Clients — we love them. We need them. And sometimes when they ask for so much, we wonder, “Is this still worth it?” It’s important to always consider a client relationship as a partnership, and this implies equal value.
In your gut, you can sense when a client might be costing you more than they’re worth. You also know your gut isn’t always enough to go on. So, you have to step back and ask the hard question, “How can I determine if my client is worth the extra effort?”
In this ebook, you’ll learn how to assess the health of your client relationships. We’ll help you understand how to identify the value of your clients, as well as accurately track the costs of delivering your services. Learn to identify the types of clients who may be difficult, as well as the tactics for addressing your most challenging clients, before you get to that final hard and sometimes necessary step: Firing your client.
Three-Step Guide to Dealing with Difficult Clients
Step 1: Build a Healthy Portfolio
Understanding the value a client contributes to your organization is the first step in handling a challenging client. This is the lens with which you will use to evaluate the partnership, and ultimately it will help you determine what actions to take. While highly profitable clients will make up the core of any healthy business, other types of strategic clients are often worthy of considering in exchange for the future value they will provide to your business.
There are many great reasons for taking on a new strategic client: credibility, capability development, and passion. And yet priorities, markets and timing can all change. Yesterday’s highly-strategic client may be today’s low priority, challenging client.
Consider assigning a category type or classification to each of your clients so that you and key team members are reminded of your intended goals and margin targets with each relationship.
Three Types of Strategic Clients
1. Brand Clients
Clients whose brand adds recognition and trust to your portfolio.
2. Highly Profitable Clients
Client work you deliver and invoice at or above your target margins.
3. Breakthrough Clients
Clients whose projects will help your staff develop skills and break into a new service area (e.g., a new industry, new service offering, new region, etc.)
Step 2: Pinpoint the Issue
As your relationship with a client extends beyond the initial engagement, your business strategy may shift, or the value of the strategic client once provided may dissipate. Your journey with a client may even go down the undesirable road to “challenging” status.
Challenging clients — those that give your team and profits heartache — burden your business with a myriad of hidden and obvious costs. Before you blame your client, though, make sure the issue lies with them. Did you put the right people, with the right skills on the project? Did you put enough people on the project? Did you do a good job managing the schedule? If you’ve matched the right people to project and scoped it properly, the issue most likely lies with the client.
Challenging clients usually come in one of five flavors — Jump-Through-Hoops, Burnout, Aggressive, Moocher, and simply Unprofitable.
Five Challenging Client Types
1. Jump-through-Hoops Client
Constantly modifies and/or micromanages deliverables; very particular and not always clear.
2. Burnout Client
Demands a large volume of work with tight timelines (often requiring late nights and weekends), causing undue stress.
3. Aggressive Client
Treats your staff poorly; reducing morale across the team serving the client.
4. Moocher Client
Negotiates add-ons ad nauseam, finds ways to suck non-billable time from your staff.
5. Unprofitable Client
Costs your business more than what they’re paying you. This status may not be mutually exclusive from those above.
Step 3: Determine if Challenging Clients are Worth Your Time
Eventually, all companies must become profitable to have a sustainable future. So unless there is a very clear strategic reason for the partnership, determining if a challenging client is worth all the pain and effort starts with examining your margins.
In a services-centric business, margins are largely determined by your cost of labor and fees you’re collecting against your staff’s time. So when evaluating effort versus value, ask questions including, how often does this client require excess work beyond the original scope? Are we tracking what work is being done outside of the scope? How much of that are we recovering through change orders, and how many hours are simply stacking up as non-billable?
Answers to these questions are key to understanding client margins and the opportunities to improve them. To have this level of visibility into your business, it’s critical that all of your resources track and document the time they’re spending on each client — without exception. Otherwise you will suffer from murky information, guesstimates, and assured margin leakage.
When hours are tracked and recorded diligently for a given client, you can analyze the costs of delivering projects and measure how they compare against your targets for other similar clients.