When to Fire a Client

One of the mistakes that a small business owner can make, especially a wholesale business, is grabbing every little bit of business that comes by. The owner may have some idea about maintaining “market share” or “placement”; the fact remains that when you look over your client list, it’s a sure bet that you have deadwood on it – or worse, clients that cost more than they make you. It’s painful, there can be no doubt. Some of these people may have been with you from the beginning. Some may be small, struggling business owners in their own right. But regardless of how much it hurts, clients that take away from your business, instead of building it, are sapping your resources and reducing efficiency. Cutting them out may be the only answer.

Slow Payers
Every business has them. They are consistently two weeks to six months behind in their terms. Checks are lost in the mail. Invoices fall through the cracks. You have tried COD, but no one is ever around to sign the check, or the amount is wrong. You have tried all sorts of billing schemes and dunning letters, to no avail. Private conferences, emphatic phone calls, you have tried it all.

Cut them loose.

A slow payer is like a slow leak in your cash-flow lifeline, If your client can’t live up to agreed upon terms, and has resisted your efforts, turn your worries over to a collection agency and stop delivering. Sure, they will call, angry, upset, begging, pleading for one more chance. If you do finally bow to the pressure, then institute a COD + 10% of the back balance, and make sure they know this is the absolute last chance. One missed check, bounced check, or other irregularity, and they are utterly cut off. If they are offended, don’t worry about it. Of course everyone worries about their professional reputation, but when word gets around that you take you’re a/R seriously, your business will shake out some of the losers before they even call.

Maintenance Hogs
Almost as bad as Slow Players are those clients who demand a lot out of you. Certainly, you want to provide outstanding customer service, but when their demands far outstrip the profit you make, you are in essence working for them for free. I’ve had this happen a few times. A decent restaurant who paid reasonably on time was making noise about some new equipment – not an unusual request in my business. But when I examined the maintenance records and saw that the previous year we had made sixteen “emergency” calls, nine repair calls (only three of which were legitimate) and three training sessions for this account, and then saw we had made less than $1500.00 last year, I fired them. The owner was confused and angry, until I sat down and showed him the math. Then he was just angry. He threatened to go to my biggest competition, and after I got past the initial horror of that idea, I imagined my competitor dealing with this account. Twenty eight site visits in one year was a lot for any company, and I knew my competitor’s labor costs were already higher than mine. I also imagined my counterpart over there dealing with all of those calls, trying to keep this guy happy while trying to make a profit. I shook the restaurantuer’s hand, wished him well, and gave him my competitor’s number.

A week later, he wanted me back. I told him no. It was wonderful. The stress level around the office had gone down, my maintenance guy was ecstatic, and even though we lost that revenue, we were actually more efficient and profitable than before.

The Heavy Promiser
Almost all wholesalers are willing to work with retailers to boost sales – it’s in everyone’s interest, after all. The more a retailer sells, the more a wholesaler sells to him. But among your client list you are sure to have a few people who are visionaries, who are so sold on their own dream that they have rooked you in to a business relationship based on how rosy things will soon be. It almost never materializes. I put up with this for years from some of my clients, extending credit, support, and special discounts to places that just needed to get on their feet until the money started rolling in. Each one of them was certain that their business model was ideal, and that it was just a matter of time.

Time is money, and for a wholesaler it is precious beyond mere money. I am always willing to give someone a chance – but after three months of “things will pick up next month” it’s a pretty safe bet that this dog won’t hunt. Don’t be drawn into their dream while you are trying to build your own. Cut your losses and devote more time to your profitable clients – it’s always easier to get an existing client to sell more than to build a new client. Wish them well, but get out of their way: they are headed for disaster, and they could easily take you along with them.

The Doublecrosser
This is actually one of the harder ones to let go, but one of the better ones to let go. Doublecrossers are very mercenary in how they choose their vendors. While this is good business practice for them, it is lousy for you. They may well be profitable clients, paying on time and ordering well. But they run you ragged with performance issues. Every week you get to hear how your competitors are wooing them for their business. Every week you have to re-negotiate prices and service issues to match the competition. Every week you have to worry about whether you will lose the account today, or next week. Every week you stop at the store on the way home for antacid or booze, depending on your tastes.

Doublecrossers often look great on paper, but they will run you ragged. Healthy competition is one thing – a client who threatens you on a regular basis, no matter how lucrative, is a client you just don’t need. If you spend more than 25% of your time thinking about how to keep this guy happy, then you are probably better off firing him and moving on to someone more loyal and less demanding. As with the Slow Payers and Maintenance Hogs, you may do better by letting them go to the competition, who will then have to put up with their unreasonable demands and constant negotiations. True, your bottom line may suffer in the short term, but your quality of life will improve in the long term.

Occasionally you can actually use a potential firing to improve your relationship with a client. I caught one Doublecrosser I dealt with for two years meeting with my biggest rival while I was making an unplanned site visit. I did what I had to do, then approached the client after my competitor left. He was smug, telling me that my competition was willing to lower their prices to get their business – was I willing to match it to keep the account? It had always worked for him before.

Not now, though. I had had enough. I felt like I had been cheated on. I calmly told the client that it was obvious that he was unhappy with my performance – I would be by on Friday to yank his equipment. That was more than enough time for my competition to install theirs. I immediately felt a sense of relief, as his face grew pale. My product was a premium one, with great name recognition and his customers would certainly detect the difference and complain. I turned on my heel and got out of there.

He flagged me down in the parking lot and apologized. He told me that everything was fine with our relationship, and that he had been wrong to do that, and please, please continue to sell to him. I called his bluff and he folded – one small victory for me. I told him I would consider, and he would have his answer on Friday. Then I went back to the office and typed up a far better contract than the one I had been operating under. He signed without a blink, and I never heard that threat again.

Few business people like letting people go, employees or clients. But just as you wouldn’t tolerate an employee stealing from you, you don’t have to put up with a client robbing you of money, time, and peace of mind either. Kick them to the curb and get on with your life. It’s a big market out there, and it’s just as easy to get good clients as bad ones.