clients can take, so you’re not putting your whole business at risk.
4. You’re Being Treated Poorly
There’s no excuse for bad behavior. If a client is treating you poorly, it’s time to move on. Fear of bad word-of-mouth can tempt a lot of entrepreneurs try to dig themselves out of a no-win situation, even when they’re dealing with a meanie. Instead, the best course of action is almost always to cut your losses, refund according to your contract terms, and find someone else to work with.
Next Time: Put a couple “personality” screening practices in place. Depending on how extensive, involved, and long-term the work you’re planning to do is, you may want to take prospective clients to
lunch or at least set up a “get to know you ” phone call before giving them a proposal. Consider their behavior in scheduling the appointment and during the meeting to be telling of their working style.
5. You’re Too Close for Comfort
Working with people you know, like friends or family, is tricky. Yet, since most entrepreneurs turn to those close to them for support, they end up fielding a good number of business requests from their personal Rolodex. Some people can handle it and some relationships continue on unfazed, but mixing business with pleasure is tough, and many of these arrangements wind up in trouble.
If you find yourself in this situation, take the high road and exit as quickly as possible. Bend over backward to make sure that the clients who you’re personally connected with get what they want, but don’t extend your work with them a day longer than necessary.
Next Time: Establish a clear friends and family business policy for yourself and stick to it. Don’t be afraid to have a go-to line, like, “in my experience, working with friends has proven to be difficult, and I care too much about our friendship.” Be particularly aware of ongoing relationships where you are also a patron of their business. That doesn’t mean you can’t help them out, though—this is a great opportunity to make use of your referral network and send them to a stellar colleague of yours.
You don’t have to get in the trap of accepting all business that comes your way—and in fact, you shouldn’t. In the long run, you and your business will be better off if you stay focused on the right client relationships and steer clear of the wrong ones.
Firing Clients Can Be Good for Business
TAX PRACTICE MANAGEMENT
by Cari Weston, CPA, MST
Published March 01, 2013
John’s day is planned for maximum efficiency:
1. Read technical updates;
2. Respond to the previous day’s emails;
3. Return client calls;
4. Clear off desk by reviewing tax returns;
5. Spend the afternoon meeting with clients; and
6. Leave time to make his son Billy’s soccer game and have dinner out with the family.
John opens his email and starts scouring his inbox for the daily tax updates, but his attention is drawn to the three emails from a client all sent between 5 p.m. yesterday and 8 a.m. today. All of the messages are flagged with a red exclamation mark.
Suddenly John’s shoulders tighten, his stomach quakes, and his temples begin to throb. Despite his well-thought-out plan, he has to open those client emails; after all, they could be important.
As he feared, the client is in a hurry to get his returns filed and is very frustrated. After all, he dropped off most of the tax return documents last week and emailed the remaining items yesterday morning. As he told John when they met last week, this is a very simple return that John should be able to complete with minimal effort, and he wants to get this out the way so it will not be hanging over him.
All too often this or similar scenarios occur at CPA firms. Anyone with more than a year’s experience in a tax practice knows the rest of the story.
John is the fourth CPA this client has hired in as many years. He spoke disparagingly about them (wonder what he will say about you?). The client was not comfortable leaving a retainer when he dropped off the information because he has trust issues. The return most likely contains complex issues that require additional work, and it is likely the client has not provided all relevant information upfront. It is also likely that the client is not willing to pay for the additional work that may be required.
This is an obvious example of a “bad” client, and the decision to part ways should not be too difficult. But, often, the decision is not as obvious. In reality, there are a variety of reasons that clients should be asked to leave the firm. The average CPA can follow certain steps to recognize these situations and take appropriate action.
CPAs are taught to exercise due diligence when bringing on new clients. CPAs should assess whether they have the technical knowledge to perform the work and the available staff and resources. They should also assess whether the potential client’s expectations are reasonable and whether its management team exhibits high levels of integrity.
If a CPA firm does not have a client acceptance policy that evaluates these issues along with many others, it is time to create one. The AICPA has resources on its website that are helpful when deciding whether to accept new clients (see “Evaluating and Firing Clients”). Most professional liability insurance carriers have materials and checklists available. Even a general internet search will produce numerous results on new client screening techniques.
While it is not always possible to weed out bad clients before bringing them on board, it is best to try. Anyone who has had to fire a bad client would probably agree that it would have been better to have never accepted the client in the first place.
This is certainly not an all-inclusive list, but the following are a few warning signs CPAs should look out for when meeting with potential clients. Consider whether the prospective client:
Has changed CPAs often;
Is rude to office staff;
Will not allow contact with prior CPAs;
Tries to haggle down the fees;
Keeps records in poor condition;
Needs a project completed quickly;
Is not willing to leave a retainer;
Is hesitant to sign an engagement letter;
Is currently delinquent in filings;
Insists on being the only contact; and
Comes in close to a tax deadline.
