The Art of Firing a Client: 4 Signs You Should Let Them Go

0:02Hi, I'm Joel Miller, and this is the Business Accelerator podcast. Our show to help busy but growth-minded small business owners just like you scale yourself and your business so you can win at work and succeed at life. It's what we call the double win. And this week, I want to focus on clients, particularly the kind that make you want to pull your hair out. Do you keep them or do you let them go? I've got a conversation between our founder and chairman, Michael Hyatt, and our CEO, Megan Hyatt Miller, that gets at this very question. Let's jump in.

0:44Back when I was in the book publishing industry, we had an author who was almost impossible to please, particularly when it came to the cover design for his books. And we'd worked through a number of books with him. He was one of our biggest authors. And every time, we would go through 25 to 30 different covers, and he would reject them all. And then he would accuse us, basically of just being incompetent at graphic design. Now, never mind the fact that we did this every day, all day. We produced innumerable New York Times bestsellers and Wall Street Journal bestsellers and all the rest, and it never seemed to hurt us in the past, but we couldn't satisfy them.

1:24And so I got so frustrated that I decided as the CEO, which I shouldn't have done, admittedly, this was like in poor form, but I decided, okay, I'm going to take over the management of this process because I can please him. I'm confident that I can please him. Never mind the fact that that communicated to my team that they were incompetent, that I had to step in, but I digress. I learned the lesson, okay? So at any rate, so I take it over, and guess what? We went through 25 to 30 covers, and he rejected them all. He accused me of incompetence, and then we ended up going with one of his designs.

2:02He turned it over to his internal graphics department. They actually used some of his art on the cover, which I'm sure made him happy. And that was the design. So when it came time to renew his contract, I called his literary agent. I said, we're not going to do this. I said, this is just too much overhead. He can't be pleased. We're done. And I walked away from it. And that was so hard because it's, you know, it's difficult to fire a client or in this case, an author, particularly when they're one that's, you know, is so big. But at some point, the maintenance level or the maintenance required to service that client exceeds the profitability of that account.

2:41And I just sort of got to that point where I just said, we're done, and we're done. And the staff, they didn't exactly celebrate, but everybody was very happy. Okay. Well, that's what I'm wondering the whole time. I'm listening to the story, and of course, I've heard it before. And you have so many of these great stories that you're gracious enough not to tell people's names because we would all know who you're talking about if you did. But what was your team's experience like of watching you fire this client, this author? Well, I think they were partly reveling in the fact that it happened to me after I took over the account.

3:19You're like, see, we told you. And I think part of it was just everybody was done with them. Because most conscientious people are out to delight their clients. They really want to get good feedback from their clients. They want to please the client. They're in a business like we were in because they're committed to the business. But at some point, when you realize you just can't satisfy that person, that they're impossible to please, I mean, you just have to just kind of write it off and go on. Some people just like that. And I think the staff was really thrilled. Yeah, I think it probably communicated to them that there was something more important than money, you know, or the prestige of this particular author slash client.

4:01And I think, I think that probably went a long way in just their trust in you and feeling like you were advocating for them and making a hard decision that was ultimately in the best interest of the team and the business, not that client. You know, I think this is so interesting because all of us have come up with the adage that the customer is always right. You know, that we got to do whatever it takes to make a customer or client happy. So this idea of firing a client is so counterintuitive because they're the ones that produce revenue in our business. Right. They're the ones that ultimately we exist to serve.

4:41And it's costly to acquire new clients. It takes time. We know that. So this is a counterintuitive idea, but I think at its root is the idea that you're likely spending the majority of your time on your worst clients and the least amount of your time on your best clients. It's kind of like the 80-20 rule in reverse. You know, the worst clients tend to take up the most amount of your time. And so it can really be kind of a doom spiral for your business if you hang on to these clients that are so costly and demanding and exhausting to serve. Well, there's actually a couple consequences of hanging on to a client like this, both of which are negative and one of which you mentioned.

5:26First of all, it's sucking up all the staff attention, focus, energy, and frankly, a lot of other resources. So that's not good because those resources could be deployed on grateful clients that if you could just focus on them, could probably perform at the same level as the big client that you're about to fire. The other thing is, is that it keeps you from finding another client to replace that client because you've got so much bandwidth tied up in servicing that existing client that you can't go look for the ideal client that would actually be a better fit for you and your business. And I think it kind of speaks to the point, Megan, that we do need to have in mind an ideal client.

