Can I Really Fire a Client?
I’d like to weigh in on popular business consulting advice. Many times I hear the pundits or business consultants during webinars say one of these things: “Raise your prices!”, “Fire your bad clients!”, “Only take the right revenue!”.
I know I’m unique in this, but when I was an up-and-coming entrepreneur, I actually took the advice I heard, and sometimes that was dangerous. I was taking the above advice while missing several other key components and creating quite a bit of stress for myself. My goal today is to give you the same advice with a different approach that includes some temperament.
Now, you, dear reader, probably have some sense of self-preservation, hesitance, or risk-avoidance, and that’s carried you this far (with the obvious dose of risk-tolerance you also had to start your own IT firm). I’ve bootstrapped every business I’ve ever started, so I know what’s it like to start with $0 in revenue and nothing in the bank. When I started my first IT business, I sold a block of time for $800 and used that money to incorporate my business, start a bank account, buy checks, and those fun things. Then I still had to deliver 10 hours of service. That was not the best client, but should I have said no and kept waiting for the right client to come on board? Of course not.
The fact is, a low-revenue IT firm really only has one thing to worry about – get revenue. Without it, growth is not possible, bills can’t be paid, children can’t eat, and significant others can’t be proud of their partner. Yes, you generally shouldn’t sell things without a profit, but any profit will do to cover your expenses in the early stages. Cover them. Making your engine more efficient or powerful doesn’t do much good if the car doesn’t have tires.
Then Get Busy
Fill your dance card, get your schedule busy. Once your business has revenue, now we have something to improve on. Here is where my more practical advice comes in. With the tires on the car, now making some adjustments to the engine makes sense. Once your schedule is busy, raise prices a little. Know your numbers and profitability for each client, know which clients you can’t afford to lose, and which clients, who if they left, you’d be okay or relieved. When we raise prices, we fear clients leaving but they rarely do. Those clients who do decide to leave usually have correctly self-selected. Now your busyness level just got back to manageable and between your price increase and minimal attrition, you are making the same revenue (and more profit).
Onboard or offboard
Another strategy I employ is only to sell to the best prospects the best services. When I say best, I mean best for everyone, not just the most expensive or most profitable. It’s the “right” solution, versus the “good-enough” solution. We get pretty busy and have a full schedule when we onboard a new client. So, as soon as they are up and going, I target my lowest-paying or worst-performing client and I work with them to get them off of the target list. Maybe this is a price increase, cost decrease, service change, or maybe an off-boarding. Nonetheless, with a full plate and good revenue, I no longer have to fear having a very professional and appreciated conversation with a client about what is best for them. Most of the time, they take our improvement suggestions, and now I have to go find a new target to pick off.
Knowing When to Fire a Client
When raising prices or removing bad clients no longer nets me a gain on my schedule, then I usually have the profits needed to hire another resource. With a new resource, I may still not take “perfect” clients but I get wiser with each iteration of this process and start further up the ladder each time. As revenue and profits from previous resources go into funding new teammates producing quality results that see further growth and thus repeats the cycle.
So by all means, raise prices, fire a client, and only take the right revenue. But if you are bootstrapping or are not well-funded, you have this consultant’s permission to take on any profitable revenue until you have the need and comfort to do so!
What are your thoughts on this process? Have you had to fire a client before?