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Why you should let bad clients go

by | Sep 24, 2022

You should let bad clients go. But, you already knew that. The hard part is actually letting them go, especially when they’re paying you a lot of money. Our egos and our monthly bills (both the business and personal ones) make letting clients go easier said than done. We know we should drop them, but convince ourselves that we don’t HAVE to let clients go, we just WANT to let clients go and we should just deal with it because the money’s good.

But, sub-par clients are bad for business. And, not just in a squishy emotional, ‘talk to your therapist’ kind of way. They’re mathematically bad for business. They drag down employee morale, mess up cash flow, and limit profitability. And, maybe you can hold onto the slightly annoying clients, but the legit crappy ones need to go and make room for better clients that respect your team, pay on time, and just all around aren’t schmucks.

 

For culture’s sake:

Company culture is more than fringe benefits and work from home. It’s 360°. It’s everything your business can control — including the time spent working with and for clients (which is going to be a healthy portion of the day, if you’re trying to keep utilization up). Those demanding and unreasonable clients are a drain to work with. They require more emotional bandwidth, cause more stress, and lead to more frustration. And, your employees are expecting you to stand up for them because, good management and culture are both how you treat employees and how you let clients treat them. If you keep assigning them unreasonable clients that bombard them, treat them poorly, and continually demand changes, your employees can and will look for other opportunities.

(“I’ll let the account managers handle the crappy clients. I’ll only interface with the big A-tier clients.” Say that out loud. Is that a place you’d like to work?)

 

Wasted employee hours and utilization:

Crappy clients are rarely crappy because they take lessss of your precious time (unless, they just aren’t paying on time). It’s usually because they send too many emails, demand faster response times (and, frequent context switching), give unhelpful feedback, miss meetings, keep slyly pushing out of scope, and are just difficult to work with. All of that takes time to deal with, leads to inefficiencies, and results in less billable work getting done. And, that holds overall agency revenue down and prevents you from getting even close to your max revenue capacity. Because, while your max revenue capacity may be a function of ideal utilization, your revenue reality is a function of actual utilization, and crappy clients that waste time screw that up.

 

You can’t scale your way out:

Hiring more employees or selling bigger proposals aren’t answers to bad clients and the poor utilization they cause. More employees and larger projects just make it harder to get rid of problem clients because you’ll need their revenue to afford your bloated overhead. Bad clients become your business’s golden handcuffs. You hate them, but you can’t get rid of them. And, as you scale, purging those clients will either become a long drawn-out process or require downsizing to deal with the revenue drop.

 

Cash flow issues:

Of course, bad clients aren’t always a morale or utilization problem. Sometimes, they just never pay on time or always need payment plans. And, while there’s a time and place to take those clients, you can’t build an agency on them. Those cash flow problems will eventually become ‘making payroll’ problems or ‘actually paying the owner’ problems. And, you can fix most of those issues with stricter payment terms (eg, due upfront, direct debited payments, etc), but there’ll always be clients that refuse (aka, are big enough to throw their weight around) and either need to be fired or kept on a short leash.

 

It’ll eventually flare up:

Bad client relationships eventually implode. It’s only a matter of time. It’s over once seeing their name in your inbox gives you heartburn and you dread talking to them. Either you get rid of them on your own terms (aka, now) or the relationship keeps degrading, resentment keeps building, and you stop putting the full effort into their work until it blows up. You should phase them out now, instead of waiting for the inevitable fallout where everyone is truly upset and reputations can be damaged.

 

Because that’s not why you started your business:

No one starts their business to deal with more of the same old bullshit. You could’ve done that at the last job you had. You started your business to make more money and lead a more balanced lifestyle. And, you should absolutely take crappy clients if you need to put food on the table, but that’s just a stepping stone as you bring on better clients. They aren’t meant to be forever clients.

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