Video: Is it Time to Fire One of Your Clients?
Barb and Blaine discuss if and when it might be time to say goodbye to a client that doesn’t fit your business.
Barb here with Blaine from Dryrun. We are looking to have another conversation regarding an aspect of cash flow that I think people don’t even want to touch with a ten foot pole, today I’ll be asking Blaine to share his experiences and perspective on when it is time to fire a client, why you might do that and the benefit that it brings to your business.
Just to preface this conversation, Blaine was a business owner prior to founding Dryrun so he has considerable agency experience going back a long, long, long way.
So Blaine, if you wouldn’t mind sharing, how do you know when it is time to fire a client? What does that look like?
Yah, I’ll go back to a story that I sort of remember because when I started my agency I had long hair, it was dark, no beard, you know going back quite a long way…we actually fired one of our first big clients we ever landed with our agency.
It was such a learning lesson for us because it’s not, we’re not in a rush to fire a client. And in fact, I don’t know if we ever fired a client after that or if we did it was very rare, and I think it was a consequence of us learning enough to make sure that at the start of the project we learned enough to know that the contract had to be right, the price had to be right, the opportunity, the relationship, the discovery part had to be right, then everything would generally work out well. We wouldn’t be firing another client.
So, the reasons you could fire a client are a number of things, so first of all, you just simply aren’t making money, and really in the one we fired it started out that way, the problem was, we were young, we were new, we signed a contract that we shouldn’t have signed and the scope creep would have put us out of business.
So there really was unlimited scope to the project the way it was worded that we just missed when we signed. It wasn’t really what we had verbally agreed to, what got it really contentious was it was a really large organization they were really just covering their ass, getting everything they possible could out of us and so it went from basically being an issue about contracted dollars and scope to really being an issue where we really didn’t even want to work with them.
And the fortunate thing was we actually had a way out of the contract that we could fire them. So that was the one thing that was really beneficial.
You built that in? You built an out clause into your contract?
No, they had built it in, probably with the intention of using it for themselves, or having it in their boiler plate stuff probably with the intention that they would be able to use it, but when we actually looked at the contract the way it was worded we realized, ok, here’s what’s going on, we actually have an out clause that we could use and we fortunately did.
So after that, like I said, it was a lot of ground work at the start to make sure that we were getting clients, pricing and getting contracts with everything that made sense. Which means that we weren’t firing clients after that, because we had good relationships and good clients.
But there are a number of reasons you could fire a client you could fire a client because you aren’t make money, even if you really like them, you can’t run a business losing money.
You may fire them because you simply don’t enjoy working with them. It could be completely abusive.
Like they are a jerk.
They are a jerk, yah, we, I remember we did have a client at one point that I don’t remember the details on this at all but I just kind of remember, picture it a bit, we had a client that was really quite abusive to our staff and once I heard that, it was dealt with. It wasn’t happening.
So that was another time that we had to deal, or I had to deal I guess with something that was a little bit contentious.
There are more than one reason why you might fire a client, you are simply not making money, or maybe they just aren’t delivering. It might be a really nice person but if they are not making your job easy because they are not holding up their end of the bargain.
So there are a number of reasons that could lead you to fire a client. But in the end, there are times you have to simply to make sure your business keeps moving forward.
Was it awkward?
In the end we were relishing firing that climate, so know it wasn’t.
What I hear from you is that, I just want to recap here, you were green and then you learned and sometimes the things that you learn between the firing and subsequent client acquisition was tighten up your scope docs, and do a discovery and toughen your skin a little bit. And make sure you are getting paid enough, that you are pricing it right.
And those are things that make termination proof your relationship with your client. In 95 percent of the circumstances, except for the jerk clause.
One of the other really obvious one is they are not paying you on time. There are times when you actually have, there’s enough money in the contract and everything is good, terms are fine, you might even like some of the people you are dealing with but you could have a finance department that is simply holding a won’t pay you and sometimes if it happens too much and you don’t have a way, you don’t have the leverage, you may just have to at some point, you just…
But when you fire them, you have to get the money out of them so if you fire a client there are a lot of different ways and there are times it has to take some time, to get that money out of them, you have to finish up projects.
There are other times where it’s just a simple phone call this is not working, we are done.
A lot of times it’s an in between you may say to them it’s costing us more than we thought, here’s really the new scope and the new price to go forward and you may basically price them out there are a number of different ways to actually fire a client and it goes circumstance to circumstance.
The biggest thing is do it professionally and try not to make it contentious.
It’s hard to be, it’s hard not t be contentious as a sole prop, so I know that you have agency experience but sole prop, when someone doesn’t pay you that’s a big deal.
Ok, alright. I know, house on the line, all that stuff…
But you know like, when we were talking about the scope, talking about the contract, talking about the terms, talking about all those things, that applies to an awful lot of businesses so even if you are an accounting firm, bookkeeping firm, the scope of what you are going to deliver and what you are going to charge them for are all the same.
Doing that discovery meeting to know, diagnose what they need, come up with a solution and document it, and talk in real terms and make sure you’ve got it set up right.
That’s not like, oh that only applies to an agency, that applies to just business.
Making sure it’s a business relationship that makes sense. That you are going to make money off of it and it’s going to be profitable you are going to be paid.
But you also want to work with people that you like to work with and sometimes there are other issues that can really cause you a big headache, your team a big headache where it isn’t worth it for your business.
Sometimes, honestly the other thing is sometimes you have developed a niche, that niche is making you money it’s moving you forward, it’s using your staffs real solid expertise and you may have a client that is really just simply out of the niche and so in a round about way they are just causing a lot of headache and costing you a lot of money where it just might not be a fit.
This entire conversation activated me, I think it’s so necessary to have that seasoned perspective on why you might want to or need to terminate a client contract.
So, we are almost out of time, thank you for your perspective.
Just to let everybody know that if you want more information or a different perspective on any number of issues including cash flow, you can reach out to myself or Blaine or you can visit our website at Dryrun.com to learn more.