Firing a Client
Blair interviews David on why dropping a client is sometimes necessary and how to best approach letting them go.
Transcript
Blair Enns: David, our topic today is firing a client. What's going on? You're itching to do something? You’ve got a troubled engagement?
David C. Baker: I've got seven of them I need to fire, and I just want to think through this logically before I do it. I'm wanting your help. Those of you listening, who know who you are, expect an email next week. Firing a client, this should be therapeutic if we do it right.
Blair: I'm surprised we haven't covered this. We're five years into this since we came up with the topic. Didn't we talk about that? No, this is a deep topic. There's a lot here. I want to start with why. What are the conditions? What happens?
David: There is nobody there sitting, listening, and saying, "I wonder if I should fire this client." Everybody knows, but might be interesting just to talk about the big reasons. You were too eager to sign them in the first place, so you overlooked the clues. We could talk for 30 minutes just about that because in almost every case, you go back and you can see the beginning clues of how they were a bad client and you just talked yourself out of it.
Blair: If you're a salesperson or a creative, you are an optimist generally. Not universally true. Generally true. You ignored all of the signs that said, "Bad client," and you chose to misinterpret the signs differently. A part of your brain knew what you were doing, and now those chickens have come home to roost.
David: That's the first one, it's the universal banner across all of these. Maybe there was an internal change with the client and everything kind of changed. You really bonded with the CMO before or the product manager, and now you don't. Or the shock of all shocks, you did some cost accounting and discovered that this one isn't all that profitable, even though it may be pretty big. Maybe they're abusive to the staff. This is where it really feels good, where it's therapeutic to do it right.
Blair: It’s the most therapeutic reason to fire a client.
David: If you want your staff to love you, then just fire a client every month. Just pick one, have it hanging in the public square.
Blair: I don't know. I have this line in my head for the last two minutes, a Johnny Cash line, "I shot a man in Reno, just to watch him die."
David: This is taking a very early dark turn. A later dark turn is okay.
Blair: I fired the client just to-- Whatever the equivalent is. Whatever, shits and giggles, as we would say, or the LOLs.
David: Slow decision-making, giving you feedback not promptly enough, too many last-minute requests.
Blair: All the things under the banner of not a good client, day-to-day behavior.
David: It's not like I need to point these out, payment issues, or you just outgrow them. You step back and you think about every one of your clients, and your biggest one, you've come to accept that this is a great client. You’ve been able to grow on their back. You’ve built a lot of new service offerings because they've pushed you to provide this for them as well and so on. It's not until you have a slightly different perspective on that client that you realize, "Oh, goodness, this client got us to here, but we’re not going to get to the next stage until we replace them."
What are the places where you have to cinch up your belt and really change to move from the first stage to the second stage, and it's- you got to get rid of that first client that was responsible for a lot of good things but won't take you to the next level. Sometimes it's not always a bad thing. When I say "fire", I'm giving people the wrong impression because it may just be an issue of dismissing or finding another option for them.
Blair: These client relationships are not life sentences. They were never meant to be life sentences. Sometimes, as you say, you just outgrow a client. Sometimes it takes a lot of little things to build up before you realize that you have outgrown them.
David: One of the most intriguing reasons why you would get rid of a client, and this wouldn't otherwise occur to you, is because this is a great client in every way, they treat you respectfully, they let you do good work, they don't fight your money stuff and so on, but the one thing they don't have right is they expect too much of you personally. As you've adapted and the firm has grown, your role has migrated to a slightly different one, but this client still holds you back because they want you to do this, but you’ve found somebody else who's even more qualified than you to do that. That is reason enough to move on from that client sometimes if it's holding you back from doing what the business needs.
Blair: You also have on this list, whenever you find yourself protecting the team from your clients. If you find yourself being a human shield to deflect or protect the team from the bad behavior of the client, that should be a sign that it's time for this client to move on.