It is best to slow the process of bringing a new client onboard and thoroughly vet the client before accepting the engagement. In an ideal world, this would always happen. In reality, most, if not all, CPAs have some bad clients. It is important to identify clients that are not a good fit and ask them to leave.
Identifying Clients to Fire
There is a gentleman named Walter Haig II, who taught annual auditing and accounting updates. Every year he drilled participants with the same simple and clear message: “Bad clients make bad lawsuits.”
Bad clients are generally pretty easy to identify. If partners have any doubt about who their bad clients might be, they should ask the front office staff. Staff members often know exactly which clients are troublemakers.
Bad clients are ones who:
Are abusive to staff;
Complain about fees;
Lie or conceal information;
Set unrealistic deadlines;
Do not follow advice;
Blame others for problems; and
Monopolize staff time.
However, firing clients is not always about getting rid of bad clients in the traditional sense. CPAs should evaluate their client base regularly and make sure that existing clients are a good fit with the firm’s mission and culture.
A firm that has chosen to embrace new technologies may find that some clients are not keeping up. Implementing a paperless workflow system may require all clients to complete online tax organizers and sign electronic engagement letters. Some clients are not going to be comfortable with this new process, and their accounts will have to be handled differently. This is going to slow processing and may increase both the cost and the likelihood that things will be missed. A firm needs to seriously consider how long it can make exceptions for clients that are not willing to change.
Perhaps the firm has had some turnover in staff, and the people who were the strongest in real estate transactions are gone. Evaluate whether the firm has enough clients in this area to make it cost-effective to bring the remaining staff up to speed. If not, or if suitable replacements cannot be hired, the firm may not have the technical competence to continue working with these clients.
An annual assessment of fees earned by each service line may indicate that a disproportionate amount of time is being spent on a low-profit service. Firms may also find that the costs of offering a service that is not routinely performed outweigh the fees the service generates. For instance, a tax practice that has only a handful of clients that require annual reviews may need to consider dropping this service. The cost of educating the staff on the AICPA Statements of Standards for Accounting and Review Services (SSARS), purchasing technical guidance materials, and paying for required peer reviews can cut into any potential profit. Furthermore, the time spent staying up to date on just one service cuts into the time the staff could use to learn more extensive tax planning or compliance techniques.
The firm’s leaders should meet at least annually to review the direction of the practice. They should evaluate the firm’s mission; how many clients the firm can honestly manage while providing exceptional service; what client services the firm performs the best, or at the highest rate of profit; and what is the profile of its perfect client.
The results of this discussion can be used as the basis for criteria to evaluate current and future clients. It can be as simple as creating five to seven questions (must be an uneven number to avoid a tie) that require “yes” or “no” answers. A “yes” means the client meets the firm criteria, and “no” means the client does not. The client list can be formatted in Excel, and a basic formula can be created that says if the “no” answers outweigh the “yes” answers, then the client should be fired.
While the list of clients the formula says to fire must be reviewed before taking any action, the reviewers should also be true to the standards they have set. It may be tempting to decide to keep a client who is enjoyable to visit with each year. However, if the majority of the results are contrary to what the firm values, the client is not a good fit.
Preparing to Fire Clients
Once the firm has determined which clients to fire, it is wise to devise a strategic plan for carrying out the terminations.
It is good to start by contacting the firm’s professional liability carrier to advise it of the plan. Since there may be a few disgruntled clients on the termination list, the carrier may want to be alerted to any potential claims. The loss prevention teams have experience in firing clients and can be a good source of information on best practices for this process. In addition to offering advice on how best to disengage, the insurance carrier may have sample disengagement letters that can be modified to suit the firm. Some insurers may even offer to review the firm’s modified letter before it is sent to clients.
The most common method for firing clients is to send a disengagement letter via certified mail with return receipt requested. However, care should be taken when firing clients who have close personal relationships with members of the firm or those that have some strategic value, but not enough to warrant keeping them as clients. These clients should be told in a face-to-face meeting, whenever possible, or at the very least by phone. A letter should be sent as a follow-up to document the meeting or conversation. It is best to follow the advice of the insurer if the firm is considering firing clients via email.
Before notifying clients, the firm should make sure there are no current projects in process for any of the clients who are to be fired. If current projects are in process, the firm must decide whether to complete the projects or terminate the services immediately. The firm should address the planned level of involvement in continuing the work in the disengagement letter.
