How to fire a client: Why pruning clients is a good thing

Perhaps “fire a client” were not the best choice of words for this headline. “How to end a business relationship with grace,” is probably the more tactful and preferred headline.

Business relationships are intended to be mutually beneficial. However, this is not always the case. Sometimes, people find themselves in situations where it is not a win-win, mutually-satisfying scenario. It is important, in both life and business, that we recognize when a relationship has potential and when it may not.  It is far better to be honest, transparent, and astute enough to recognize when a relationship has run its course and devise an exit strategy so both parties can walk away with grace.

My goal is always to part ways with grace, not disgrace.  Particularly because while we may not be a good fit at this moment, we may want to work together sometime in the future, so I want to ensure that I don’t burn bridges and instead, leave options open for the future.

Back in the day, when I was first getting started, I was anxious to get traction, acquire new clients, and grow the business.  Often, in the beginning, you don’t really have standards for what is a good client, a bad client, or the right client.  The same could be true of employees and partners.  When you are first starting out, you may not know what direction you want to pursue, what may interest you, what may be in demand, or what might be more or less profitable.  So, you try everything, do anything, and serve everybody and anybody.

Over time, if you are good or successful at some aspects of your business, you might reach a point where you have more work than you can handle, more clients than you can handle, and find yourself in a bit over your head.  You might find that you are dropping some balls, missing some deadlines, not keeping up with customer expectations, and letting some people down.

This is the point where you may need to decide if you are going to scale up or prune down. We have done both. While scaling up may seem to be the obvious choice, it’s not always the best.  Scaling up and growing fast can be hard, risky, painful, and expensive.  If you are not careful, you might drop a glass ball and not be able to recover that stellar reputation you worked so hard to create.

Not in this particular business but in a prior business, I reached this point where we simply had way too many clients that we could handle.  We hired too quickly and brought in some employees and partners that we probably should not have acquired.  We were too busy to give new employees a proper on-boarding transition and the right training, tools, and environment to succeed.  So, of course, most of them failed to perform to their potential.

It was certainly easy to point a finger at a new employee who just made one too many mistakes and blame their incompetence and experience.  It is a lot harder to look at yourself and wonder what I could have done to have given that new employee all the tools, training, information, support, and the environment necessary for them to have succeeded and reached their potential.

When we found ourselves in this situation way back when, I made a pretty radical decision, which most of my employees and partners vehemently disagreed with but, in hindsight, turned out to be one of the best business decisions I have ever made in my life.  I created a VIP client criteria.  I ranked all my clients according to that criteria.  Then, I terminated my relationships with all clients that did not meet this VIP criteria.  I did the same thing for my employees.

In the end, we cut the number of clients and employees by about 75%.  With only 25% of the remaining employees, we focused on serving the remaining 25% of clients.  But, we were determined to serve them well, do things the right way, and be extraordinarily thorough and professional in everything we did.

It made all the difference in the world.  For one, we discovered that we could generate the same amount of revenue with fewer clients because we were able to serve them better and generate more repeat business and bigger contracts.  In addition, we were able to pay all of our employees better and have a bigger budget for our own training, travel, technology, and benefits, which created a more qualified, happier, and well-rounded workforce.  Morale increased, stress reduced, customer satisfaction increased, stupid mistakes reduced, profit increased, and turnover reduced.

There is this book out there called, The Pumpkin Plan: A simple strategy to grow a remarkable business in any field, by Mike Michalowicz.  This book gave me the confidence and insight to make this somewhat risky and radical decision to prune my clients and employees.  Having been in business for over 20 years, having founded or co-founded half a dozen startups, I can honestly say that pruning my clients was one of the single best decisions, if not the best business decision, that I have ever made.

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