David: Yes. That reminds me, I use that test in a different environment. I think about a middle management person, this isn't the top layer, these are the managing people, the managing directors. They're the C-level people, but they're not owners. It's time for them to move on when most of their energy is spent protecting the team from the principal. It's a similar way to think about it.
Blair: Wouldn't it be time for the principal to move on?
David: Yes. It's just harder to fire them.
[laughter]
Although I have done it. Yes. Three times now.
Blair: All right. You got a category of bullet points here about this idea of like, what goes through your head? What are the thought processes when you consider doing this?
David: It starts with just recognizing that there are two stages here, and you want to take advantage of both in your head. This is how I think about money. A prospect says they want to talk. I get really excited. Then they sign up. I get really excited. I get the check. I get excited. You can stretch this stuff out, and the same is true for firing a client. You get huge relief when you fire them in your head even though you haven't told them yet, but you start thinking and planning differently, and then you actually fire them and you get this second shot of adrenaline because it's done.
The process itself is seldom fun although I think we need to be really respectful about how we do it, but the relief that comes from it is really remarkable. That relief is important because it's what balances out the panic you feel about losing this client and being able to replace them, so it's a good thing. Huge relief is a part of it, and you need to use that as a motivation for the toughness of it.
Blair: Your point is you feel that relief twice. Once when you make the decision, you look forward into the future, and you imagine doing this and you decide you're going to do this, and you get this euphoria, you achieve the emotional benefits as though you've already taken the action. You get the same emotional benefits in that moment when you decide to do it. Then a little buyer's remorse sets in. In the sales world, a little bit of doubt sets in between that exciting moment and the moment when you do it, but when you do it you actually feel that relief again. It's so fantastic. You get to [chuckles] experience it twice.
David: Yes. This is true for almost all big decisions, right?
Blair: Yes.
David: A divorce. I haven't been through one, but I imagine when you decide you're going to do it, then you make it final, or you're going to quit your job, then you actually do, but what's the downside here? What are all the things that stand in your mind when your more reckless instincts tell you, "I need to dismiss this client"? What are all the things you tell yourself that basically steer you away from actually doing that? These are the things you think about, and I wanted to talk about each of these.
Blair: The money has got to be at the top of the list, doesn't it?
David: Yes. Well, for sure, but isn't it interesting? When principals think about the money they think about the top line and not the bottom line because in many of these cases, these clients are not contributing-- It's not good money. It's bad money.
Blair: They're not contributing margin. They're contributing revenue, but not margin.
David: Yes. Money's first. What if word gets out that we're hard to work with and it spreads to our peers that we lost a client or-- That's just crazy. What leverage will we have in a dispute if they haven't paid us everything? Because now they keep paying us because they know they need us and they want us to keep working to-- We'll talk about that another time. What else? Why is it that we don't do this? Is it just really hard to step off the flywheel when it's turning, or what are the other reasons?
Blair: Is there fear that you're going to hurt, insult the client, not be liked by the client, personal feelings get in the way? I hear this a lot, like, "We have a culture of being nice. We don't fire clients." You probably don't fire employees either, but the flip side of that is, "Okay, well, continue to put up with the abuse or the lack of margin or constantly moving deadlines or whatever it is." You have in this list this idea that I've been wronged, I'm unappreciated. What do you mean by that?
David: Well, some of it is irrational just honestly, but some of it isn't. Maybe the client- even if they've been totally above board from an ethical standpoint, there's a pretty good chance that the client doesn't value your work the same way you value it. That is going to hurt somebody's feelings. When you're hurt, the way most of us express that is through anger. The anger is an enemy here because while on the one hand, it can prompt you to do what you should and be honest without couching your words, if the way you do it is to influence by the anger you feel, then you're really creating a lot of nonsense and turbulence that's not beneficial and it's not going to help you. You're not going to feel good about it at the end.
