When is it Time to Fire a Client or Customer?

Many times a small business owner is so wrapped up in running the business and also running after new business that he or she doesn’t realize that they would be better off firing the clients who are making them crazy. Now that is not to say anytime a client starts getting on your nerves you should jump at the chance to get rid of them. As a small business coach, I have seen countless times the angst and frustration business owners go through when they are being treated poorly again and again by one of their clients.

More often than not, this one client is causing them to lose focus of their goals to be productive and increase profitability in other areas because they are so wrapped up in that one client who is either making unreasonable requests, paying late or asking for ridiculous pricing and expedited deadlines.

How to Know if it’s Time to Fire a Client

There are many questions you can ask yourself when trying to decide if it is time to fire a client? I boil it down to just two questions:

1. Would you be upset or secretly relieved if this client decided to take their business elsewhere?
2. Knowing what you know today, would you hire this client again?

In his book Good to Great, author Jim Collins poses these same questions when it comes to deciding on whether an employee should be on your “bus” or not. We have found these to be applicable to customers as well.

While these questions seem very simple and straightforward on the surface, there are lots of factors that can impact how you answer them. For instance, one of our small business clients was recently feeling very uncomfortable with not being paid on a timely basis from one of his clients, to the point where the debt had reached six figures. It was pretty clear that if this company defaulted, it would leave our client in a pretty tough spot. Was it time to cut their losses and sue their customer?

Before pulling the trigger on a lawsuit, we advised this small business owner to call his client and make an appointment to go in and have a face-to-face sit down. There is so much to be gained from sitting down with someone (especially with someone who owes you money).

This customer was responsive, (to his credit he recognized that he did owe our client the money and he never dodged telephone calls) and was willing to have the sit down meeting to talk.

Prior to that meeting, we had a meeting with our client and explained the reality that his customer had put him in a situation where he had asked him to be his creditor and his bank. With that in mind we said he should come into this meeting with his banker’s hat on and ask for financial statements and to access the necessary data on why he should keep him on as a customer.

The objective was to try and come out of this meeting with an agreement of what his customer had to do. In the pre meetings with our client, we had to role play this several times to get him ready for what questions he had to ask and discuss and receive the financial info to make the right decision and develop a course of action.

“I was surprised that this guy gave me his financials,” was this client’s reaction after the meeting. “I came out of the meeting with a payment agreement which was workable to both of us. My customer made a case for his growth spurts and why cash was tight with government related contracts. I had a tour of the plant during my visit and could see the activity and what was going on which confirmed what he was telling me.”

Within a period of six months our client’s customer had made good on the payment plan to get caught up while continuing to do business on a day-to-day basis. There was a blip along the way and they sat down and talked again to make adjustments on the pay down. The only bad thing about this customer was that he wasn’t paying. Otherwise he was an ideal customer for our client and proved to be worth salvaging and growing with. What had started out as a good reason to fire the client was resolved with a little coaching and a plan to work together to get payment and future resolution.

What if a customer makes you cry? That would seem like a pretty obvious one to fire wouldn’t it? Maybe to someone outside the business, but when you’re in the middle of the situation, it’s easy to rationalize staying in the relationship. This came up recently when I met a business owner with some colleagues over beers one night. I simply asked if she had ever fired a client before, and within five minutes she was fighting back tears.

Now don’t get me wrong, most of our clients have cried with us at one point or another during the relationship, but usually it happens as we dig a little further into things. I asked this business owner the two questions outlined above. Not surprisingly, she said she would be very relieved if this customer took his business elsewhere and that knowing what she knows today she would never take this customer’s business again.

The problem is she was getting stuck in the “how.” “How” do I fire this client without him suing me or saying bad things about our business? “How” do I take on this man who is a bit of a bully? The “how” questions were numerous. She didn’t know where to start.

Like most small business owners, she didn’t want to have an unsatisfied customer and she wanted to complete the project they had agreed to. But, it became obvious during our discussions that her customer had changed the agreement and was adding things to the project that made the work not only frustrating but also unprofitable. By the time we finished some role playing for what the termination would sound like she wanted me to go with her to fire this client since it “sounded so good when I said it!”

When It’s Time to Fire a Client, It’s Essential

Firing clients and firing employees are almost never an easy thing to do, but they are an essential part of running a successful business. Just like plants need to be pruned to stay healthy and grow, your business needs to be pruned of clients and employees that are holding you and your company back.

Fired Photo via Shutterstock

This article, "When is it Time to Fire a Client or Customer?" was first published on Small Business Trends