4 Reasons to Fire a Customer and the Best Ways to Do It

By Rieva Lesonsky

4 min read

Even before most of us become small business owners, we grow up with the belief that “the customer is always right.” But once you own your own business, it generally doesn’t take long to discover that like many clichés, this one doesn’t tell the whole truth.

Every once in a while, you’ll run across customers who make your life miserable. When that happens, is your only option to put up with whatever these customers dish out? Not at all. Sometimes, however, you have to take drastic measures and fire a customer.

Of course, firing a customer is not a decision to be made lightly. Here are four common situations in which you might consider letting a customer go, as well as some possible solutions for salvaging the situation.

1. The Customer Makes Unreasonable Demands

Every customer has times when they need a rush order, extra work on a job, or some other special treatment due to unforeseen circumstances. Customers worth firing, however, regularly make a practice of demanding the impossible and showing no appreciation for your efforts to deliver it.

Possible solution: A detailed contract drawing up the scope of work for each project and clearly stating that additional work will result in new charges can help rein in a customer who simply doesn’t realize that he or she is making too many demands.

2. The Customer Makes Your Employees Miserable

Some customers are all smiles with you, the business owner, but treat your employees like dirt. If this comes to your attention, take it seriously. If an employee hates working with this customer, he or she is going to have trouble delivering excellent work. This could seriously affect your company’s reputation, not only among your customers, but also among current and future employees.

Possible solution: Talk to the employee to get their side of the story about the customer’s mistreatment. If you feel that the problem is simply a personality conflict, talk to the customer about having a different employee handle their account. This way, you’re protecting your employee while also keeping the customer happy.

3. The Customer Doesn’t Pay

This can be a tricky situation. Often, your biggest customers will be the slowest to pay, particularly if they are government clients that have slow payment cycles. However, if you get the feeling that you are getting the runaround from a customer and payment may never be forthcoming, you need to take steps to handle the situation.

Possible solution: Be honest with the customer about the issue. Ask for the reason behind the delayed payment and offer to work out some type of payment plan. You should also institute a new payment policy for the customer going forward, such as asking for a deposit upfront before any work is done or not doing additional work until the current tab is paid.

4. Serving this Customer Is No Longer Cost-Effective

As your business grows, sometimes the customers you had when you started out are no longer a good fit for your business. For example, if you originally targeted small business owners but now primarily sell to corporate clients, your early customer base of small business owners may pay too little, and take up too much time to support the current profit margins you need.

Possible solution: Talk to these early customers to see if you can either raise your rates to an amount agreeable to both of you, or cut back on what you do for them while keeping your rates the same.

What to Say When You Fire a Customer

What do you do if these suggested solutions still don’t solve your customer problem? In spite of your best efforts—or an absence of theirs—there will be times when you have to part ways. When letting go of a customer, for whatever reason, be tactful. After all, your reputation is on the line. You can explain that:

  1. Your business model has changed so you are no longer the best provider for this customer. If your customer has certain expectations that can’t be met following a business model change, then it might be time for them to find a new provider.
  2. Due to ongoing payment problems you’ll have to stop doing business with this customer. Non-paying customers represent time and money you won’t get back. Let them know that you’ll be happy to reinstate their account if they resolve the issue, but beware of repeat offenders.
  3. Your company has so much new business that you no longer have the bandwidth to serve all your customers, and need to let go of some accounts. Expanding your business with some customers means that you have to cut back business from others.
  4. Because of ongoing personality conflicts, you’ve decided that it’s best if your business no longer works with this customer. There are times when personality conflicts become more trouble than they’re worth. Learn to recognize when your sanity and time are worth more than your pay, then move on.

I have had to let a few customers go since starting my business seven years ago. It’s not easy to do, but believe me: cutting the cord on an unhealthy customer relationship is the best thing for both of you. The customer is free to find a company that can better serve their needs, and you’re free to focus your time and effort on more productive work, like growing your business.

If you have to make hard decisions about keeping a customer, find out how valuable they are with our article on calculating customer lifetime value.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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