How to Fire Your Worst Clients and Replace Them With Profitable Ones
Like many of us in the IT business, when I first started my IT Solution Provider business I was desperate for clients - both for income and for experience - and so I pretty much agreed to work with anybody who wanted to work with me.
As my business grew and I made the transition into a Managed Service Provider (MSP) though, it quickly became apparent that not every client was a good fit for me to work with.
Of the large number of clients I was working with, I had some who I didn’t enjoy working with, some who were too demanding, and many clients who were paying me rates that weren’t in line with what I was now charging.
The solution to this problem was, of course, clear. Put my rates up across the board, and to end the working relationship with those clients who I had outgrown.
But anyone who has been in this situation will tell you that things aren’t that simple
Loyalty to long standing clients
Firstly, you have a sense of loyalty to those clients you’ve worked with for a long time. They helped you reach the stage you’ve reached, and you feel callous raising their rates or ending the working relationship with them.
Secondly, you are gripped by what I call “the fear”. If I fire these clients, where will I find new clients? Wouldn’t I be better off retaining all my clients, for better or for worse, than the stress of finding new clients?
The Bucket Method
One way to overcome these mental obstacles to growing your business is to categorise your clients into three “buckets”.
Bucket A are clients who
- … you enjoy working with
- … who pay your current rates
- … who respect your advice and experience
- … who pay their bills on time
- … who refer you to others
Bucket B are clients who
- … you typically enjoy working with
- … who rarely pay you late
- … who listen to your advice more often than not
- … who sometimes negotiate on price, but never beat you up on it
Bucket C will contain clients who
- … your heart sinks when you answer their calls
- … always seem to “nickel and dime” you on quotes and bills
- … continuously ask you for “favours” but don’t want to pay for them
- … are always demanding your attention as a priority
- … don’t follow through on recommendations, then expect you to drop everything to help them when a problem arises
- … don’t pay your current rates
Go through your existing client list and put each of your clients into one of these three buckets based on the criteria above. Be honest.
Firing C Bucket Clients
It goes without saying that the “A” clients are keepers. For the most part, “B” clients are too - but you probably need to raise their rates in line with your other clients.
But those “C” clients?
Your first step is to fire those “C” clients. They are unprofitable, and they are a drain on your time and energy. So why are you working with them?
Depending on the number of “C” clients you have, you may want to send them a letter, pick up the ‘phone or visit them in person to explain that your business has grown and you are making some changes, and that as a result, you’ll no longer be able to work with them.
Use this as an opportunity to refer “C” list clients to your friendly competitors. Just because they aren’t a good fit for you doesn’t mean they won’t be a good fit for someone else who is at a different stage of business growth.
Trust me when I say that once you’ve taken this step, however scary it may be, that you’ll feel like a weight has been lifted off your shoulders. You are running your business to work with profitable clients such as those in the “A” and “B” buckets. Keep a hold of that thought.
I don’t have enough time to find new business
But what if you’re not brave enough to fire those “C” bucket clients?
The most common excuse for lack of forward motion I hear from IT business owners who want to grow their business is “I don’t have enough time to find new business”.
Conversely, those same business owners will freely admit they have a lot of “C” bucket clients who drain their time and energy and who are unprofitable.
The answer is clear. Fire those “C” bucket clients and use the time that you free up to win more “A” bucket clients.
To work with clients who you drain your energy, who irritate you, and ultimately are not profitable means you are running an unsustainable business.
Unsustainable because without profit, your business will certainly not grow, and will almost certainly contract until it is not longer a viable business.
Unsustainable because if you you are working with clients who are over-demanding, time consuming and energy draining, you will begin to resent your business, lose your passion and be too tired to grow your business until you reach a stage where you give up on it.
Clients need to profitable for you, and you need to enjoy working with them. Working with clients who are anything less is selling yourself and your business short.
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Richard Tubb works with MSP's to help them focus on what is important, free up their time and make more money. You don't have to do it alone any more!