I just want to recognize that in many of these cases when you're firing a client or dismissing a client, you are angry and you're angry because you're hurt, and you need to separate that part of it out as much as you can. That means if some of this is in writing, you're probably going to need to rewrite it five times, you might need to sleep on it three nights, whatever it is, recognize that there's a lot of hurt and anger in this, and it is not useful.
Here's the way I think about it. You want to write your emails such that you assume that they're going to be on Twitter someday, or you write a dismissal letter assuming that all of your new prospects are going to see that because it was put on a LinkedIn post or something. That's just kind of the spirit. It is so easy and so fun to be passive-aggressive, that we just have to be super careful about that.
Blair: The initial stimulus is something happens or a series of things happen and then you have this response that's anger, "I'm unappreciated, my feelings are hurt, I've been wronged," whatever. You make the decision, and probably that anger, you've experienced it enough that it's the final straw that causes you to make the decision. Then you need to have, and I'm paraphrasing you here and correct me if I'm getting this wrong, there needs to be this gap, this space between the moment you decide to do it and the emotions that you're experiencing, and the act of doing it because you need to diffuse emotionally in that space.
You need to communicate this in a way that as you just pointed out, if it's in writing, the assumption is that everybody's going to see this at some point. I'd better leave a really nice, polite, even-handed paper trail.
David: Yes, exactly. It helps to try to imagine that this person on the other side has something falling apart in their personal life or some serious health condition they haven't disclosed. It's probably not true, but that mental game really helps me to be a little bit more empathetic and to separate in my head what's my own personal anger and hurt from this, from what needs to be said in a professional way.
There are a few times when I think it's okay to be pretty caustic if this person needs a complete slap in the face, not a real one, just so somebody doesn't misunderstand, maybe they need a real one too, just because you've got nothing to lose at this point, and there's a really good chance that most of the people in this person's life see the situation just like you do, but they have too much to lose to be as honest with them as you do. Chances aren't all that great it'll get through, but it's probably worth the risk. In most cases, I don't think that's the way to go about it.
Blair: If it's an abusive client, you can't be the only one or the only organization in their world that is suffering from that abuse. You don't have to worry about what other people are going to say.
David: Right.
Blair: You have two important things to remember. I think you just spoke to the first one or did you want to add to it? The idea that the truth will almost always surface.
David: Yes. I think that's really important because I hear people talk about this all the time when they're at the juncture of considering, finalizing what they've already done in their head. They're afraid that their side of the story won't come out, that it will be misunderstood, that the other people at this company who will then leave and go work somewhere else will never hire them if they fire this client because they won't ever hear the right side of the story.
I just don't think you should worry about that. I'm a firm believer that the truth always surfaces. The truth is like an inner tube that's fully inflated and you're trying to hold it under the water by yourself. At some point, the inner tube is going to win. It may be five years or it may be three days, but the truth will always surface. You cannot run your life in a way to try to control that truth surfacing.
There are many times in life where you've got to think about the consequences of different ways to decide something, that's part of what it means to be a leader and to be thoughtful. Then sometimes you need to say, "Oh, okay, now that I know the worst that could happen, I'm still going to do it, but at least I'll be prepared for it." You don't think of the consequences just because you're looking for reasons not to do it. You look for the consequences to plan for them. You can't control when the truth comes up. Yes, I guess I did have a lot more to say about that.
Blair: Yes, back to the idea of telling your side of the story, nobody is as interested in the story as you are. You think you're going to let this client go, and and there's going to be all of this discussion in the marketplace. People are barely going to notice other than your competitors who see an account is up for grabs, but it's going to be gone before you know it. There, isn't going to be the conversation about this that you think there is. Obviously, there are some exceptions to that.
David: Yes, no kidding. You're telling the whole story, somebody at a bar, a friend of yours, and there is like, "Duh, what? It took you that long to fire him?"
Blair: [laughs] Yes. Right.
