When you’re starting a business, it’s hard to imagine a time when you would actually turn away business or find yourself in a situation where firing a client is required. In the beginning, of course, beggars can’t be choosers, and even if the client isn’t a big spender, every penny counts. Plus, at the beginning, you’re more concerned about getting experience and building your reputation, in your industry and community. But eventually, as you get more established, there will likely be a situation when you have to decide whether a particular client is worth the hassle or whether you should cut them loose.
In the beginning, of course, beggars can’t be choosers, and even if the client isn’t a big spender, every penny counts. Plus, at the beginning, you’re more concerned about getting experience and building your reputation, in your industry and community. But eventually, as you get more established, there will likely be a situation when you have to decide whether a particular client is worth the hassle or whether you should cut them loose.
How do you know when a client is actually detrimental to your business?
Perhaps you’ve put up with a lot from this client already and seen warning signs, but chose to muddle through in case some of your other clients leave. Maybe a normally pleasant client has turned into a raging monster, impossible to please—and you can’t figure out if the hassle is temporary or not. Sound familiar?
When Firing a Client is Best
Here are a few common situations where “firing” a customer may be unavoidable if you want to continue growing your business.
1. The customer requires too much hand-holding.
It’s important to remember that personalized customer service is probably one of the main reasons you have the customer in the first place, so be careful not to get upset with customers for wanting your attention. But as your business grows, you’ll have less time to work with every client one-on-one. Try working in tandem with a trusted employee on the high-maintenance client, then eventually handing the client off to that person. However, if that demanding client takes up so much of your time it affects how you treat your other customers, it may be time to suggest “breaking up.”
What to say:
Without burning your bridges, kindly suggest the customer may want to start looking for another company in your industry to handle their business. Be honest and explain while you’ve enjoyed working with them, your business is growing and you can no longer spend as much time with them as they need—and deserve.
2. You’re losing money working with this customer.
Maybe a certain customer has been with you since the first day you got your business license. But that doesn’t mean a customer you’ve had since you started is a good fit for your business today. If you find other, higher-paying customers are demanding more of your efforts, while your smaller clients are taking up the same amount of time but paying less, you may need to part ways.
What to say:
It’s perfectly acceptable and understandable that a growing business eventually needs to raise prices. Give the lower-paying customer advanced warning about the rate change. They might decide the prices are too high and move on without you having to fire them. They might accept the price increase, which means you can keep working with them. Final scenario: Offer to keep prices the same but cut back on the services provided or product customization so the client takes less of your time and no longer hurts your profit margins.
3. The customer consistently makes unreasonable demands.
You can usually tell right away when a customer or client is going to be a lot of work, and want things you can’t provide. It’s always a good idea to set a trial period when working with a new client (such as 60 or 90 days) so either of you can exit the agreement at the end of that time. But if your trial period has expired and the client starts placing constant rush orders or always wants work redone, it’s time to fix the problem.
What to say:
Have an honest discussion with the client, focusing on how you want to provide the service they expect. Then put all details of future projects in writing and get the client’s sign-off before starting work. Specify the scope of work and clarify that there are additional charges for additional work. The customer might realize they’re making too many demands. Even if the customer refuses the new terms, you can walk away from the relationship knowing you tried.
4. The customer is rude to employees.
Sometimes a customer is fine working with you, but creates a negative work environment when working with your employees. If you’ve worked hard to build a company culture where workers are happy and productive, don’t let a “bad-seed” customer spoil your business’s reputation as a good place to work. Make sure your employees know you support them, and that you want to know when a customer causes a problem.
What to say:
Talk to all parties involved to make sure your employees and the customer feel heard. Try to come to a mutually agreeable resolution. Sometimes, the solution is as simple as changing the employee who works with this client. If the customer clashes with the replacement employee too, it may be time to cut your losses and tell the customer you don’t think it’s working out. Warning: Keep an eye out for online reviews in case the jilted customer decides to lash out online.
5. The customer pays late, or not at all.
Customers could have a variety of reasons for not getting payments to you on time. It could be your invoices are confusing or they are simply having cash flow issues. With late payers, you can offer solutions to keep working with them until their financial situation is solved, such as requiring COD, setting up a payment plan or asking for half the money upfront as a deposit before starting work.
What to say:
Usually, a customer with payment issues wants to pay, but their current circumstances prevent that. You can work with them. However, the nonpayers who avoid your calls and emails are just plain bad for business. Immediately stop doing business with those customers and withhold any scheduled future orders or services. Then, decide whether the amount owed warrants hiring a collection service or making a trip to small claims court. In this scenario, it will be obvious to the client the relationship has ended; however, you should follow up with a letter in case the courts want documentation.
Breaking Up is Hard to Do
Firing a client or customer is never easy. By trying to resolve the situation first, you can be assured you gave the customer a chance to mend their ways. If they don’t do so, the decision to separate is really a mutual one.