All money, ain’t good money…
When you find a client who is willing and able to pay on time, typically, you try to hold onto them. But occasionally, you come across a client whose money isn’t worth the headache that accompanies it.
For example, you may have a client who treats your team like dirt. Or, a client who doesn’t understand boundaries and is constantly making unreasonable requests. Or maybe you have a client who is unresponsive, which is holding up your workflow and taking time from other clients.
While they may be paying your invoices on time, difficult clients will end up costing you in the long run. Whether they’re damaging team morale, or draining time and energy from important projects, learn how to recognize difficult clients and fire them before they cause too much damage. Here’s how.
Why fire difficult clients?
There’s a video on YouTube of Magic Johnson talking business with Maverick Carter. In the video, Magic talks about how he often says no to people who are interested in partnering for ‘smaller’ deals. The reason? It takes the same amount of time to make $1 million as it does to make $100 million. So he would rather save his time, energy, and resources for the next $100 million deal. This is an example of opportunity cost.
Opportunity cost is an economics concept that measures the value of an opportunity in relation to the other opportunities that one must give up in order to pursue it. In other words, when you devote time, money and energy to one opportunity, you are taking away from your ability to pursue other opportunities. So, if you’re not careful, one opportunity could end up costing you a better one.
What does this have to do with firing difficult clients you ask?
Everyday you delay firing clients that cause headaches for your business, you’re missing out on better opportunities. There are opportunities for growth out there waiting for you. But you can’t find them or (even worse) you’re turning them away because you’re stuck with a client you can’t stand working with. When viewed from this perspective, it’s easy to see why difficult clients aren’t worth the hassle even if they’re paying.
When should I fire a client?
This is a question only you can answer. Again, firing difficult clients is important because it frees you up to focus on better opportunities. With that in mind, you have to ask yourself — what opportunities am I missing out on by continuing to work with this client? And would my business be better served by pursuing those opportunities?
When answering these questions, be practical. The more concrete the alternatives are, the more likely it is that you would be better off moving on.
For example, let’s imagine you have potential clients blowing up your phone day and night. But, you’re turning them down because you don’t have time. This sounds like a good opportunity to get rid of your problem clients and take on some new ones you may actually enjoy working with. On the flip side, if you’re not sure you’ll be able to quickly replace a difficult client and you NEED the revenue, maybe you should hold off on firing them.
At the end of the day, you have to weigh what your business needs now against what you want or envision for your business in the future. Then decide which you are more willing to sacrifice (income now or future happiness). This can be a difficult decision to make. So don’t hesitate to reach out to someone you trust for advice to see if your making the decision based on emotion, or what’s right for your business.
How to fire a client
Let’s say you’ve thought about it, and come to the conclusion that you’re better off letting a client go. How should you do it? Here are a few things to keep in mind.
First and foremost, make sure that firing your client doesn’t violate any contractual obligations. By firing a difficult client you are hoping to get rid of a problem, not create one. And that’s exactly what you’ll be doing if you terminate your relationship with a client in violation of an existing contract. So before firing a client, review your existing agreement(s) with them.
Pay particular attention to the term (i.e. length) of the agreement and any specific circumstances under which it may be terminated early. Many service contracts only allow for early termination with advanced notice, or if one party doesn’t follow through on certain obligations. Be careful not to violate such terms if they are in your agreement.
Second, put your ego to the side. No doubt, there’s something satisfying about firing a client who’s been causing problems. But this isn’t about personal satisfaction. It’s about doing what’s best for your business. Remember, even if you’re not working with them, the client can still cause headaches (e.g. negative reviews, refund/chargeback requests, etc.). So no matter how the client reacts to your decision to fire them, keep it professional and polite. Avoid the urge to air your personal grievances or settle the score. Remind yourself that getting the rid of this client is the victory.
Finally, document the decision in writing. In my experience, if the relationship isn’t working for you, it probably isn’t working for the client either. Most of the time they will understand and happily accept that it is time to part way. However, if you’re unlucky enough to be dealing with someone who needs revenge for every perceived slight, the road ahead may be rough. Providing the client with a letter documenting why you’re firing them and what will happen next can help protect you in the event that your former client attempts to slander or sue your business down the road.
Tip for next time: Make firing clients painless
Not to quote Drake but chances are ‘if you’re reading, this it’s too late.’ If you haven’t planned ahead for firing difficult clients, things will get awkward when the time comes. There’s no way around it. However, that shouldn’t stop you from using this as a learning experience.
Firing a client can be a relatively painless experience if you’ve set the right expectations in your service agreements. Many times, contract templates found on the internet or borrowed from a colleague contain only the most basic terms. They may not address the circumstances under which you can terminate the agreement unilaterally (i.e., without the client’s consent). And even if they do, they may impose burdensome requirements, such as the need to provide advance notice or a refund. Even worse, the terms may be contradictory or ambiguous opening you up to a lawsuit.
Custom contract language solves these issues. When your contract contains terms specific to your business, you can move quickly and decisively to fire problem clients because your right to do so is clearly protected in your agreement. Got a client who is unresponsive? Failing to meet deadlines? Or refusing to listen to your professional judgment? You started a business, in part, for the freedom entrepreneurship provides. You shouldn’t have to put up with clients if you don’t want to.
If you want to be better prepared to fire difficult clients in the future, let MZA Legal review your contract or draft you a new one. We’re here to help you design contracts that support the growth and stability of your business. Give us a call or reach out to us today so we can help you be better prepared for the next time you need to fire a client.