We've all been there — unfortunately, it's one of the realities of running an agency.
Strong client relationships help you retain your current clients, find new ones through referrals and public reviews, and make running your business more efficient.
You and your employees both need healthy client relationships, but that isn't always how the cookie crumbles.
There are tons of reasons you might want to sever ties professionally. Maybe you've outgrown their needs and your relationship just isn't as productive or valuable. Or they treat you poorly, miss payments, or ask for one too many revisions all too often.
If you're growing your business and haven't honed in on your ideal customer yet, you might need to stop working with them even if they aren't particularly difficult to deal with.
In any case, bad clients cost you money and stress out your employees and freelancers. And part of being a business owner is making decisions that push your company forward.
Before you hit send on that “it’s not going to work out” email, you need to make sure you do it right. In this article, we'll tell you everything you need to know about firing a client professionally.
Boundaries are the guardrails protecting you and your team. They set clear expectations, foster healthy relationships, and keep your employees from burning out.
When it comes to client relationships, they also prevent misunderstandings and scope creep.
For instance: If your contract states that you won't do any work outside the original project scope, then make sure to communicate that early on. If your client agrees, then it should be fairly easy to push back when they ask for extra tasks.
In this sense, you are partially responsible for how your business relationships turn out, and you can't always blame clients for issues that come up.
Had you set boundaries from the beginning, you could have prevented future difficult conversations.
Let's take a look at some critical boundaries that can save your relationships before they sour.
Getting paid on-time is quite literally a matter of survival.
New QuickBooks research shows that two of every three businesses spend 14 hours per week collecting payments and completing the related administrative tasks. That's nearly two full days that could have been spent completing projects, selling, or strategizing.
Mid-sized businesses face an average of $304,066 in late payments from their customers. 81% of them reported that their customers have been making late payments more often compared to previous years.
For small business owners (about one-fourth of whom don't even pay themselves a salary), the cash flow implications are much more significant.
Here are a few common examples of payment parameters you can set up contractually with your clients:
Entrepreneurs tend to learn this problem early on (the hard way): Clients often want more than they originally anticipated.
If you don't state in the contract what type of revisions requests will cost extra (if any), your team can end up doing almost double the work while only you only get paid for one job.
To avoid scope creep and protect yourself, the most important first step in initiating a client relationship is setting limits on revision requests when outlining your scope of work.
This will vary depending on the type of agency you run and the work you do. Most agencies offer a maximum of three rounds of revisions as part of the scope of work.
But feel free to limit that amount or make it dependent on incremental payments (e.g. one extra round for a 25% fee).
If you've ever had a toxic client send you emails and Slack messages at 7PM on a Friday, then get frustrated when you don't respond until Monday morning, then you know how important response times are.
Juggling multiple projects means that no particular client should feel entitled to an immediate response from your team members.
Having clear expectations on communication and response times will save your sanity in the long run.
For instance: You can set up an agreement that emails, questions, comments, and revisions should be answered within one business day or less. Or, if a client expects immediate responses, you can determine what warrants a quick response and what doesn’t.
Be sure to specify which channels of communication are preferred (e.g., email vs. phone call) so both parties know where it's best to reach out with questions and requests.
It helps to use a project management software (Duda has client management built-in for this exact reason) that stores all client conversations in one place.
This way, everyone is on the same page regarding communication expectations and you can ensure nothing falls through the cracks.
Whether your clients play the blame game despite clear boundaries or they are constantly asking for more without additional compensation, pay attention to red flags that come up throughout your business relationship.
These include:
The most challenging clients will probably meet more than one of these criteria. Perhaps the most well-known of all is the client who never pays enough or on-time, but demands the world.
Problematic clients are more than just a hassle to deal with — they also cost you money and wear out your team members.
Even if everything seems to be running smoothly, pay attention to these other red flags:
If it's time to sever ties with a client, follow these seven steps to do so the right way.
Firing a client should be a last resort. Acquisition is 6 to 7 times more expensive than retention, and there may be negative results you can't control.
Before carrying through with your decision, ask yourself the following questions:
If you're ready to move forward, you need to come prepared. That starts with an exit strategy.
Every exit strategy should include:
Check your contract or engagement letter before finalizing your termination notice and supplementary documentation — you might run into problems if your client refers to terms that prevent you from doing so (such as a guarantee of services for a set period).
Once you have your exit strategy and supporting documents ready, reach out to the client with a professional notification detailing how you will be ending the relationship and why.
When communicating with the client, always remember to:
Here is a sample script of a well-written client termination notice:
If the client is open to it, a face-to-face meeting can be beneficial. It's an opportunity for both sides to discuss the situation and come up with solutions that benefit everyone involved.
When you meet with the client:
A client meeting isn't always required, but it could be a good idea if you think it could help both parties understand the situation better.
Keeping a paper trail of everything discussed is important, especially if a termination agreement goes south. It can protect your reputation and allow you to defend yourself in the event of legal trouble.
A follow-up email should include:
Your follow-up should be sent within 24 hours of the termination meeting, and you should make sure to keep a copy for your records.
Sometimes it's not just the client who is to blame when a project goes south. While you shouldn't take on all of the burden yourself, reflecting on what went wrong can help you fix other client relationships or prevent future problems from happening.
Take some time to think about what could have gone better — was communication an issue? Did the scope of work need to be revised? Did you overestimate your capabilities?
These reflections can make you a better agency owner in the future. Use them to adjust processes or create new policies that will help you work more efficiently and effectively.
Healthy client relationships are vital, but so is the health of you, your employees, and your company. If a client begins to infringe on your success, then it's time to let them go.
Although firing a client should be a last resort, strong relationships go both ways. If you've exhausted your other options and weighed the pros and cons, letting a problem client go might be the best decision for the success of your business and its employees.
Taking the right steps when doing so will save you from bad reviews, legal issues, and potentially ruining your reputation with other clients.
By following the tips outlined here, you can fire a client in the best way possible for everyone involved — preserving your reputation as an agency owner and allowing both sides to move on with their own goals in mind.