Ideally, it is best to disengage in advance of any deadlines, but this is not always possible. If the client has any upcoming deadlines or tax filing requirements, it is a good idea to spell these out in the letter.
To aid in a smooth transition, the client’s files should be prepared prior to notification. The firm should make sure that all original documents have been copied or scanned; all agreements and authorizations have been signed; all fees are paid (if possible); and all client documents are neatly organized, packaged, and labeled to be returned. It is also a good idea to have a staff member prepare authorizations to release information for each client being terminated and place them in the client’s permanent folder. This will speed up the process when the new CPA contacts the office requesting documents. The authorization can be sent to the client for a signature.
If the firm uses a client portal system, the letter should address when the client’s access will be removed. This will allow the client time to download copies of any documents it may need for future reference.
The process is almost complete; now it is time to prepare the firm’s staff.
Firing the Clients
Once the list is complete and the letters are ready, it is a good idea to meet with staff to discuss what is about to happen. While many of the staff members have counted the days to see their least favorite client fired, they may not be truly prepared to handle what is about to happen.
The people involved will vary depending on the size of the firm. In a small firm, it is probably best to include everyone in the discussion. Larger firms are more likely to include only the key staff on the engagement, although it is generally advisable to have some members of the firm who are not directly involved with the client participate in the decision-making process. Staff should be made aware of what is happening and why. Staff should also be given examples of how to respond if contacted directly by the terminated clients. The fear of confrontation makes many people uneasy, so helping them prepare for any possible conversations may alleviate unnecessary anxiety.
This is also a great opportunity to remind staff of the firm’s mission and future direction. It is human nature to be concerned about job security when sources of revenue are going away.
Some staff may fear that losing key clients, even bad ones, will have an effect on their job. It is important to focus on the positive elements of the change. For instance, the stress level will most likely decrease; work hours will drop; and the team can spend more time focusing on delivering exceptional service to the clients the firm retains, and bringing in new and (hopefully) better new clients. The result should be that everyone has a better quality of life, is happier, and is more productive. This should also result in bigger profits.
The firm should decide ahead of time if it is going to provide referrals to other CPAs. It is probably not a good idea to send bad clients to someone you like. On the other hand, if a client is fired because of a business motive, it would be helpful to assist in finding a replacement.
Prior to giving out names, it is best to contact potential referral sources to make sure they are interested in accepting new clients. If they are accepting new clients, it is a good idea to find out what their ideal client looks like. A list can then be prepared of possible CPAs with their client criteria. All relevant staff can have this list available when they are asked to provide a referral.
The Client Has Been Fired, Now What?
The feelings that accompany firing clients may vary widely. Certain staff members may be elated that they are finally unburdened from difficult clients. Some may be sad at the loss of relationships and the uncertainty that awaits them or the practice. Others will be anxious, wondering how terminated clients will receive the news and what those clients may say or do in response.
It is best to remind staff why the clients were fired and the benefits the process should reap. Posting the firm mission statement and goals nearby could provide support. It will also help if clients call and want a personal explanation or ask the firm to reconsider. If the clients do call, it is best to be polite but firm. The client must be reminded that this was a business decision and not personal. If the firm has opted to offer names of potential new CPAs, this would be a good time to present those names.
On an administrative level, clients that have been fired need to be removed from the firm’s client management system. It is best to create a checklist of tasks to be completed when clients are terminated. It should include things such as removing them from client email and mailing lists; changing them to inactive in the billing system; archiving their client files; removing their access to client portal systems, etc.
Make sure all client records are handled properly and in accordance with firm procedures and professional and legal retention rules. CPA professional standards require that all original client data be returned, and most states have specific requirements for how long client data must be kept.
It is always best if the relationship can end on good terms, so remain professional through the process regardless of the client’s behavior. Remember that this decision was best for the firm, the staff, and the client.
What to Do With All of the Free Time?
The process of pruning a practice is by no means simple and without challenges. It is difficult to end relationships of any kind, but the reality is that getting rid of the wrong clients makes room for the right clients. Chances are good that if a firm has been struggling under the strain of bad clients’ demands, the good clients have suffered.
This is the perfect time to reconnect with the good clients. Find a way to reach out to them with a handwritten note or get together with them for coffee or lunch. Let them know about the changes the firm has made and the renewed purpose in serving only those clients aligned with the firm’s mission. The firm should ask how it can serve them better, and the chances are good that they will give honest answers. This feedback should be useful in providing more and better services to those clients. When they are satisfied, ask them to refer others who they believe will be a good fit. Use free time to become more involved in business, professional, and civic and charitable groups as these activities are often personally fulfilling and may lead to potential new client engagements.
