When you first start your business the idea of firing a client sounds ridiculous. You’re so focused on growing the business and adding new clients that the idea of one day telling a hard-fought-for existing client you no longer want their business seems absurd. But, it does happen.
People fire clients for a variety of reasons ranging from financial to emotional. Some of the more common financial reasons for firing a client include a client no longer paying their bills or concerns that the client is having financial difficulties. Another financial reason for firing a client is the desire to work with bigger, higher paying, clients. Although this is certainly a valid reason for firing a client, it’s important to remember that your company’s long-term health requires a diverse pool of clients from different fields and of different sizes.
Once you fire a client, they are less incentivized to pay you, especially if they owe other people, with whom they are still working, money as well. So, if you are firing a client for nonpayment of bills, or because you are concerned that they soon won’t pay their bills, you will want to take certain steps before letting them know that you can no longer work together.
The obvious first step is to get paid as much of the money owed you as possible. If you can get even a partial payment while the relationship is still good, that will mean less money that you have to fight for later. Hopefully, you have a well-written, legally-binding contract that outlines the terms under which you will be paid. If not, ask to have the terms confirmed via email. You can phrase this request as an attempt to get your business affairs in order, without giving away the fact that you may let the client go.
If you are planning on firing a client who currently owes you money then you may also want to consider accepting a partial payment on the amount they currently owe you. This will allow you to clear the books and save you time chasing after the unpaid invoice. Remember that once an issue goes to collections you’re automatically going to give up 10%-25% for the collection agency’s contingency fee. While your relationship with the client is still active and friendly, consider offering a 5%-10% discount if they pay the invoice within two weeks. If the client is able to clear up their past due bills you may decide that you have less to worry about than you thought.
Keep in mind that even if the financial details are worked out, firing a client can be difficult emotionally. No one likes to be rejected, especially if they feel like they’re being rejected for something bigger and better. If you’re firing a client because you want to work with bigger clients, especially if those clients are in the same field, be aware that there will be hurt feelings. You might wish to suggest a competitor or former employee who may be better able to serve the client. Helping the client get settled elsewhere may take some time, but it lets the client know that your decision isn’t personal.
Breaking up is always hard to do, but giving some careful thought to how to release clients, while still being paid all of your owed money before you start the process can make the breakup less painful for both you and your former client.
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