6:05In other words, what kinds of clients are we trying to pursue? Now, there's a lot of things that we could put into that customer avatar. You know, a lot of demographic information, psychographic information. But two sort of baseline things that I look for is I want a client that's highly profitable and low maintenance. And God help you if you get those reversed. Yeah. And oftentimes they are reversed. High maintenance and not that profitable tend to go together. Yep. And I'll tell you another, if you get high maintenance and high profitable, that's a problem too. You know, and in my view, that just creates a big question mark and you've got to decide, you know, either I'm going to get rid of that client because it's still not worth the effort because of the maintenance required, or I'm going to have an adult conversation with them where we're going to try to fix the maintenance issue.

6:59And frankly, sometimes, you know, we expect them to read our minds. You know, we're going to talk about some tactics, you know, that when we look at this, there are some signs that we need to fire the client. And sometimes the signs are there, but the quick fix is we just need to have a conversation. You know, set some boundaries or do something else, set our expectations. But we don't do that. We expect them to read our mind, and then we're frustrated because they become high maintenance. They don't think they're high maintenance, but they are high maintenance from our perspective, and oftentimes simply because we haven't clarified what we expect or how we want the relationship to work.

7:33Well, hopefully just this little introduction has inspired you to think about who are your best clients and maybe who are your worst clients and what are those worst clients costing you? And how might you rethink that, your relationship with them so that you can be more profitable yourself, that you can serve your best clients at a higher level. But as you're thinking about that list and you're thinking about, okay, it's probably pretty easy to identify your best clients, but you're wondering, well, how do I know which are my worst clients? Well, essentially, there are four signs that you want to pay attention to that if you check all these boxes, you probably got somebody in the red zone that you need to consider firing or at least having an adult conversation with to true up their behavior and their expectations to what you're able to provide and what you desire to provide.

8:23So why don't we just dig in to the signs?

8:32Sign number one, they don't respect your boundaries. Okay, setting boundaries around your workday is what makes you productive. You just can't be always on and expect to get good results. Now, if you're an emergency room doctor, if you're a customer service representative, then your job is to respond to customer or patient or client emergencies. And so that's kind of a different category. But for the rest of the work that most of us do, that's not required. And the reason people violate our boundaries oftentimes is because either we haven't made our boundaries clear, and it can be as simple as an out-of-office message or an after-hours message that says, hey, thanks for your message, we'll get back to you between work hours, or clarifying that up front, like what you could expect from me, and giving the rationale of why.

9:26And a lot of times people violate our boundaries because we kind of trained them to do that. So when they text us on the weekends, for example, and by the way, I have almost zero problem with this. You may have a story, Megan. But if they text you on the weekend and you respond, guess what? You're training them to violate a boundary that you have. They don't have the same boundary, clearly, but you're training them to violate that boundary. So like Tony Robbins says, you kind of get the behavior you tolerate. And I think that's right in this case. I had a great conversation with somebody that we were partnering recently with about this very topic, not a client, somebody that we were collaborating with.

10:06And I knew that our expectations around boundaries around the workday were going to be really different. You know, our stage of life was different. Our work style was different, all of that. And so I explicitly communicated to him, here's what I would be grateful if you would respect about my boundaries. You know, here are the edges of my workday. I don't respond to emails or texts on the weekends unless it's an emergency. And here's how I define an emergency and all that. And so when he read that, he said, well, let me ask you a question. Is it important that I respect your boundaries, meaning that I don't expect you to respond to me?

10:46or is it important that I also adhere to the same boundaries that you have? Meaning, if I send you an email at 10 o 'clock at night, is that offensive to you? And I had to think about it for a second because I thought that was a really insightful question that he asked. Great question. And I thought to myself, no, I don't really care if you send me an email at 10 o 'clock at night. I'm not going to see it because I'm not checking my email at 10 o 'clock at night. But I'm also not going to respond. And so as long as you don't expect me to respond outside of regular business hours, then I don't really feel the need to dictate the boundaries that you have for your own work.

11:20I just don't want to conform my boundaries to yours. And so that was a really fruitful conversation of us basically both being able to maintain our autonomy as well as establishing a protocol for when something is an emergency, then what are we going to do? You know, so that we have a very clear expectation for responsiveness around that. And it was just such a great way to start that relationship. And honestly, I thought to myself, I wish I would have done this in so many other situations, because you're right. Usually we just kind of drift into an understanding of what our boundaries are. And usually for one person, they're not as stringent as they would like.

12:00And they may not be as lax as the other person likes. But that's because we have not defined those things up front. And it's just kind of like whoever's willing to push the envelope and whoever's willing to not resist, well, that's where the boundaries settle out. Yeah. And I agree with what you said to that person. The challenge for me, to be honest, would be text messages. Because there is something about a text message that creates a sense of urgency that is 90 % of the time false, right? It's just that part of it is that if you read it and bounce off of it, it's very easy to forget to respond to it.