Finally, take some time to reconnect with the family and friends who have likely been neglected. A rewarding life outside of the firm is important in keeping everyone happy and healthy.
When And How To Fire A Client
by Robert Warren
Author's note: When I first sat down to write this article, I never imagined then that it would prove to be one of the most popularly requested ones on this website. While I'm amazed at the number of hits this piece gets every day, I'm also gratified to know that so many people have clued in to the fact that there alternatives to working with bad clients.
If you enjoy this piece and find it useful, would you mind dropping me a line and letting me know? I would love to know more about you and your story - please direct email to writer [at] rswarren.com and include "firing clients" in the subject line. Thanks!
I've had to fire clients before. It's not an easy thing to do, especially if they're making good money for you; aside from money, there's also a pride issue involved, an understanding that you probably shouldn't have gotten involved with them in the first place. It's never easy to admit a costly mistake - even though it may have been a good idea at the time.
It all boils down to trust and integrity: if they're not paying their bills, or they're violating the terms of your contract, then that's a given - you'd be a fool to continue doing work for them. But even if the literal business transaction is going smoothly, there can be warning signs of future trouble and justifiable causes for letting them go.
So when should you fire a client?
When they question your honor. My personal policy is to never, under any circumstances, do business with someone who questions my integrity; I work hard to keep things on the level with my clients, and the quickest way to lose me as a vendor is to accuse me of dishonesty. Your honor is everything: the moment a client accuses you of lying to them, cheating them, or generally acting in a criminal fashion, cut them loose. There's no going back from that.
When your client starts lying to you. I'm not a trusting person by nature; I know that. That's why I take my contracts seriously and rarely take someone's word on anything. The moment the lies begin - particularly the ones built on the assumption that I'm an idiot - I know we're headed into dark waters.
Few are saints, and we're all less than coldbloodedly honest from time to time. That's just the fact of living in a human society. But when you begin to realize that you can't trust your client to be honest with you, it's time to reevaluate the relationship.
When they ask you to lie for them. As a copywriter, I get this one often; too many people think that advertising is mainly lying for money, and so feel justified in telling their prospects anything just to get the sale. As a policy, I won't do it and you shouldn't either. A business that lies to its customers isn't one which will attract many. Don't sink your own reputation along with theirs.
When they begin playing power games. The client wants to renegotiate the contract; it's not their fault, they say - someone else is forcing them to do it, so please be a good sport and just sign this new contract, which has been heavily rewritten in the client's favor. It's just stuff to keep our lawyers happy anyway. Oh, and if you don't, we'll be forced to cut off a substantial part of your income.
It's a scenario you can't win, and when it pops up, the relationship of equals is over anyway; if you agree to the new terms, you've relegated yourself to a submissive position. If you don't, you've lost their business. The moment your client begins playing these kind of games with you, prepare for life without them.
When they play the "anything for money" card (otherwise known as the Faustian Bargain). This one comes in all shapes and sizes, but boils down to temptation: the client has a super deal, there's lots of money involved, it's maybe a bit queasy ethically but that doesn't matter because there's lots of money involved. Are you up for it?
Don't get me wrong: I certainly like money, and profit is most certainly my friend. But anyone who deifies it isn't. There are already too many businesspeople willing to do and say anything for a quick buck - these are the people who would juggle babies over hot coals if a high enough dollar amount was involved. You don't want to work with them.
When they play the "if it's good enough for me" card. Everyone chooses their own nonsense threshold - while some people are willing to work with last-minute deadlines and to put up with overly demanding and unreasonable clients, others aren't so willing. When your client is unwilling to draw the line with their own clients, they'll often come back to you with the argument that your standards are too high, and that anything good enough for them should be good enough for you. If the question has even been brought up, it's usually its own answer.
When they abuse your allies. Most of us have trusted relationships with good people (albeit not nearly enough of them); never sacrifice the good ones for the bad ones, and never let a client use you to abuse one of your own allies.
Divorcing A Client
Do you see any of the warning signs in your own client relationships? If so, deliberate before acting; the situation may be one you can talk through and resolve peacefully. There's no need to go nuclear at the first sign of conflict.
If you do decide to fire a client, however, don't do it rashly or emotionally. Keep a level head and cover all your bases:
Make sure your obligations are met. Some clients can handle a terminated relationship reasonably, and others throw temper tantrums. Go over all your contracts before giving notice and make very sure that you aren't legally exposed; don't give the psychotics an excuse to get the legal profession involved.
Get your documentation together and store it. Anything in writing (including email and IM transcripts) could in theory be part of a court case later. Get everything you have on the client into a single file and put it away. Archiving email is also a good idea: I've kept archives of all my incoming and outgoing email since 1998 or so, and at times it's been my savior. You never know when an inconvenient truth may slip out and find its way into the official record.
