Which Clients Should You Fire?
July 28, 2015
Sometimes You Just Have to Fire A Client
This article is the second in a series, which started with “Sometimes You Just Have to Fire A Client.” The five tips we covered in that article were: (1) Consider Your Opportunity Costs; (2) Make a Business Decision; (3) Show, Don’t Just Tell, Your Client You Value Their Relationship With Your Business; (4) Don’t Be a “Bad Breaker-Upper”; and (5) Make Room for Reconciliation. We also talked about using the Pareto Principle to guide your decision-making process. This article expand on that, explaining a process you can use–and adapt to your circumstances and needs–when considering firing a client.
Two Important Categories of Client
There are two particularly important categories of client who need to be considered when deciding which clients to fire. The first category is the 20% of clients who cause approx. 80% of your headaches. Who are your “problem” clients–the ones who consume more resources than any of your other clients, who have the most complaints, or require the most hand-holding? Using these kinds of metrics, and documenting your use of these metrics, to define your “problem” clients is important to help you avoid even the appearance of potentially illegal discrimination.
From a legal perspective, it is important to make sure that your criteria for determining which clients fall into the “Problem” Client category are not discriminatory. You should not consider someone a “problem” client simply because they are a member of a protected class. Title VII of the Civil Rights Act of 1964 (Title VII) makes it illegal to discriminate against someone on the basis of race, color, religion, national origin, or sex. So, avoid considerations of race, color, religion, national origin, or sex when determining which of your clients is a “problem” client.
The second category is the 20% of clients who generate approx. 80% of your profits. Clearly, this is a group of clients you don’t want to piss off. Cutting ties with them will hurt your bottom line. So, you need to keep an eye on these folks, but understand that some of the people in this category of client may also be in the first category, defined above. The following diagram illustrates the overlap of the first and second categories.
Lead, Follow, or Get Out of the Way
My whole approach to life–especially when it comes to other people–can basically be summed up by the maxim: “Lead, follow, or get out of the way.” This is especially true in traffic, but I digress…
Applying this maxim to the decision of whether to fire a client is fairly straightforward. Either a client will follow where you lead them (Lead; keep the client), or you may need to follow them for a time to better understand their needs and serve them better (Follow; improve the relationship with the client), or you need to get out of each other’s ways (Get Out of the Way; fire the client). Identify those clients who generate a large part of your business’s profits, yet who cause you a lot of headaches, and work on improving your relationship with them. In this context, “improving” the relationship doesn’t just mean generating good will, although that may be part of what you need to do; what we’re really talking about, here, is making your relationship more efficient and more effective. Using or updating a written agreement can be a great way to do this.
Make sure your communication with your client is clear. Tell them what you need from them, what they should expect to get out of your relationship, what your ultimate mutual goals are, and what reasonable expectations there should be regarding deadlines. If the client’s expectations or goals are incompatible with your own, that’s a good sign that you need to get out of each other’s ways. Remember the five tips from the previous article in this series, which were restated at the beginning of this article.
Finally, if you are struggling with a client relationship, periodically updating the written contract which governs that relationship can help smooth out issues by [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][re]setting expectations, clarifying ambiguous aspects of your relationship, and establish a formal set of rules for how each party will perform their obligations under the terms of your agreement. If you need a business lawyer to help you create and implement a contract like this, please contact Executive Legal Professionals. A good business lawyer can help you use contracts in your business to protect and improve your client relationships, reduce the risk of litigation, and improve your over-all long-term profitability.
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