Many companies have difficulties justifying the act of firing clients, as the general belief is that losing clients is bad. However, there is nuance to this issue, as bad clients do exist and can technically cost you money. If clients can fire you, why can’t you fire them?
The heart of this issue can be boiled down to the Pareto Principle, which states that 80% of the effects derive from 20% of the causes. To apply this 80/20 connection to business management, 80% of your sales come from 20% of your clients, and 80% of your headaches come from 20% of your clients.
So how do you determine when a client needs to be fired in order to reduce the negative effects they are
having on your organization? As a way to help inform this weighty decision, we want to provide you with three signs to look out for when considering the firing of one of your clients.
All relationships, whether professional or personal are built and developed on a foundation of respect. I always found it ironic that many of my friends wouldn’t tolerate dating somebody who was disrespectful to them yet they would take constant abuse from their clients. They’re really not that different.
One clear sign of disrespect is when the client is constantly undermining you and your team members and questioning a majority of the work that you deliver. This continued lack of regard for work that is both time and resource intensive can become toxic and bleed over into internal office relationships. The client might conduct themselves in a way that emphasizes their status as overly dominant, and look down upon you and your company as subordinates. This type of behavior is likely not worth dealing with as the headaches it will cause are significant and damaging to productivity and overall work satisfaction.
Respect, or lack thereof can also manifest itself in your views of the client in question. Perhaps their lax ethics or poor treatment of employees just don’t sit right with you, or they treat their own customers with contempt. You should feel no obligation to continue a relationship through this type of behavior, as there is no amount of money that justifies maintaining your efforts when a clear lack of respect exists.
2.) Return On Investment (ROI)
To put it simply, in order for any business to gain success you need to earn more money than you spend. I assign an ROI to each customer. If my average customer yields me $100 per hour of work and Client B (who is difficult to work with), only yields me $25 per hour, it’s probably time to fire them.
Some clients demand extra attention, which can be undeserved and resource heavy. We all know that time is money, and if a client is expecting more time than they are paying you for, it doesn’t make much sense to continue the relationship.
One of my biggest concerns has been the happiness of my employees and I also measure my ROI on them. In my experience, it’s been amazing to see the trickle down effect when I’ve had a bad customer. The employees felt beaten down so she lost confidence, stopped working as hard and complained to others in the office which negatively influenced morale. When I fired a tough customer, things changed quickly because it signaled to my employees, “I have your back. I’m not going to allow your time to be wasted or for you to be talked to that way.”
There is always an exception to the rule. Some clients present the potential for a long-term strategy that is profitable. In fact, some of my best clients took 6-12 months before my time invested in them really paid off. If this significant consumption of time is only temporary, with the strong possibility of becoming more lucrative in the future, then it could very well be worth the short-term resources spent ensuring their satisfaction.
The success of all relationships can mostly be attributed to good communication. It is important that a line of communication is established in order to discuss updates, questions at hand, or any relevant news. Similarly, it is important that your client knows that they can reach you with suggestions or guidance they might have, as well as feedback.
One of my clients recently complimented our recruiting firm on the great job that we did filling his open roles. I thanked him but also let him know that a huge reason for our success was his ability to communicate. If we sent him a good candidate, he told us why. If a candidate didn’t quite hit the mark, he explained what they were lacking. The client stayed true to his word on everything that he told us he’d do, which has made our relationship a huge win-win.
If a client is unwilling to work towards regular communication, it is hard to imagine this relationship remaining successful. Your team won’t be able to deliver in a way that is satisfactory or on par with how you typically operate, and larger issues are bound to arise. It is always worth addressing these types of communication based dilemmas before firing a client, but it is important to be aware of them before they escalate.
At the end of the day these factors should always be thoroughly considered when you feel as though a client is costing more than they are worth. Every individual client relationship is nuanced and requires a slightly different approach, but without mutual respect, a worthwhile ROI, and clear communication, it becomes very difficult to justify the toll that a questionable client taking on you and your organization.