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Firing a Customer

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Every entrepreneur or small business owner has (or has had) at least one troublesome customer. Maybe the customer complains over minor (or nonexistent) imperfections or is always slow with making payments. But some customers are not only irritating, retaining them could be costing your business time and money that could be better spent on other, more productive customers. If you find yourself in this position, you’re better off cutting ties with a customer who has become more trouble than he or she is worth.

Is It Time to Cut Ties?

With some clients, the need to sever the relationship is obvious. Clients who are rude and disrespectful or who ask you to conduct business in an unethical or illegal manner can be dismissed without hesitation. Keeping such clients can demoralize staff members who must deal with them or even expose your company to adverse civil claims or criminal charges.

With other clients, however, making the decision to cut ties is not clear cut, and in fact there may be a way to salvage the relationship. For instance, late paying clients can wreak havoc on your company’s budget. But if the customer doesn’t drag payments out on a consistent basis and is otherwise a good client, severing ties might not be the best approach. Instead, try structuring contracts so that you receive partial payments at different phases of the job, and that work continues only after payments for the previous portion of the contract have been made. That way you’re not left waiting for the entire amount that you’re due.

Likewise, dealing with a client who regularly adds “just one more thing” to projects without offering to pay for those add-ons can be both frustrating and costly. However, rather than refusing to take on new projects with such clients, take a firm stand at the first sign of unreasonable demands. Explain politely that the request lies outside the agreed scope of work, and that an additional fee and possibly more time would be required to fulfill a particular request. If you’re consistent with this approach, many clients will take the hint.

The Direct Approach

If you’ve tried to salvage troublesome customer relationships with no success, cutting ties may be the only answer. If possible, provide the client with some lead time to allow him or her to seek out another company to work with. If the problem is simply a mismatch between what your company provides and what the customer needs or demands, you may even consider making a referral to another company that provides a better fit.

The point is to be as gracious as possible while making it clear that you won’t be working with the client in the future. Emphasize that your company doesn’t seem to present the right fit for the client rather than criticizing the client directly. Even if the client is a jerk, no purpose is served by matching rudeness with rudeness.

The Indirect Approach

Sometimes the need to sever ties with a customer comes from the realization that you’re not making enough money to justify continuing to maintain his or her account.  While it’s almost always better to take a direct approach in cutting ties with such clients, it’s frequently possible to motivate a client to sever ties with your company instead.

One effective way to do so is by significantly raising your rates. This an especially effective strategy with clients who add extra work without offering additional pay. If the client balks, explain that your company has expenses it must meet, and that your business model cannot be sustained without receiving adequate compensation for the work you perform.

Beware of Retaliation

Unfortunately, cutting ties with a client can have negative consequences beyond the loss of a person’s or company’s business. Vindictive clients may badmouth you or your company on social media, by word of mouth or even in the news media.

If the badmouthing occurs on your company’s website or social media pages, you’re justified in blocking the responsible parties from making further comments. If the badmouthing occurs on third party social media sites, or in the news media, avoid matching fire with fire. Instead, assess whether a response from you or a company spokesperson to clarify the situation is warranted.  In extreme cases, it may be wise to consult with an attorney.

Audrey Henderson

Posted In: Customer Service

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