Your Business

How to Fire a Customer or Client

By Rieva Lesonsky

Like most entrepreneurs and business owners, the adage, “The customer is always right,” is likely embedded in your brain. But, in some cases, following that advice is a waste of your time and money. It might seem nuts to tell a client or customer to hit the road, especially if you’re in the startup stages or trying to expand your business, but if you’re staying awake at night trying to come up with ways to cater to an overbearing or ungrateful client, it’s probably time to “fire” them.

“Bad” clients can drain you both financially and psychologically. Heed these four warning signs that it may be time to fire a client or customer:

  1. They take up an inordinate amount of time. Some clients demand special treatment without paying a special price. They may expect you to be at their beck and call 24/7 or insist on only working with you, the business owner when normally an employee would handle their account. If you are putting in extra time, you should be charging extra money—otherwise, this customer may not be worth it.
  2. You’re not getting paid on time. Often the most demanding customers are the very same ones who are regularly late on payments, dispute charges, bounce checks or make endless excuses for why the check is “in the mail.” You don’t have time to deal with this type of customer.
  3. The customer is rude and unprofessional. An unpleasant customer puts a strain on you and your team, and if the problem is bad enough, it could cost you a key employee. Address the issue with the customer and, if they can’t change, assess whether the relationship is worth continuing.
  4. The customer relationship is not profitable enough. Small business owners often start out charging rock-bottom rates to get their initial clients on board. As time passes, however, those rates may no longer make sense for your business financially. Regularly assess how profitable your various customer accounts are and, if needed, either raise prices or let the customer go.

Confronting a client about problems can be tough, but you have to do it or run the risk of truly damaging your business. Of course, you need to deal with the client professionally, so they don’t try to tarnish your reputation. Here’s how:

  1. Be honest. Really, honesty is the best policy. You don’t want to get caught up in some elaborate lie and then have it come back to bite you later. If the issue is not money, then don’t pretend that it is because a potential customer may hear about it and avoid your company. If the issue is personality conflicts, say so. There’s a good chance the client will agree with you and go quietly.
  2. Suggest another vendor. Whatever your reason for cutting ties with this client, it’s a good idea to have a suggestion for an alternate place the client can take their business. For example, if price is a concern, you can say, “I hear X Corp. does a great job at a lower rate.” Remember the reason you’re letting the customer go and address those issues when you make your alternate suggestion.
  3. Change terms. If the client asks for a second chance, you’ll need to decide whether or not you can change something about the relationship to make it work for both parties. If the client isn’t paying on time, ask for COD terms or to be paid upfront. If the clients continually add new demands to projects, tell them you’ll to need to cap the amount of time spent or raise your prices. If you can come to an agreement and set a probation period before you completely “fire” the client, this option is always the best.

It’s hard to turn money away, but once you take the step, you’ll quickly find you have more time and energy to devote to your good customers and to finding new prospects—and that ultimately means more growth for your business.

Ready to move your business forward?

Subscribe to Fundbox Forward for expert insights and tips every week so you can grow.