When your pieces are in place, send a simple termination letter. Keep it formally written, and don't explain any more than necessary; don't pick a fight. Just state the clause of your contract under which you are ending the relationship and then wish them the best. The less said, the better.
Send a final invoice. Get it in the mail immediately and make sure it covers all remaining deliverables. Make the remit due date immediate rather than your normal 30/60/90 day term. Don't make any mention of the consequences of nonpayment; just assume they're going to pay it, until they prove otherwise.
Keep your mouth shut about it. Most people don't get married looking forward to a divorce; there's almost always some feelings of hostility on both ends, caused by the circumstances that led to the breakup. A natural human response is to complain publicly about the other party. Don't do it.
First, it makes you look bad. Other clients and prospects may hear your ranting and wonder if they might be next. At the very least, it diminishes your professional image.
But worse, you could be setting yourself up for slander and libel claims. Legally, it doesn't matter if what you say is true; what matters is whether you can demonstrate that you had court-admissible proof of the fact when you said it. Otherwise, your former client could have legal grounds to sue you for defamation. If you need to vent, keep it to your family and friends - don't take your conflict to the world.
No one enjoys breakups, but sometimes they have to happen. When you find yourself having to fire a client, do it right. Later on, you'll be glad you did.
Fired! When It’s Time To Let Go of a Bad Client
POSTED ON JAN 21, 2011
We have them. Every business no matter how big, no matter how small, regardless of industry, stage of business, or nature of the product or services has bad clients. These clients run the gamut from those who skip out on bills or pay with rubber checks to those who are higher maintenance than the fees and sales justify. Worse still are the clients who ask for advice but don’t heed the advice, yet still want to control the process.
One of my colleagues experienced just such a bad client, who was starting a new venture and wanted to fund it entirely with government funds: Federal, state, and local. However, was the company founder didn’t have the qualifications to oversee the type of projects that were being proposed. This meant that the company needed (based on terms of these types of government funding) to have an employee who was qualified and who wasn’t working full-time for another company. Furthermore, the company would also need funds that were not from another government entity AND facilities in place or that could be demonstrated would be in place if the grants were awarded.
Not only did the company not have employees who could do the work, they also had no facilities. None. Zip. Nada. Zilch. The founder of the company wanted to represent that they had facilities and had a number of other things, like lab facilities, equipment, and other funding. The reality was the “manufacturing” operations were little more than an old stove and some pots and pans. The product testing to date had been on friends and family members. Overall the “company” was simply a name, an address, and a dream.
Many companies if not all start with an idea and a dream in someone’s garage or kitchen or dorm room or research lab. That wasn’t the holdup. The true bottom-line issue was that the client wanted to make false statements and misrepresent what they had, had done and could do to the government in the grant proposal. No matter how anyone worked with the founder, no matter how many explanations of process and rules were made, the client refused to hear what was being said. To compound the issue, the client also didn’t have information on the concept to use in the proposal. Not to mention, the client wanted a project that would normally take 120 hours to be completed in 10 hours. The lack of understanding on how the process would take was particularly hard to deal with, as the client had attended individual private consulting sessions with accountants, lawyers and government officials on what the process was and what it required.
Crash and Refund
Ultimately the engagement to work with the client had to be terminated. There was no way to deliver a final product in the timeframe, with the lack of information and no cooperation from the client on working on the project. In fact in the final days of the project the client wanted written reports in addition to the work product (proposal). The reports would have entailed more time away from writing the proposal.
When the client is uncooperative, then it is time to part ways. Whether you need to give a partial or complete refund will depend upon the situation. But in the end severing ties with a bad client promptly and decisively will in the long run leave you more time to make money with good clients, and definitely reduce your stress.
Author: Lea A. Strickland, MBA CMA CFM CBM GMC Copyright ©2010 F.O.C.U.S. Resource, Inc. All Rights Reserved
Get Rid Of Jackass Clients
Shaun Rein, 09.18.09, 07:09 PM EDT
The customer is not always right--so fire your wrong ones.
Jackasses have been in the news lately, with President Obama caught on an open mike observing that Kanye West was one after the rapper made a fool of himself at the recent MTV Video Music Awards. Jackasses are always with us in business too. Robert Sutton in his book (using a cruder term for the same sort of person) The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't, argues that talented yet disruptive employees always cause more harm than good. He says you need to either reform them or push them out. But what about when it's not employees but clients who are difficult, who berate your team and make you waste time running around in circles? Should you just suck it up and make sure you hit the quarterly numbers? Or should you fire those customers?