David: The games you play. The other really important thing to remember is about the emotional load. You're thinking about- "What's the contribution to margin that we might lose? Can we replace this?" All of that stuff is pretty easy to quantify. What's not as easy to quantify, but what may be actually more important is the emotional load that it's costing you the headspace it's occupying. They've pitched a tent in your brain and they're playing with you. Frankly, your partner when you go home at night every day is so sick of your talking about this every time that it's also going to be a relief to them if you dismiss this client.
Blair: Yes. Great. All right. You should probably have some expectations in your mind as you go into this. What should those expectations be? Help us manage them.
David: Yes. I think you want to assume that you're going to get all of your money. That may not happen. We're going to talk in another episode about specifically how to do that, but there's some really interesting data that Dun & Bradstreet published about the relationship between whether you get stiffed and the size of your firm and firms 10 to 15 and lower really get stiffed a lot more frequently because they just figure there's not as much they can do. That's just one thing to think about. Probably most of the people listening to us are a little bit bigger than that.
The biggest goal here is to recognize that you are 100% responsible for this. You've got to keep your expectations there. Your goal is to emerge from this mess as unscathed as possible and ready to fight another day. This is not about getting paid for all the hassle you've been through. There's no pain and suffering sort of thing. Really what you want to do is, you don't want to pick a second-level fight and then spend all kinds of other energy in an irreparable relationship. Just figure out what it's really costing you money-wise and emotionally-wise, and get done with it and move on and then laugh about it later.
Blair: All right. That makes sense. Do you have a framework for how we go about this?
David: Yes, I think just a few quick things to think about, it shouldn't be a surprise. When you give an employee or team member some tough things, an employee review, they should have had some hints of that along the way. You want frequent communication. Little bits of frequent communication are much better, and if that's happening well in this relationship, when you do dismiss them, they're going to nod and smile and say, "Yes, I figured that was coming." That's a whole lot better than dropping it on somebody where they can't have time, where they really need an emotional time-out even just to process it. That would be the first thing.
The second thing that I would think through is just how you couch all the conversation. This is the maximum that- I've never heard anybody say this, but I tend to say it a lot, and I mean it. It's that you don't have to say everything that's true, but everything you do say needs to be true. You don't want to lie to them. I think that's disrespectful and you're just not going to feel good about it. Everything you say to them should be true, but you don't have to give them all the reasons. You could give them some specific reasons that are true and you can leave out some other ones if they're not open and eager to hear them. I would just base the nature of the conversation on what they want to hear, how receptive are they? Do they want to fight with you? If that's the case, then don't take that bait.
If they are a little surprised and want to learn, maybe even want to preserve the relationship, then yes, tell them everything. You could say something like, "We think you deserve or we think you need somebody who's more hands-on in your account," which is code for, "You're just always over our shoulder." You don't have to say it that way. Or, "You probably need a firm where the budgeting process is always more predictable," and that's just code for, "You never want to pay scope creep changes," or, "You really deserve a firm that's comfortable with your payment terms and doesn't need to heckle you about them." In other words, "We want somebody that doesn't pay us in four months." They're our clients. That is the whole policy, or, "You're an asshole, and I'd be surprised to find out that even your own mom loved you." That's the one you probably would feel but not say.
Blair: [chuckles] It's not you, it's me. No. It's you.
David: Right. You're the guy that's supposed to be amazing on phrasing this kind of stuff and you are from everything I can tell anyway.
Blair: Thank you very much. Thank you. End of podcast.
David: How would you phrase something like this or how would you frame it anyway, even without the specific phrasing?
Blair: Yes. Let's just think of some specific situations. I really love the language that you have here. I'm trying to think of--
David: You're trying to think of how you can improve my thinking and it's just hard, isn't it?
Blair: No, I'm trying to think of situations from my own career. Your high-level advice of always framing it as a fit is great. That's a line that covers almost any situation. Then you can add some nuance after it, and it just sounds like, "Hey, we've been working together for a long time and things have changed and there just does not seem to be a fit anymore between what it is that you're looking for in a firm and what it is that we excel at delivering or want to deliver. That high-level fit there just doesn't seem to be a fit anymore."
