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Marketing Program Development
Smart Separations: Knowing When to Part Ways with Problematic Clients
As a consultant I can easily state that it's very hard to win a client and generally it's much easier to lose one. However, a productive business relationship is a two-way street and customers don't (or shouldn't) hold all the cards. Challenging clients aren't the problem. Challenging clients are usually the ones that help make your team and company better. It's the abusive clients that, after some diligent self-reflection, need to be let go.
The question is how to separate the emotion from the decision and let logic be our guide. When you make the right decision and execute, you're only question typically will be "why didn't I do this sooner".
Maintaining profitable and healthy customer relationships is key to long-term success. However, not all relationships contribute positively to a business’s growth or well-being. There are circumstances where the best course of action is to part ways with a client. Recognizing these scenarios and handling them tactfully can save resources, preserve team morale, and protect the integrity of a business.
Here’s a deeper look at the signs that it might be time to consider ending a business relationship with a client, and how to approach this tough decision with a strategic mindset.
Non-payment or Chronic Late Payment
The fundamental expectation in any business transaction is the timely payment for services or goods provided. If a client consistently fails to meet this basic obligation despite repeated reminders and negotiations, it becomes a drain on your financial stability. Chronic late payments or non-payment can disrupt cash flow. When faced with such a scenario, severing ties might not just be a choice but a necessity to safeguard your business’s financial health.
In this scenario you need to minimize ongoing resource investment while you extract the maximum financial recovery. Putting a company on service or support suspension as you go through this process may be your best tool in handling this financial equation.
Excessive Demands
It’s natural for clients to expect quality service and to request modifications or enhancements as needs evolve. However, when the demands become disproportionate to the agreed-upon scope of work or pricing, the relationship can turn unsustainable. If fulfilling these demands means diverting an excessive amount of time, personnel, or financial resources away from other profitable endeavors, it’s a clear sign that the costs outweigh the benefits. Reevaluating such a client’s impact on your business is crucial.
In this scenario, you want to make sure you clearly document resource investment and make it clear to the client throughout the entire service journey. If you wait until there is a problem and then "dump" a lot of information on them then you've done less than ideal account management. If you're exceeding scope of services then it should be an in writing request from the client that has an in writing approval from you. Some process, even simple process, will make it much easier for you to throw a flag on the account management field.
Disrespectful or Abusive Behavior
Respect is non-negotiable. A client who is consistently disrespectful or abusive towards you or your employees can erode workplace morale and impact mental well-being. No amount of financial compensation justifies enduring such treatment. Prioritizing the mental health and safety of your workforce is essential, and dismissing a client who poses such risks is imperative.
Some people are facing exceptional personal circumstances that cause them to act in ways that normally they would not. It's your job to inquire in a non-threatening way to see if something exceptionally stressful is happening for those individuals. Some people are just plain jerks. One percent of the human population are sociopathic by diagnosis. Cut ties with people in those categories. A no jerk policy should be an internal and external rule.
Legal and Ethical Concerns
Engaging with a client who is involved in illegal activities or insists on unethical business practices can jeopardize your company’s reputation and legality. The risks associated with such associations can include legal penalties and severe damage to credibility. It is advisable to distance your business from any client involved in such practices immediately.
A great example here is Enron and Arthur Anderson. A few people at AA were complicit with the Enron unlawful practices and almost overnight AA, which had been a pillar of corporate accounting for 100+ years, collapsed almost overnight.
Mismatched Values and Goals
Alignment in business values and goals forms the foundation of a strong client-provider relationship. If there’s a fundamental mismatch in this area, it can impede any form of productive collaboration. When diverging values or goals affect project outcomes or lead to constant conflicts, it might be healthier to end the relationship rather than compromise your business’s core principles.
Cultures in companies are powerful things. They are slow to form and rigid in structure. When your culture is at odds with a client's culture the relationship will be rocky from the start. Cultural mismatch should be identified in your sales processes and a criterion for account pursuit.
Overuse of Resources
A client should not strain your resources to the point where it harms your ability to service other clients or forces you to operate at a loss. If the effort and resources required to satisfy one client are disproportionately high, it’s worth reassessing whether the relationship is viable in the long term.
Each company needs to assess the size and resource requirements across all clients. When you service enterprise accounts you need to determine resource ratios based on client service metrics. A client may be "too large" and put your entire business at risk. When losing that one client could tank your business you have to ask yourself are there ways to mitigate that risk? Can you team up and partner? Can you outsource certain functions? Can you create a contract period with enough notice of non-renewal that things aren't a surprise?
Lack of Profitability
When the costs of servicing a client consistently outweigh the revenues they generate, the relationship may no longer be financially viable. Continuing such engagements can lead to financial losses and detract from more profitable opportunities.
You can't scale loss with more non-paying clients. This isn't manufacturing we're talking about. In these scenarios you have to have a conversation with the client letting them know that you, like them, need to make a profit and seek to renegotiate. Failing that, end things.
Negative Impact on Company Morale
A client whose actions significantly lower your team’s morale or cause ongoing internal strife can be detrimental to your company’s culture. Protecting your team’s work environment is crucial for maintaining productivity and job satisfaction.
In this situation you need to determine if the stress being created on your company is actually a good thing. Cultures are never perfect. Sometimes you take on a client exactly because it will challenge your company, including cultural challenges. This scenario can lead to employees being dissatisfied and even leaving. However, sometimes that's actually what's best and healthy in the long run for your business.
If the strife is almost completely outside destructive influence then you need to confront the client and potentially break the relationship.
Conclusion
Deciding to end a client relationship is never easy and should be handled with professionalism and sensitivity. Ensure that all contractual obligations have been met, communicate your decision clearly, and, if possible, provide the client with referrals or recommendations for other services that might better suit their needs. By approaching these difficult decisions with a strategic and empathetic mindset, you can focus on nurturing relationships that are mutually beneficial and aligned with your business’s goals and values. Onward!