12:44And by the way, if anybody from Apple is listening, there's so many improvements that you could make to messages. For those of us that use iPhones, like to be able to have a bona fide out-of-office message on it, like being able to come back to a message and show it as not read. Or forward it to your email. Yeah, just like your email. So yeah, or another thing, I love this about Google Voice. And for a long time, I really disciplined myself and I've fallen down on the job, as I admitted in one of our previous episodes, using Google Voice. The thing I like about Google Voice is that I could literally unload messages if it had this feature and it would send me an email when somebody texted me and then I could process it during normal work hours like I do the rest of email.

13:33Or my assistant Jim could pick up the message and respond on my behalf. But you don't have that with messages. One of the points of the conversation that I had with this person I was collaborating with was we talked about how we were going to communicate with each other. So not so much the boundaries, but what means of communication we were going to use. And we determined that we were going to use Slack, which is what we use for internal communication, and we were going to use email. And then we were only going to use text messages for something that was an emergency. And so I think that's how you get around this.

14:05I think you tell your clients right off the bat, you know, I don't use text messaging for clients unless it's a bona fide emergency. And here is the criteria for that. So I actually think you can get around that by having a conversation around the text messaging point because you're right. Once it comes to you, it's pretty difficult to ignore because there's not an easy way to put it off for later and ensure that you're not going to miss it. Yeah. Yeah. And to be honest, I just don't have the discipline not to reply to a text message. So, you know, I just need to know that about myself and I need to take your advice and kind of enforce that boundary on the front end.

14:45Okay. So that's sign number one, which is they don't respect your boundaries. What's sign number two? Well, sign number two is they haggle on price. And, you know, sometimes, especially if you're in a either a new business or you've launched a new product, your pricing may be off a little bit, or there may be something that you need to look at or refine. This could also be related to the terms of service that you have. You know, normally in any agreement, you're going to have a terms and conditions in the contractual language of the agreement. And oftentimes people will try to negotiate on that.

15:20So if it's brand new, if you're kind of in a beta test, maybe that feedback is valid. However, some clients truly think they are the exception to every rule. They may demand a significant discount because somehow in their mind, if they didn't get a discount, they feel like they've been had in some way. They, you know, may want to negotiate the terms of the contract. And those are almost always good indications that you are about to enter a very demanding, very exhausting agreement with a client. Because as you have said often, you know, people are on their best behavior when they're dating. And once they're married, they kind of let their hair down.

16:03And I think, you know, that's a good analogy or a good analog here to look at when people are in the prospect stage of an agreement and you're deciding if you're going to work together. If that's not a good experience, it doesn't exactly bode well for the rest of the relationship. And And you're probably going to encounter some problems. Yeah. And I think, you know, we got to be particularly careful with how we manage our sales team. Now, I love salespeople. I started as a salesperson. I still to this day consider myself a salesperson. I love, love, love selling. But I also know that sometimes if we're not careful, salespeople in the pursuit of the sale will do virtually anything to get the sale.

16:48And so you've got to give them parameters around, you know, how much can they negotiate the price, for example, if any. And frankly, I don't like discounting prices either because I think it devalues the service or the perception of service on the part of the client. But even on the terms, and we've had this in the past where we've had some eager salespeople, shall we say, who, in the pursuit of the sale, have modified the terms or the payment schedule or something else and created a really difficult contract to manage in the back office. And this will complicate your business. And at some point, it will become unmanageable because every deal becomes unique.

17:32And again, I saw this back in the publishing industry where almost every contract was negotiated. but we had to set some parameters because once you get at scale, you can't do this manually. You just can't have spreadsheets or remind yourself manually of the terms of that contract. You've got to have something that, you know, is within tolerance and can be put into a system and could be automated in a way that's good for the client or good for the customer and good for you. Yeah, absolutely. Otherwise, it pollutes your data. It becomes a whole mess. And really, in the end, what happens is it compromises the client or customer experience, because there's too much complexity to manage well.

18:13And what made sense in kind of a one on one conversation between a salesperson and a prospective client now has to be operationally executed. And it's too complex. And so then the team ends up dropping balls or their inconsistencies here and there. And it creates a negative experience for the client or the customer. And so while you might think you're doing something that's in the best interest of the client to close the deal and to get them what they want, in the end, they're going to find themselves frustrated because there are all these little particularities of their contract that nobody could possibly manage at scale, and then they're disappointed.

18:49And so I think part of how you can frame this up to the client, if you're on the front end of the agreement, is the standardization we have around our pricing, around our terms and conditions and so forth, is in your best interest. It's so we can ensure that we deliver a great experience to you that our team can execute on and that they're expert at executing on. So I think that's one of the ways to handle it. But, you know, bottom line, if somebody can't afford your program and or they don't see the value of it, there's probably no amount of discounting negotiations or customization that's ultimately going to make them happy.