That might prompt some questions, or if the client really knows what's going on, they might say, "Yes, thanks for being honest about it. Obviously, we've seen it too," but if they say, "Oh, what are you talking about?" "Well, our business isn't really structured to respond to 30 client requests a day," or, "The fee arrangement that we've had with you historically isn't built on this model of 30 client requests a day. Maybe it's something in how we're handling the scoping situation upfront. We've been working together a long time. We're entrenched in the financial part of the relationship and the working part of the relationship seems to have changed without the financial part moving. So, let's just call it a day. It was a good relationship for a while. We were both well served by it, but those days are over, and let's be grownups and just call it like it is."
David: Maybe the specific timing would surprise a client, but it's hard to imagine a decent client relationship worth saving where that would be a surprise, it seems like.
Blair: Yes.
David: I just think it's useful for you to be super helpful and kind, and as empathetic as you can, and if you don't want to envision your letter showing up on Twitter again, then think about going to a conference or something and just bumping into somebody and being totally fine without any serious awkwardness where you could laugh and talk about your families. That's what you're looking for. You can make really good decisions for your business without being a jerk.
Blair: Yes. What about notice? What kind of notice do you give a client?
David: Well, this is tough because you give them too much notice, then you're a lame duck, but you don't give them enough, it's not very fair to them. Part of this would be governed by whatever the contract says, the MSA, but I think ideally this would be sort of a two-month thing. I'm thinking. If you know another firm and there are a lot of good firms where they wouldn't view this client as a punishment, they're actually set up for it, then, by all means, try to introduce them to somebody else. You don't want this client to fail. You want them to move on and to make that as painless as possible, and here I believe very strongly against the mainstream advice. I think you ought to give them whatever they need and I don't think you should fight about it. The files, just make this really as easy as possible, and I think that makes you feel better in the process as well.
Blair: Can you envision times when you have let the client go, and then they've talked you out of it where you've gone back on that decision where the wise thing to do is to actually go back on the decision?
David: Yes, absolutely. I have seen that many times where this person's going through something, you're contacted the client, and they're just busy with all kinds of things. They've let things get out of hand, and they've delegated too much to the level right below them, the ones you deal with, and you come to them and it's like cold water in the face for them. They're like, "Oh my God, this is so right."
There's other times when you might decide you're gone for good, and you are fine burning all the bridges in throwing gasoline on them. Instead of telling your main contact, you go to their boss and tell them that you're resigning and you're resigning because of this jerk right here that works underneath you. That is also a good strategy if you've got nothing to lose, and that's where I have also seen a lot of these things reversed where that's the impetus for that person to be hired on the client-side and then they ask you for some recommendations and you keep the client for another two to three years. I know there's people listening where that's happened.
Blair: Yes. I've seen that happen as well. What about if you're resigning because the client is just beating you up on the price and you're just tired of cutting price and that's it? You're going to go get a more profitable client and you very politely point that out. "Hey, you just don't seem to be willing to pay us what we need to be paid or what we feel is fair value for this work, so we're just going to part company and you can go find a more affordable firm, and we'll go find a client who appropriately values the work that we do for them," and the client says, "No, wait, okay. I'll pay."
David: Just kidding on that $124 an hour.
Blair: In that situation, if the client meets financial demands?
David: Here I'm stepping out on a little bit of thin ice because I don't know for sure, this is pure instinct, but when I've seen that happen, it does rescue the account for a time, but along with the higher prices, they emotionally can't do anything but also have higher expectations. What you're doing is buying another 6 to 12 or maybe 18 months and you're going to lose the client because they're going to start looking at you differently. They're going to be on a short lease from your standpoint. I do think it would be worth trying to save that relationship if they're willing to pay more everything else is good enough, but just don't recognize that you've saved it for another four years. I just don't see that happening.
