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.
In the part one of this series we explored the first steps you take to determine how to handle a difficult client and how to identify when your client relationship has devolved to the point where it’s no longer valuable.
Once a challenging client is identified, you have a decision to make. Should they stay or should they go? But before making that decision consider the following:
Step 3: Are Challenging Clients 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.
Step 4: Relationship Saving Tactics
Continuing to serve a difficult client that is no longer providing strategic or financial value to your business risks more than bringing down team morale. It risks bringing down your business.
Before you do consider firing your client, though, see if you can help the situation. These five tactics can help you save your client relationship.
- Start a Dialogue. Tell your client your concerns. Emphasize what solutions they could employ to improve the situation, and say what you will do as well.
- Cycle Your People. Rotate resources who work with your most challenging clients. This helps you avoid burnout.
- Set Clear Expectations. From the start, your clients should know what you expect of them, including collaboration, equipment, and how you will handle requests that fall outside of scope. For an unruly client, you may need to remind them of the way you’d like to work.
- Strengthen Your Tools and Processes. Find the right tools that strengthen communication between you and your client. Be sure you have tools that help you speak transparently about your fees. Make your processes explicit, so everyone on your team and theirs knows how you will be getting work done together.
- Audit Yourself. Is there anything your team could be doing to make your client relationship better? It’s easy to assume the fault lies with a challenging client. You may be able to identify ways to improve the relationship and results through small tweaks in your approach.
Step 5: It’s Time to Fire Your Client
If those tactics don’t change the situation, it may be time to fire your client. You’ve done the analysis, and employed relationship-saving tactics to no avail. You’ve taken reasonable steps, and nows it's clear the client no longer providers a positive value proposition for your team and your firm.
When you’ve reached this point, it’s time to part ways.
The good news is this does not have to ruin the relationship — it’s possible to leave on good terms. Here are a few tips for handling the discussion:
- Give your client a chance to improve. No one wants to be blind-sided with bad news. If things are not going well, let them know how you feel before you have made the decision to end the relationship. Give them a chance to respond or help rectify the situation.
- Provide evidence. Show your client the proof – how the profit versus cost of delivery are not working in your favor, or point to specific examples of how they caused unnecessary stress.
- Be rational, not emotional. Never respond in the heat of the moment.
Your Growth Relies on Good Partners
Clients are the backbone of your business. The good ones will help your business scale to new heights, and the bad ones will do the opposite. In order to grow, sometimes you need to let clients go. And that’s what’s best for your business.
This is an excerpt from the new Mavenlink ebook, The Guide to Handling Difficult Clients. Download the full ebook now to learn more.