Companies need to exceed the expectations of customers to create brand loyalty, as I wrote in "United Airlines Shows How Not to Run Your Business." After all, it costs less to sell new products and services to current customers than to acquire new ones. But the old adage that the customer is always right is just plain wrong. Customers are not always right, and you should not always let them run all over you.
That might sound counterintuitive if your company is struggling just to scrape by in this difficult economic time, but you have to get rid of bad clients. Jackass clients, just like difficult employees, can destroy a business by destroying morale and diverting attention from growing the business. Cutting clients isn't easy, especially if they're big ones, but companies need to do it more often.
How do you know if you should fire a client? Look for these three signals:
First, too often executives, especially small business owners, spend so much time and energy servicing difficult clients that they're unable to canvass for new business. Relying on just a few clients is a killer. Basing your whole business on one or two income sources is simply too risky. If you find yourself spending so much time and effort on one difficult client that you're neglecting your other clients, or if you're not able to search for new ones, then you know you have a problem.
Keep in mind the 80-20 rule. At most companies, about 80% of the revenue comes from 20% of the clients. If you find you're spending too much time on an unproductive client, fire them. Analyze where you spend most of your time and effort. You're likely to learn that you spend the most time on the least important clients. That's because more important clients already trust you and are therefore easier to please.
Second, remember that if your company is like most, your employees are your greatest asset. A good management team can squeeze profits out of bad products, and a bad management team can kill even the
best ideas. The key is to retain your best people. In the long run they will help you make far more profits than the one difficult client who may drive them away.
If your employees look haggard and even the go-getters among them hesitate to take on a new project with a particular client, it's time to investigate. Sometimes an employee will leave a company because of unhappiness with day-to-day client work, rather than because of bosses or colleagues. This is especially true in service industries like law, medicine and accounting, where one spends more time with clients than with co-workers. It is terrible to work in an environment where the client makes your life miserable and your boss fails to back you up. Everybody wants to work in a humane environment where they feel valued and supported.
Bad morale also exhausts employees and makes them unable to think clearly and plot the best courses for future success.
Finally, life is short. While we all have to put up with difficult situations and people sometimes, you can't let chronically difficult clients affect the health and well-being of your family. If your kids or significant other tell you you're especially grumpy, then think about whether a client is causing your stress, and whether that stress is worth it. Most of the time it isn't.
High-paying jobs and the resulting benefits like vacation homes, jewelry and gadgets are great, but at the end of the day, always remember why you work so hard.
Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, marketing and China
Why And How To Get Rid of ‘That Client’ Who Wastes Time (And Money)
Posted on January 29, 2013 by Linda Reyburn
Everyone knows that there’s a limit to giving away free products or services, but what if clients who pay are your biggest problem?
Profile of Headache Clients
There’s a long list. Clients who don’t pay on time, or in an inconvenient way. Clients who ask for everything and then are no-shows at a planned meeting. Clients who create impossible deadlines that don’t really matter. Clients who take hours of your time just talking and visiting, then bargain with you about every charge. Clients with attitude who use their connections as a bargaining chip, until you wish you’d never heard of the Senator/Executive/Bank Manager that they know. Clients who bully you into making changes you know won’t work, then blame you for it not working. Essentially, it’s a no-win relationship. They want everything, you get nothing worth having, like a profit margin. You keep them because they pay – eventually. (For an even more detailed list, go to Laura Spencer’s hilarious blogpost, “10 Types of Bad Clients and How to Avoid Them“!)
If you thought about the headaches for too long, you’d probably lose focus about why you want a small business in the first place. Have you ever thought that getting rid of these headache clients might give you more energy to really grow your business?
Good to Great
“Good is the enemy of great”, Jim Collins wrote in his best-seller. He pointed out a lot of areas in which tiny, incremental changes were made in mediocre public companies until they became great companies. The principles hold true no matter what business you’re in. Focus on the few things you can do best, get
the whole team on board (and get rid of those who don’t see the vision), and be okay with change lasting a long time.
One of the biggest enemies to small businesses is clients who pay money for ‘now’ bills, that end up costing you in the long run. Do you have to keep holding on to these paying clients? (Or in Collins’ words, “is the disease of ‘just being good’ incurable?”)
What Headache Clients Cost You
All you have to do is pick up the phone and hear that whine – the low, depressed tone – or the bark – on the other end of the line. It’s ‘That Client’. You fight to stay positive and stick to your resolutions (from the last time they called), but you end up agreeing to more work at a lower price than you’d charge other clients – because they badger you. They constantly remind you of what you owe them, how much they paid last time, or Who They Are. If you weren’t such a nice person, you’d tell them to go jump in the lake. They are not worth the fees. So – why don’t you?
