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This post was last updated 4 weeks ago by Yusuf Odukoya.
A few weeks ago, I wrote an article on how to deal with difficult clients, and it was mentioned in the concluding part of the article that if everything fails, firing the client becomes the only viable option.
As an enthusiastic and highly motivated business owner, it’s quite hard to imagine that a time would come when you would have no other choice than to walk out on a client. But it happens, and it will eventually happen to you, too. Nonetheless, it is important that you know when and how to do this professionally.
At the beginning of your journey as a small business owner, you are most likely to be less choosy, after all, every penny counts — even if the client isn’t a big spender. It is a phase when you’re more concerned about getting experience, recommendations, and building a reputation for yourself and your business. But as your business grows and you get more established, you would start to realize the need to determine whether a particular client is worth your time or whether you should show them the red card (or fire them).
Knowing whether or not a business relationship with a client would be beneficial to you and your business is a very important skill as a small business owner, but how do you know when to actually fire a client that is toxic to your business?
You’ve tolerated enough from this client already and seen other red flags, but you just chose to let it slide, perhaps for fear of losing another client, or maybe a normally happy and satisfied client had just turned into a thorn in your flesh, and impossible to please—but you can’t seem to figure out when this struggle would end. Does that sound familiar to you? Read on.
When it is best to fire a Client
Here are a few common scenarios where “firing” a customer may be inevitable if growing your business is what matters to you.
1. Working with the client results in loss of money or low-profit margins.
The fact that a certain customer or client has been with you since the earlier days of your business doesn’t mean they are still a good fit for your business today. If you find out that your less-paying client is taking more of your time and money, while the higher-paying customers are demanding way lesser, you may need to part ways. In some cases, low-budget clients cause the most problems. Can you relate to that?
What to do:
Considering the rate of inflation, growing a business would require that you raise your prices from time to time. Give the problematic client a notice prior to the rate change, stating the date on which the new rates would take effect. They might decide that, well, your new rates are too high and move on without you having to fire them or they might just accept the price increase anyways, which means you can keep working with them. But watch out for number 2 👇🏽;
2. The customer consistently makes unreasonable demands.
As your experience grows, you would be able to tell right away when a customer or client is going to be a thorn in the flesh.
A client may start mounting unnecessary pressure on you by always wanting work to be redone and on time. Such clients may never be satisfied, no matter what you do. If you find yourself in such a situation, it’s time to fix the problem once and for all. This is why it’s never a bad idea to have a cancellation clause in your Terms of Service.
Having a well-written cancellation clause in your Terms of Service (or ToS) document would allow you to legally exit any project as long as the terms highlighted in the cancellation clause are met.
What to do:
Have a sincere discussion with the client. Focus your discussion on how they want the service to be delivered and what they are looking for. Then put all those details in a written form and make the client to append their signature before commencing their project.
Make sure to have specified the scope of work and clarify that additional changes or revisions may incur additional fees. That way, the customer might just become aware of their demands and keep them in check.
If, however, the customer refuses the new terms, you can walk away from the relationship knowing fully well that you have tried your utmost best.
3. The customer needs too much attention.
First, it’s important to admit that personalized customer service is probably one of the main reasons the customer was attracted to you in the first place, so you can’t really blame the client for wanting your attention. However, as your business grows, you’ll have less time to work with every client one-on-one.
So, if an overly demanding client takes up so much of your time that it affects how you treat your other customers, then it may be time to part ways with such a client.
Here’s what to do:
Without getting too personal, suggest the customer may want to start looking for another company to handle their business. Try to be honest about it and make them understand that you’ve enjoyed your relationship with them. Your business is growing and you can no longer spend as much time with them as they need.
4. The customer pays late or does not pay at all.
There could be a variety of reasons why customers may be unable to get payments across to you on time — Personal, medical, family, or other unforeseen circumstances could cause some cash flow issues to your client. You can devise a solution to keep working with them until their financial situation improves. Such as requiring Cash On Delivery (or COD), setting up an installment payment plan, or asking for a fraction of their bill upfront as a deposit for starting their work.
What to do:
Usually, a good customer with payment issues would always wish to pay, but they might be going through a tough period financially.
On the other hand, there would be defaulters who deliberately avoid your invoice reminders, calls, and emails. These types of clients are just plain bad for business. You should immediately cease doing business with such clients and withhold any scheduled future orders or services. You can also decide whether or not to involve the small claims court.
If it involves huge amounts of money you can’t let go of, you may want to involve a debt collector. In this scenario, it will become obvious to the client that the relationship has ended.
5. The customer is consistently rude to your employees.
There are a few cases when a customer is cool working with you but the opposite is the case when working with your employees. If you let this continue, then the client may create a toxic environment for your employees.
If you’ve worked so hard to build and sustain a company culture where workers are happy and productive, why let an “ill-mannered” customer tarnish your company’s reputation as a good place to work. Reassure your employees of your support, and let them know that you know when a customer unnecessarily causes a problem.
What to do:
Have a conversation with all the parties involved to make sure your employees and the customer feel heard. Then try to come to a mutually agreeable resolution.
Sometimes, the solution is as simple as swapping the employee who works with the client. But if the customer clashes with the replacement employee too, it may be time to cut your losses and let the client understand that you do not think it is working out.
A piece of warning: Keep an eye out for online reviews (Google My Business, Yelp, Facebook Pages, Instagram, and Other Directory Listing Websites), just in case the jilted customer decides to cause more damage online.
Firing a client is never easy
Firing a client or customer is never easy. But by trying to resolve the situation first, you can be assured you gave the customer the benefit of doubt. If, however, they don’t adjust, then it is safe to conclude that the decision to separate is nothing but a mutual one.