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Building and running a successful business requires a steady flow of revenue and new customers. This is especially true in the beginning stages of building a business. Without a solid client base, you run the risk of financial trouble or drying up your capital reserves. For this reason, entrepreneurs will often bend over backwards for their clients to make sure they are happy.
Most people assume that having more clients is always better. The reality is that some clients may actually be bad for the well-being of your business. In some cases, you might not even realize that some clients are actually costing you money. Having a roster of bad clients can be a financial drain on your business, cause stress to your team and take time away from other valuable tasks like sales.
While it may seem counterintuitive, it may benefit your business to fire certain clients from time to time. You don’t want to develop a reputation for casting clients aside, so it’s important to take the right, professional approach when firing a client.
Related: 6 Signs It’s Time to Fire a Client
1. Identify bad clients
Sometimes, it’s easy to spot a bad client. Signs of an obvious bad client include those that are abusive to your team, constantly dispute invoices, or create legal issues. However, there are other factors to consider when deciding whether to continue working with certain clients.
Revenue per client hour: A great place to start is by understanding how much effort you are exhausting with each client compared to the revenue they generate. This can be a good guide to identify where you might be exhausting your resources for little return. Keep in mind that even high-value clients can be bad clients, but this metric should help you quantify if trouble clients are worth the headache. In some cases, the money might be worth the hassle.
Unclear scope of work: We’ve all worked with a client who always wants to add “one more thing” to a project without adjusting the timeline or budget. This is fine on occasion, but frequent, last-minute changes can be a sign of a bad client.
Payment issues: Identify which clients tend to make late payments, dispute invoices or attempt to negotiate lower fees after the work is completed.
Boundary issues and unrealistic demands: Some clients expect high-quality work in an unreasonably short timeframe. Most clients are demanding. Bad clients will get upset when you try to explain that their request isn’t feasible, require 24/7 responses from your tea, or make requests late on a Friday afternoon and expect you to work over the weekend.
Too much or too little communication: Some clients don’t respond timely, causing major delays in important feedback or approvals. Others want to be too involved and micromanage the entire process. The extreme ends of this spectrum are a red flag when it comes to spotting bad clients.
2. Complete your obligations and decline future work
The best option when firing a client is to finish the task you have promised to complete. This shows that you are willing to honor your commitments and also provides a clear exit for your team. When the client requests additional work, you can simply let them know that you are not able to take additional work from them at this time.
3. Renegotiate your contract
In some cases, you can remedy the situation by updating your contract and renewing expectations. For example, if the client always wants expedited work, you can outline the fees associated with faster delivery so there is no confusion. This approach can help minimize bad behavior like scope creep and payment terms from an otherwise good client.
4. Adjust your fees
Sometimes, simply raising your rates is a great way to deter a bad client, especially if they are sticklers for the budget. However, be cautious with this approach. By raising the rates, the client might expect even more in return. Be clear on what’s included and excluded in the new rate. It’s important to note that some clients may not be bothered by the higher fees, but at least you’ll be compensated for your additional suffering.
Related: 3 Red Flags You Have a Nightmare Client — and How to Cut Ties
5. Simply fire them
This may be a tough message to deliver, but sometimes it’s best to be direct. This option is especially important if they are causing harm to your business, such as being abusive toward your team. To soften the blow, it’s best to offer a referral to another company and provide some sort of notice to give them time to transition their work.
Firing a client is no fun for any business owner, but keeping bad clients around can create a number of financial, legal and operational problems. Most importantly, remain professional throughout the process and try not to burn any bridges. You never know if you might cross paths with this client again, especially if you work in a niche industry.
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Nicholas Leighton