How to Ditch Clients (Without a Lawsuit)
Part of the trouble is that this person could cause serious damage if let loose. You may not be able to refer them to someone who needs the money worse than you, like a young and eager college grad with massive student debts. The client has been with you a long time, and perhaps you’ve told them things you shouldn’t have.
First, do not tell them in an email what you really think. (By phone is okay but not advisable.) Information and a backup plan are your friends. Instead of growling and procrastinating, sit down and figure out their weak areas as if they were your competition. (In a way, they are – they’re costing you future business and future great clients just by the poison of their presence.)
Second, write out what you will say, such as:
1. I’m downsizing my business (only if you are);
2. The last time that we spoke, you indicated that you weren’t satisfied, and I understand;
3. I don’t have the resources to take care of your business the way that I should;
4. The economy is forcing me to raise prices (quote 200% higher than they’ve ever paid);
5. My consultant advised affiliation, so I am now exclusively working with those who refer me business;
6. You/one of your employees was inexcusably rude to my staff and I don’t tolerate abuse;
7. Your account has been past due/overdrawn for more than 30 days and I’m terminating the relationship (take it as a loss);
8. Inflation is forcing me to add on a charge for ‘x’ (gas, increased labor, specialization, airline tickets, rescheduling meetings);
9. You’re undercutting my prices by giving business to my competitor, so we either sign an exclusive contract or you can just work with my competitor; or
10. I no longer accept this form of payment (check, credit card, etc), it’s too costly.
Third, commit to your resolution with someone who is more annoyed with That Client than you are. A spouse or employee will do. You’ll be more afraid of jeopardizing that good relationship than what That Client will say to you, and the bigger fear is your best motivator.
Find a Replacement
Unless That Client is replaced with better clients, you’ll have Yellers’ Remorse and take on that client again once bills come due.
Make a replacement plan before you call That Client. Find out who your best clients are, and try to clone them. Either narrow down to a specific demographic, or get in touch with their friends. Craft an email campaign around a holiday or your business anniversary, and only send it to your “A-list” clients, with an exclusive invite to a classy restaurant or a service giveaway at your company. Send a gift basket to your best clients for being such great customers, just to let them know they’re appreciated, with no marketing tag added. If you’ve never done that before, they’ll probably either want you to do more with them, or send along a friend.
Carpe Diem! (“Seize the Day”) Again in the words of Jim Collins, “It’s deeply satisfying to climb into the boat, like Lewis and Clark, and head west, saying, “We don’t know what we’ll find when we get there, but we’ll be sure to let you know when we get back”. Did you really get into your own business so you could be bossed around? Surely not.
About Linda Reyburn
Linda currently works as a freelance writer and researcher, having previously spent 10 years in office administration, from attorneys to accountants to international marketers. She enjoys helping small businesses run more efficiently.
3 Bad Small Business Clients And When To Fire Them
Posted: 07/28/11 12:54 PM ET
"What are you, stupid? I just explained that to you." No, not a line from a novel about a bad boyfriend, but a real live comment a client (or former client, I should tell you from the onset) said to me when I respectfully questioned his reasoning on a marketing message he was using in his small business branding. Admittedly, this is an extreme example of bad behavior, but every entrepreneur has faced a problem client at one time or another. These challenging customers can drain your energy, suck up your time and even sap your enthusiasm for running your small business.
It really comes down to the classic 80/20 rule: 20 percent of your clients will cause you 80 percent of the grief in your business. Smart small business owners know how to identify trouble clients right away, head off problems early on and, when necessary, cut their losses.
Here are just three types of bad clients a small business may want to send packing:
The Constant Complainer: These are the clients for whom you move heaven and earth, and they still aren't happy. You deliver on budget, on time and on what you promised, but they always seem to find something wrong. Worse yet, they never acknowledge you for what you have produced or the professional way with which you provide it. If this sounds familiar, there may be a gap between what you can deliver and their expectations.
Begin by sitting down and speaking with them about their exact expectations and where they don't feel you are living up to them. If, in the course of the conversation, you discover that their expectations are unrealistic, or something you can't deliver on, be straight. Once you know the criteria they are measuring you against, perform to it.
If you do meet their expectations, and they are still unsatisfied -- cut your losses and let them go. Try saying: "We've worked together for a while now and you still seem to be dissatisfied with the job I'm doing for you. I've tried my best to meet your expectations, but at this point, I think maybe we're not a good match and you might be happier working with someone else."
The Nickel and Dimer: Have you noticed that, while some clients settle on a fair rate with you and then move on to the business of working together, others constantly bring up your pricing and question each charge, no matter how small?
