Clients — we love them. We need them. And sometimes they ask for so much, we wonder, “Is this still worth it?”
There are many reasons for taking on new clients: Perhaps they bolster your credentials and capabilities. Or maybe working with them will open similar opportunities with more clients in that industry or geographic area. Of course, you also hope they contribute to your financial success. All of these are important considerations.
“The Customer is Always Right”- Every Client Everywhere
The key to successful working agreements with clients is remembering that they are partnerships — implying equal value shared by both parties involved. You’ll feel it in your gut (and see it in the numbers) when a client is costing you more than they’re worth. Continuing to serve a client that has a negative impact on your business is serious and compromises more than team morale. It risks bringing down your business altogether.
It is OK to let a client go. Repeat that. When you’re not getting the value you thought you would, and when the cost of continuing the relationship exceeds the value you receive, it is OK to let a client go.
So how do you know your client relationship has devolved to the point where it’s no longer valuable?
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, 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.
There are three types of strategic clients:
- Brand Clients: Clients whose brands add recognition and credibility to your portfolio.
- Profitable Clients: Clients whose needs become profitable projects for your company.
- Breakthrough Clients: Clients whose projects will help your staff develop skills and break into new areas of development (e.g., new industry, new service offering, new region, etc.).
If your client is causing you, your team, and your business significant pain, remind yourself of their position in your portfolio to help understand the appropriate value exchange.
This is especially important nowadays in the evolving Service Level Economy in which we are working. Service firms are facing tighter margins and intense competitive pressures making it even more critical to have the right partners that will help your business grow and scale.
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 myriad 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 Client: Constantly modifies and/or micromanages deliverables; very particular and not always clear.
- Burnout Client: Demands a large volume of work with tight timelines (often requiring late nights and weekends), causing undue stress.
- Aggressive Client: Treats your staff poorly; reducing morale across the team serving the client.
- Moocher Client: Negotiates add-ons ad nauseam, finds ways to suck non-billable time from your staff.
- Unprofitable Client: Costs your business more than what they’re paying you. The status may not be mutually exclusive from those above.
Once a challenging client is identified, you have a decision to make: Is this client still worth your time? We will explore this in more depth in the second post in this series.
This is an excerpt from the new Mavenlink ebook, The Guide to Handling Difficult Clients. Download the full ebook now to learn more.