They say ‘the client is always right,’ especially for business start-ups that are still trying to build a portfolio and a decent profit margin. However, there are cases when you need to drop an account because it takes away time and resources away from either nurturing good clients or looking for better ones.
So how do you know when it’s time to say, ‘Enough is enough!’ and drop a client from your list? There is no hard-and-fast rule—only you can appropriately weigh the business you get from a client, and what he demands from you—but these questions can help you assess the situation and decide, ‘It’s not worth it anymore.’
1. Is he asking for an unreasonable discount?
You’re running a business, not a charity. You need to watch your bottom line, and that includes maintaining a particular price. Now it’s normal for clients to try to haggle for a discount. However, you need to set a ‘floor price’ which you never, ever cross—not just to protect your profit margin, but your other customers. They’ll get pretty mad if they find out that they’re paying far more than everybody else. By giving in to one customer, you’re actually penalizing your other clients for not demanding a lower price.
The only way around this is to give discounts only if you get a good deal in return. For example, you may establish a ‘bulk’ rate for a minimum order. Or, you haggle for better payment terms, a tie-up with free advertising, or other items that can improve your business.
2. Is he demanding proprietary information?
No client is worth risking the trust of your other clients or the reputation of your company. So, step away the minute a customer starts fishing for inside information on his competitors (this includes the items in this list). You can politely say, ‘I am not at liberty to divulge that data. Our company policy is that we protect the privacy of all dealings with our customers. We’d never give them information about you.’
Besides, saying yes will actually backfire, since he can’t trust you either to keep his information private. Chances are, he’s after a ‘quick deal’ not a long-term relationship with your company—and in the end, you’ll be losing both him and your other customers.
3. Is he rude to you or your employees?
Let’s face it, some clients feel that they can treat everybody like trash just because you’re under their contract. They can yell, curse, put you and your employees down, and even make sexual comments and advances.
Don’t put up with that. This type of client will never reward your ‘loyalty’ but will consistently belittle your services and make everyone feel that he’s doing you a favor by giving you his business. Plus, your company morale will go down. You may lose good employees, or lose their respect. ‘My boss is a whuss!’ they’ll think, and you lose the ability to lead them and earn their confidence and trust.
4. Is he asking for a bribe?
You may be dealing with a middle-manager who asks for cash (or any other kind of payoff) to approve a deal or ‘protect business interests.’ Others may want a cut of the profits or ask you to pad a deal and give him the amount in return for his ‘support.’
You may justify this by thinking that everyone in the industry does this, but even if that were true, it’s a risk that’s too great to take. In the event of an expose, your name and the company’s reputation could be drawn into a messy scandal, especially if the investigation gets media attention. Plus, it sets a precedent and puts you in a vulnerable position. Your ‘insider’ can easily come back and bribe you again—this time for keeping quiet about your negotiations. It’s just not worth it.
5. Does he renege on contracts and agreements?
The minute a client backs out of an agreement, or flakes in the middle of the deal, you need to cut off ties. The contract protects you and your business interests. By giving this client a ‘second chance’ you are gambling your profits—because what would stop him from doing it again? Plus, consider opportunity cost. Why put company time and resources on an account that has proven to be ‘unstable?’
The only exception to this rule is if you have had a good history with a client, and the agreement was broken for a good reason. Look at how the client handled it, too. Did he apologize for the problem and make an effort to explain what happened? Is there sincere desire to resolve it? Even good companies occasionally go through cash shortages, and if you have enough goodwill between you—for example, several years of partnership and a good reason to protect future business, once the client has fixed its cash flow problem—then you can take the chance.
However, you still need to protect your profit margin. Sit down with your accountant and your client to find ways to recoup costs or work out a mutually beneficial pricing or servicing scheme.