19:29And that's just going to continue as a repetitive behavior throughout the relationship. It's going to drive you crazy. It will. And I think that there are many times when somebody's trying to negotiate price or they're trying to negotiate the terms, and if we simply but graciously said no, they drop it. It's like not that important. They're just trying to see as a matter of principle what they can get. That happened to me not too long ago with a client that we were negotiating with. And we sent him a contract, and it came back all marked up. And I said, you know, honestly, we just don't negotiate these contracts.

20:05Everything in here is important. And we did go through a beta phase initially to make sure that it was right. But we can't really serve you without the contract it's set up. And if this doesn't work for you, that's fine. But if we're going to work together, it's got to be according to this format. And I think that the key to that is, and this is the key to all negotiation, is whoever needs the other person the least is in control of the relationship. That's a powerful concept because oftentimes we come at this conversation about whether or not to fire a client or to take on a new client who may be questionable based on some of these signs that we're talking about today from a place of scarcity.

20:49We think to ourselves, if I don't get this client, then this bad thing will happen, or maybe there won't be another one, or maybe they'll talk badly about me or something like that. And the scarcity motivates our behavior. And then we're just running around in a reactive mode all the time. And fast forward several years down the road, you end up with a business you don't actually like or a bunch of clients you don't actually want to work with. And so I think being in a place of abundance, there's always more clients, there's always more opportunity, there are always going to be more people that are better suited to your business than making some kind of compromise that you know intuitively is a compromise and you're going to be kicking yourself for later.

21:29I mean, you just ask yourself how many times when you knew a decision was not really quite right, there's something about it that wasn't quite right, how many times have you pressed forward and gone, whew, you know, I was just kind of overblowing that concern. It was actually totally fine. Not usually how it works, right? Usually it's the tip of the iceberg and there's a whole mess underneath that you get to discover later on.

22:11Well, sign number three is that they refuse to be pleased. These are tough people. They are. And this is the example I gave at the top of the show. So I won't repeat that example. But I think it is important to realize there are just some people, and it's probably not just you, it's probably in every area of their life, where they just like to complain. You know, they just have a negative orientation. They look to catch you doing something wrong instead of doing something right. And this exhausts your team. You know, if people would just lead with honey rather than vinegar, it would go a long way.

22:48But not every client, not every customer has the emotional intelligence to do that. But I remember learning from a friend of mine who was a literary agent several years ago that he said, I realized that in the publishing industry, that the publisher and the editors and the marketing team had a choice about what they were going to give their resources to, right? They had a certain amount of discretion. And he said, I always wanted to be the easy to please client, the grateful client, so that when they did something or when they were considering how they were going to invest their discretionary time or their discretionary budget dollars, that they would pick me because I knew I'd be grateful.

23:24And I can tell you from being on the inside of that relationship, on the other side of that, you know, he was somebody that we always wanted to please because he was always so grateful. And it was just a delightful relationship. But those clients that were always complaining that we could never please, when it came time to apply time or energy, we just said, why? Why would we do this? They're not happy. We've given them our best shot. They're not grateful for that. So we're just going to be spilling blood on the ground here. So let's go on to somebody else. So there's a real level of emotional intelligence that the client needs to have.

23:57And we need to have as well as we're servicing that client. You know, it's funny. I was thinking of a story of years ago. We had a client who probably every week, at least once, would call our director of customer experience and would just share some small thing that they wanted to talk through that they were irritated by. And it was little stuff like, you know, they came to an event and the room was slightly too cold or too hot, or they didn't like the catering choice, or they felt that the paper that we had chosen was too heavy in the notebook they got, or I mean, just a bunch of honestly small kind of ridiculous things.

24:38And after a while, you know, it became what felt like a part-time job to our customer experience person to get on the phone and almost act like a therapist to this person who was complaining. And we just determined at a certain point, they're getting something out of complaining and the interaction that they're getting. This is negatively, this is positively reinforcing a negative behavior. And so we had to make the decision to fire that client and just tell them, you know, it just seems like you're unhappy and it's time for you to move on to a different program. I don't think that this is the one for you, you know?

25:11And it was amazing, kind of like you said in your story, just to see what happened to that customer experience person when they were relieved of that predictable phone call every week or a couple of times a week. You know, it's funny because I can think of another situation that was different than that, but very similar. But when we brought it to the client's attention, they basically said, well, oh, I thought you would appreciate that. I was trying to be helpful. I mean, it's taken extra energy for me to note these things, but they kind of consider themselves an auxiliary staff person. And once we brought that to their attention, they dropped the issue and they stopped being like that, but they just thought they were being helpful.

25:47So not a lot of emotional intelligence on their part.