Blair: Let's say you've done the deed and you're wiping your hands as a client. How should you think about wrapping this up without any loose ends?
David: First thing I would do is I would have a quick meeting to celebrate, but out of-- You're all a little bit nervous too. Then just say, "Hey, let's flip this around. Who are our great clients right now?" Then divide it up and have different individuals write a handwritten note, not an email, but a handwritten note to your great clients and tell them why they're great. I just think this is one of those times when you have a perfect excuse to do this and your clients need to know that. That's what I would do first.
Blair: I can see you popping the champagne cork, celebrating.
David: Spilling it on the note.
Blair: Then while everybody is drinking champagne, say, "All right. Who among our client base do we really really appreciate?" You come up with three, four, or five clients. "Let's send them a note and a bottle of champagne. Hey, we're drinking champagne today because we let a poor client go. We kept them on too long," et cetera. "When we're talking about good clients versus bad clients, we made a list of our very best clients. and you're near the top of the list. You're not at the very top. Have a bottle of champagne, we want to celebrate you."
David: "P.S. do you have more work at the moment? You could go to the top of the list if you give us more work."
Blair: I understand in most organizations, the days of being able to send a bottle of champagne are long gone.
David: Cheap champagne you probably could.
Blair: Prosecco is allowed, but French champagne is not. Anything else to wrap this thing up?
David: Oh, yes, just like, "Come on. You got to kick yourself in the butt here because this is ultimately your fault." Not always, sometimes the clients change after you get them, but just take a quick look at your screening process. What questions do you wish you had asked before you took on this client? You might already be asking them and you just ignore the answers. Maybe what you need to agree to is to start paying attention to your instincts, but just an after-action review, I think you call them, we did a whole episode on that, I think this would be a good time to do it, about your screening process.
Blair: Yes. What went well? What went poorly? What are we going to do differently next time? To your point, David, some of these things were poisoned right from the beginning. You should have been honest with yourself. The signs were there. In those cases, they are your fault, and maybe you needed the revenue when you took the money and you took all of the grief with it. In the end, it was a fair trade-off. Some of them, it's just the natural devolution I guess, or degradation of the client relationship, and nobody's really to blame. It's just time to call it like it is and move on.
David: Do you remember that chart you draw about the correlation between how much power and how much value there is in the relationship and how long it's occurred?
Blair: Yes.
David: It's part of that tail. It's just a natural thing.
Blair: Yes. The slope of the line, eventually, you move from this position of being seen as the expert practitioner in the relationship to a position of you're just a vendor. Your power erodes, and your profit margin erodes. It's inevitable. You can affect two things. Through how you go about new business, you can affect the starting point on the line. Did you win the business from the vendor position or from the expert practitioner position? The starting line also affects your profit margin, and then through how you service the account, you can affect the slope of the line. Therefore how long does it take for you to slide from whatever position you occupied at the beginning to this position where it no longer makes sense to do business with this client?
David: Do you know what we need to talk about next?
Blair: What's that?
David: How about if this gets really adversarial and they have to collect money from them?
Blair: Oh, yes.
David: How do they do that?
Blair: Do you want to do a whole thing on collecting from clients?
David: I want to do a whole thing on collection. That is the thing I'm most excited about growing up as a child. I wanted to do an episode on how to collect money from deadbeat clients. This is how I'm going to contribute to society and I'm going to drag you with me.
Blair: When I ran a consulting company rather than a training company, we had receivables from time to time. Not very often, but it would just drive me crazy. I just built that into our current business model. Now, we're never collecting. If somebody hasn't paid an advance-- Now, our listeners, very few of them are in this situation where they can do that 100% of the time. I think this would be invaluable.
All right. This has been great David. Thanks. When we reconvene in the next episode, we'll talk about collecting money you're owed by clients including clients you've just fired. Thank you for this.