Small Business: Letting go of bad clients

In this economic climate, it may seem counterintuitive to end a client relationship. But in many cases, that's exactly what your business needs to do, particularly if a client becomes a drain on your time, patience and resources.

Not every client is going to be the perfect fit, and it's better to let them go sooner than later so you can free up your time to develop more fruitful business relationships, say experts.

"It's like a bad marriage; when you're in one you know it," says Howard Shore, president of Activate Group Inc., a business consulting and coaching firm in Miami. "It's best to sever ties before you hate each other."

Shore speaks from experience. "Usually within 90 days I know," he says. He grew one client's business "100 percent" in 90 days, he says; then the client proceeded to tell him they hadn't seen any value in his efforts.

Client evaluation: The best way to avoid having a bad client is to take stock of who your good clients are, he explains. Re-evaluate your client list annually, at least, and weed out troublesome clients. Define the type of client you want more of and market and build your products/services around that core client, he says. Don't just base it on their industry, but on some of the core characteristics that constitute a good client, says Shore.

It can be hard to be too selective in a down economy, and sometimes inevitably you accept arrangements you normally wouldn't have.

This was the case for Adrian Miller of Adrian Miller Sales Training in Port Washington, who accepted a lower fee structure than usual with one client and now may have to terminate that relationship.

The amount of work she agreed to provide has grown in scope, and the client refuses to increase the fee structure or negotiate the scope of work.

Fortunately, Miller has had to terminate only a handful of clients in 24 years. She tries to address the problem with the client first, to see if they can reach an amicable agreement.

When ending a relationship, she does so in person and gives at least a month's notice, says Miller, noting she never gets personal and also offers to provide a recommendation for an alternate resource.

You don't need to get too specific on a reason when ending a relationship, notes Don Hochler, principal at Don L. Hochler Pc in East Meadow, a law firm specializing in medical practice acquisition and commercial collections. You can generalize and say you don't have as much time to devote to their work, he says.

"Try to be as generic and benign as possible," he notes.

Don't personalize: If the client tries engaging you and personalizing the split, stay on point and remain businesslike, says Hochler, who has only had to terminate a few clients, including one who wasn't providing documents he needed to represent him in court after repeated attempts to get the information.

Depending upon the situation, when you don't give in to excessive or unrealistic requests, the troublesome client often knows a split is coming, says Kelly McCormick, a business coach, speaker and author in Malibu, Calif. She once terminated an overdemanding client who wasn't willing to pay for additional services. The client responded to the split by saying, "Well, I was just trying to see what else I could get."

McCormick recommends using the sandwich approach when firing a client: sandwiching a goodbye between two feel-good messages (see an example at outsellyourself.com).

Don't fingerpoint.

"You're taking responsibility for it," she notes.

Breakup Time

Top causes for a client breakup:

Source: Business coach Kelly McCormick