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Business Observer Friday, Feb. 14, 2020 4 months ago

How to fire a client/customer

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Honesty — with yourself and clients is a key approach.
by: Mark Gordon Managing Editor

Marc Simms was two years into his sales and marketing consulting business in 2009 when a client — nearly one-third of his revenue — began to exhibit some questionable behavior.

One example: The client was about to fire an employee he believed was underachieving. Simms recommend another route — not an outright firing. But the client persisted and asked Simms to be there for the termination. Simms was there, and after what he called a grueling 35 minutes, the employee was fired and left the office. “The client then pulled a loaded Glock out of his pocket, put it on the desk and said, “‘I’m glad I didn’t have to use that,’” Simms says. “I knew right then I had to let him go.”

So while the client fired someone, Simms — even with 30% of his revenue at stake, plus $5,000 he was owed that day — ended up firing someone too: the client. “He was doing some stuff that was really unethical,” says Simms, founder of Lakewood Ranch-based RPM Business Advisors. “It was a bad scenario.”

Although that’s somewhat of an extreme case, a decade later Simms says the principles of firing a client remain the same: Once the decision is made, be transparent about it. “If you know you are going to step away,” he says, “then you have to have the courage to have the conversation.”

The first part of firing a client, Simms and other executives who have done it say, is to evaluate every client relationship in the business for weak spots. That’s Atlas Building Co. of Florida President Andy Stultz’s strategy, going back to when the construction industry veteran founded the Sarasota-based firm in 2016. “It’s important to know who you are getting married to,” Stultz says. “You really have to do your due diligence.”

Other reasons to fire a client: Sometimes the company has outgrown the client, or the client has outgrown the company. In other cases, the company can’t scale fast enough to meet the demands of the client, or the work the company is doing for the customer becomes too costly and/or unprofitable. Other times, like with Simms, clients exhibit values that don’t align with the business.

Beck Besecker, co-founder and CEO of virtual reality and 3D commerce firm Marxent, says that often in software, for one, “companies start out knowing exactly what kind of service or product they will provide, but it’s almost always wrong.”

Good companies then shift to a customer base and market that fits. But that, in turn, leaves a hole with some original clients where the business can no longer provide the work it was hired to do. That’s happened a few times at Marxent — enough where Besecker recently took someone from sales/operations and gave him a new task: to work solely on unwinding five or six customer accounts. "We were in the wrong vertical for them,” Besecker says.

Marxent, akin to when a company lays off employees, offers fired clients some assistance. That includes suggesting other vendors or firms to handle the job to, in some cases, giving the jettisoned client the source code for the work — for free. One time Marxent returned six months of fees it had earned from a fired client, in a goodwill gesture. “We care about our reputation in the community,” Besecker says.

Stultz has also ended a few client relationships at Atlas. More recently, he turned down a potentially lucrative job — fired himself before he was hired — because he knew it would stretch his firm too thin, in geography and workload. Turning down work or firing a client could be a short-term financial hit, Stultz says, but not doing it could be worse. “You have to be honest with yourself and who you are as a business,” Stultz says, “and be willing to end the relationship if it’s not working.”

 

Being better in business sometimes requires a road map to figure out some thorny issues. Click the links below to read more from the Business Observer’s annual how-to guide:

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