If you’ve ever struggled with the idea of ditching a client, take comfort in the fact that you aren’t alone. Even if it’s the right decision for your business, it can feel like you’re betraying the values of loyalty and commitment that lie at the heart of your company.
There are occasions when it’s necessary, though. The Pareto Principle states that more often than not 80% of sales come from 20% of clients. If this sounds like you, you can probably afford to ditch some clients.
However, deciding whether to ditch a client or not isn’t just a question of profits.
Before you act, consider the consequences
Most importantly, consider how losing a client will affect your cashflow. Even the smallest incomes need careful consideration. As well as cashflow, you need to consider your contractual commitments and whether ditching a client could affect other deals. If you work in a small, close-knit market, you need to consider how a bad break-up could affect your reputation.
Prompt payment is a priority
As already mentioned, you must properly assess the financial consequences of ditching a client before you push ahead. Therefore, if your main issue with a client is payment, that decision becomes a lot easier. If their payment process is affecting your ability to pay wages and bills or to commit to other jobs, it’s time to ditch them. A single late payment can be a blip rather a catastrophe but serial bad debtors are always easier to cut loose.
When negotiating doesn’t work
If you find that your contractual obligations no longer make business sense, the first step should always be negotiation. Your client may well be happy to renegotiate rather than lose you altogether. However, if that doesn’t work, it’s probably time to serve notice on the deal. Either they’ll rethink their hard stance or you’re free of a situation that was hindering you anyway.
Some companies simply aren’t compatible
There isn’t a magic formula to business and different ones can be successful by employing totally different approaches. While you’ve hopefully ascertained what sort of company your client is before you start doing business with them, you often don’t find out all the facts until you’re working closely. It could be the fact that you think they want more than they’re paying for or that they shift the goalposts too often. Don’t ditch a client because they aren’t perfect but equally don’t let one client grind you down so much that other clients suffer.
Ditching a client is never easy but if you properly assess the consequences of your decision beforehand, it can less painful than you think.
We hope you've found this article about deciding if you should ditch a client useful, check out the other blogs we’ve written to support accountancy firms in the UK.