I am going to suggest something that may make you squirm a bit: Maybe that pain-in-the-butt client needs to go—for good. I know the economy has taken a turn for the worse. I know everybody is in business to make more money. I know firing a client means less revenue—or does it?
Too many companies operate with the mindset that every client is an important client, and therefore, cannot be spared. But these companies frequently keep time-sucking, unprofitable clients at the expense of getting new ones. They spend all their time servicing small clients and have no time or resources left for new business development. And without new business, a company is not scalable. Growth is halted. Employees are unhappy. Fail.
The blessing of too many clients can become a curse if you continually sign the wrong clients. By “wrong” I mean unprofitable. Here are some easy ways to discover the growth-killing clients that may need to be shown the door:
1. Evaluate the profitability of each client. Compare revenue to the time and resources put into managing the client. Do it for every client, and you will begin to see that some clients are much more attractive than others.
2. Name the clients you love working with. What traits do your favorite clients share? Why are they easier to manage? Where did you find these clients? If you have clients you don’t love, why? Are they time-suckers or innovation killers? What do your killer clients all have in common? Don’t be afraid to define your core customer with very specific criteria.
3. Define the mission and core attributes of your company. Are you price focused or quality focused? Are you achieving the mission of your company? If not, it may be because you are taking on every (unqualified) customer who walks in the door. Which clients are helping you achieve this mission and how can you find more of them?
4. Root out potential exposures. Some clients could actually cost you money through legal issues or unethical business practices. These should probably be the first clients to kick to the curb.
5. Weight the percentages. What percentage of your revenue is coming from what percentage of your clients? If 90% of your revenue is coming from one or two clients, then you could be in big trouble if one of those clients goes away. Avoid this exposure by hunting for new clients in complementary or vertical markets.
If and when you decide to axe a client or two, be professional and non-confrontational. Getting into he-said, she-said arguments or making things personal is just unnecessary. Simply thank them for their business and tell them that you have reached a crossroads where for business reasons, it is in both your best interests to part ways. Sometimes firing a client isn’t even necessary if you have a stern conversation and set new expectations on working together.
Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or firstname.lastname@example.org .