When you have to ‘fire’a client or customer

You have a huge customer who provides a third of your revenue. But working with this account is a nightmare, and you’re questioning whether the money is worth the cost to your stomach lining and your employees’ morale.

By Joyce Rosenberg
SMALL TALK

http://www.sltrib.com/2004/Jun/06202004/business/176913.asp

You should probably consider firing this customer.

In 1994, soon after the Seattle brand consultancy Parker LePla was founded, the company won an account that brought it between 40 percent and 60 percent of its revenue, co-founder and principal Lynn Parker said. But the company’s great luck soon turned to grief when the client turned out to be nearly impossible to work with.

"It was horrific," Parker said. "We would go in there and we would deliver against what they wanted . . . and they only paid 60 percent" of what they owed Parker’s firm. Moreover, the client wanted to micromanage everything.

"This was a business life lesson for me — it’s too short to suffer," Parker said.

So Parker LePla terminated its relationship with the troublesome client, even though doing so left a huge gap in its revenue.

Firing a client or customer may seem unthinkable for small business owners, especially those just starting out. But veterans who have done it say in the long run, it is probably the best thing to do.

Steve Friedberg has had to fire two clients of his Philadelphia-based consulting firm, MMI Communications, during the past year.

"In both cases, if I had stayed with them, I would have destroyed myself," he said.

One client’s attitude was demeaning, as in "just do what we tell you," Friedberg recalled. It was an offensive way to treat a company; like most entrepreneurs, Friedberg went into business wanting to feel that his expertise and talents were being valued.

With the second client, a large corporation, Friedberg was asked to work with the head of corporate communications and found "there just was not a fit there." Because of the friction, he decided it was better to resign the account.

Some business owners have to fire a client because of the deleterious effect the working relationship is having on employees.

"It’s terribly important that people you employ not be abused by clients," said David Grant, president of the New York-based public relations firm LVM Group. He said he ended a relationship with a difficult client who was hurting morale at LVM.

Firing a client is a delicate issue. It needs to be done carefully and diplomatically so you and your company won’t be bad-mouthed to would-be customers.

"When I resigned the account, I said, ‘I’m not getting you the results you want . . . and it doesn’t make sense to continue. I’d rather part as friends, and let’s move on,’ " Friedberg said.

One way to be sure you end things well is not to let the situation deteriorate to the point where there is lasting acrimony. Grant fired his client so well that the client actually came to him some years later to work on another project (although Grant ran into some of the same problems as he did the first time around).

The loss of revenue is also an issue especially when, as was the case with Parker’s firm, the client is a major source of income. But if a company is well-run, it has a better chance of surviving that kind of blow.

Parker said of her company, "We had kept overhead low so we could have more options." She said Parker LePla also "generated enough good karma in the world that we would be OK. We had enough good buzz about what we were up to that we would be able to rapidly replace the business."

Friedberg noted that firing a client is something of a luxury. "If these people were my only client, I’d have to suck it up," he said.

But, Grant said, "if you have to choose between an abusive client or keeping people you want to keep, unless you’re stuck for money, you should resign the account."

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Joyce Rosenberg writes about small business for The Associated Press.

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