It has taken you years to build your firm’s client base. Some clients you had to work hard to win and some practically fell in the front door. Some are an exact fit for what your team does best – and others are not. Some pay your current billing rates without discounts or write-offs, and some quietly get the best deal in town (maybe too good!). In the lifespan of any firm, there comes a time when firing clients is the right thing to do. But how do you decide which clients to let go, and what process should you follow to communicate your decision?
What is motivating you to fire clients?
First let’s say that perhaps the best thing to do is to communicate any issues that arise with your clients directly and in a timely manner so that the relationship does not deteriorate to the point where a break-up needs to occur.
Assuming that we’re discussing a situation in which firing clients is the right thing to do, there are a myriad of considerations for building that list.
- Clients are paying rates well below market rate (perhaps after a merger or clients who have been around for decades)
- Our team is overworked and we can’t take on any new clients
- Clients who are not pleasant to work with are hurting morale internally
- Dishonest clients are making leadership nervous about liability
- Slow paying or non-paying clients are setting a bad precedent internally
- Clients that aren’t in our sweet spot/wheelhouse take too much effort to serve well and profitably
- The scope of the engagement is different than what you expected or has changed over time and is no longer a good fit for your firm.
- The list goes on…
How will you decide how many – and which – clients to fire?
Unless you are the only partner/leader in your firm, there needs to be consensus on this front. Talking about the motivation behind the firing will help you to decide the depth and breadth of the cut. You’ll want to know when your list is complete so that everyone can get back to work and not continue to second guess the process or results.
- Perhaps you want to aim for a certain dollar figure. This would be appropriate if your motivation is staff bandwidth (or a lack thereof).
- You could analyze profitability by client and cut any client that doesn’t meet some agreed-upon marker.
- If you’re motivated by morale, it will be a more qualitative discussion as to which client(s) are causing the most issues.
- Liability driven decisions such as dishonesty or risky industries are more qualitative as well. Perhaps your professional liability insurance company can provide some insight into this area.
- Slow or non-paying clients can perhaps be put on notice – or maybe it’s time to part ways.
What is the process for firing clients?
You need to decide that there are no “take backs”. No partners can chicken out or be bullied into continuing to do work for a client on this firing list. If you need morale reinforcements, ask for help, or decide that two partners should be involved in every outbound client conversation. Whenever you fire clients, keep the timing in mind. Your former client will need time to find a new service provider. It’s best not to burn bridges by making them scramble before a big deadline or in the middle of a big project.
- For low paying transactional clients with whom you have little or no personal interaction, a letter is an appropriate method of communication. These people or companies can easily find another service provider without much effort the next time they need services completed. Your letter needs only to be short and to the point.
- For clients that are geographically distant or with whom you have only a minor relationship, a phone call will do. It would be best to schedule this with the client so they can give you their full attention. In this case, if the former client asks for your advice on which other service provider to call regarding their needs, you can decide (preferably in advance of the meeting) whether you want to get to be a part of that discussion. For clients who are of good quality but too small for you to service well, perhaps you will be inclined to help. Perhaps you claim a conflict of interest if the former client is being fired for late payments or for being high risk.
- For clients that have been with the firm for decades or who are large enough to warrant some attention, an in-person meeting will be appropriate. While uncomfortable, you will likely need to discuss how to wrap-up any outstanding work, how to untangle your team from their daily routines, and a process for transferring files to their new service provider. By being prepared in advance of the meeting, you’ll be able to keep the conversation focused on the future, not the past.
What happens next?
The process continues when you need to explain to your staff what you have done and why. It is extremely important everyone on the leadership team keeps the boardroom discussion in the boardroom (The Vegas Rule). Your employees do not need to know the details of why certain clients were cut. Honesty will go a long way, however.
Hopefully after it’s all over, and you’ve had a glass of wine to relax, you’ll begin to enjoy the benefits of your difficult work. Perhaps your employees will thank you for eliminating that “difficult to work for” client, or the manager will be relieved that they no longer have to “hide time” on a less profitable client. I think you’ll be pleasantly surprised by the feedback you receive internally.
Why should you fire clients regularly?
When I talk with firm leaders about firing clients, they freeze up and have at least 1,000 reasons why it can’t happen. In my opinion, the pain stems directly from the fact that they wait FAR too long to address this issue. Firing clients is a healthy process that should be done regularly (annually or as certain, pre-established criteria or timelines are met). Committing to firing clients will allow you to establish a process for evaluating clients, learn to communicate with clients when something goes wrong, and discover that parting ways isn’t actually the end of the world.
If you need help, I’m always around!
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