It's one thing to negotiate a discounted rate for a client who brings in big business, but it's another to be nickeled and dimed to death.
In my experience consulting with small businesses, it's often the case that the clients who pay the lowest rate are the ones who are the biggest pain and the least loyal. If you're in a constant battle over cash, don't over-explain or argue your position, just simply and politely tell the person, "I'm sorry, but I just can't do what you want for that price."
A variation on this type is The Late Payer. All clients may from time to time be slow in paying, but customers who repeatedly pay late, promise to send you a check by a certain time and don't or outright stiff you -- are not worth keeping. Professionals get paid for the work they do, period.
The My Way Or The Highway: Nothing is more frustrating than being hired to help your client achieve their objectives and having your well-meaning and professional advice ignored time and time again. Clients who insist on doing things their way, don't take your suggestions to heart, argue with you at every turn and then complain when they don't get the results they want are bad clients. Try saying: "I'm feeling frustrated that you don't seem to take to heart the professional advice you are paying me to give you, and I think it might be better for you to hire someone whose opinion and expertise you feel more comfortable with."
No small business will be without challenging clients, but it's important to separate the occasional misunderstandings and missteps with essentially good clients from the bad ones. While it's never fun to fire a client, holding on to bad ones can carry a huge opportunity cost. The emotional, physical, mental and even spiritual drain of a bad client can keep you from having the small business you want.
The next time you see a client's name pop up on your PDA or e-mail inbox and find yourself thinking, "Uh oh, what's wrong now?" it might be time to tell the truth and take the risk to get rid of them. Who knows, you might just take back enough of your time and energy to create some great new professional relationships.
Have you fired a bad client recently? How did it go?
Karen Leland is a freelance journalist, best-selling author and president of Sterling Marketing Group where she helps businesses negotiate the wired world of today's media landscape -- social and otherwise. For questions or comments, please contact her at firstname.lastname@example.org.
Fire Your Bad Clients
Trying to improve your company's bottom line? If profitability is your goal, it may be time to cut some dead weight.
BY PAM NEWMAN | January 16, 2007
Got a few bad-egg clients? Maybe you should fire them. That's right-I said "Fire them." Cut them loose. Give them the heave ho. Tell them goodbye and never look back.
I know you think I'm crazy-why would anyone say goodbye to hot prospects-but when you realize the positive impact it could have on your bottom line, you'll wonder why it took you so long!
As business owners, we often feel that we should take on every client who comes calling. But that's not always the best choice: Just because someone comes to you who's interested in a business relationship doesn't mean they're going to be a good client. In order to make your business as profitable as possible, you really need to assess your client relationships and ensure that they're win-win opportunities for you.
This is where the 80/20 rule comes into play: You should be focusing your time on the clients who are most profitable and who fit within your reason for existence. And you need to learn to say no to a potential or existing client when they don't fit within your business model. Most recommendations are that you should fire the bottom 10% of clients (in terms of profitability) each year so you can focus on your more profitable clients with your limited time.
Not sure this is the best idea for your business? Here are five types of clients you need to fire who are causing your business to be less profitable:
Focus drainers. In order to make the most of your time, you need to focus on your core competencies. Clients who don't fit within your targeted service or product focus may be costing you money. Have you started offering products and services that aren't a fit with your core business strategy just to keep some clients happy? If that's the case, perhaps you need to reassess whether that's a smart business move.
Low-profitability clients. If you're not generating money-or much money-from some of your customers, then you're on the losing end of a bad relationship. You only have so many hours in the day to work on your business, so make them count. Only work with clients with whom you'll enjoy a good return on your invested time.
Complainers. Ever feel drained at the end of the day because you had to deal with complaining clients who always want something for nothing? It's not worth it! It's time to say good riddance and work with those people who truly appreciate what you do and are willing to pay for what you provide without complaining!
"Something for nothing" clients. Get rid of those customers who always want something but don't want to pay for it. They don't value what you have to offer, and you constantly have to justify your prices. If they don't value you now, they never will, and you'll constantly be justifying the work you do and the prices you charge. Only work with those people who understand the value you have to offer and will appreciate it.
Time wasters. If you're spending time with clients who waste your time because they're never ready or aren't willing to listen to your advice, run now. These will be the ones that will constantly assume more of your time without providing anything in return and then will wonder why they're paying you. You can't help those who don't help themselves.
As you take a long, hard look at your goals for the year, make sure that one of them is to run your business more efficiently, especially when it comes to managing your money. One of the ways you can do that is to more effectively manage your clients. So look at your customer profitability for 2006, and decide which clients you're going to fire to improve your 2007. It'll be one of the smartest moves you make