Firing Clients: Abusive and Unreasonable People

Firing Clients: Abusive and Unreasonable People

- Lessons Learned, Episode 45

In recent episodes, we talked about finding your ideal and weeding your client garden. In a somewhat related topic, there are times when you take more drastic action. Sometimes, you need to take a saw and do some major pruning.

The most obviously example for me is getting rid of abusive and unreasonable clients. This seems obvious, but so many consultants live in fear that they "can't" fire clients because they need ever penny they can get. Well, some pennies (and dollars) are not worth the sacrifice!

We have only fired a few clients. So I don't want to make it sound like we drop people left and right. Aside from the basic weeding due to changing our business focus, we have fired clients for two primary reasons:

1) They are abusive to our employees

2) They are unmanageable

There are very different principles behind each of these. Let's take a look at them.

The Abusive Client

One of my absolutely unbreakable rules of IT service delivery is that you can can (and should) only work with people you like. You don't have to work with jerks or a-holes. And people don't get to treat you like garbage just because your an "outsourced resource." We are ultimately people working with people, and we have the right to work with people we like.

This is critical to building a good culture for your employees. On the rare occasions when an employee has reported abuse by a client, I immediately called the client and told them that this behavior is unacceptable. I also tell them that that was their one strike. We will not tolerate abuse of any kind. It's unprofessional and my employees do not have to work under such circumstances.

This is just generally the right thing to do. But it's also important that your employees see that rudeness and abuse are not tolerated. There are plenty of bosses that work in, and allow such environments. I find it unacceptable and don't think my employees should have to put up with it. Ultimately, I need to show employees that they are move valuable to me than money.

For my first IT company, one dramatic event showed this very clearly. We fired our largest client. Yes, we really did. They had grown wealthy and arrogant, and they became abusive of our employees. When I got a report of shouting and abuse in a simple client meeting, I wrote them a letter and said that we were giving them notice, per our contract. I offered to help them find another IT consultant.

That "ending" was messier than I would have liked. They threatened us with a law suit because that's what people like that do. And they refused to pay their last bill. They are one of the only two companies I have ever sent to a debt collector.

That incident shook me personally. Those folks had been a great client. They were super friendly for a long time, although I did get a glimpse of how they treated other vendors. Until something snapped, they were civil with me and my people. But when it was over, it was definitely over.

At that time (about 2005), they were our largest client - worth more than $75,000 per year, primarily labor. They were also very profitable, although they'd become less profitable as they started challenging invoices and decisions.

Two things happened immediately. First, my employees expressed gratitude for not having to go back to that client again. Second, a lot of labor time opened up very quickly. We used some of that to give faster service to the remaining clients. We used the rest to sell additional clients. In the end, we signed up clients at a higher rate and on recurring revenue plans.

It will always be the case that clients will treat your employees more "employees" than they will treat you. With you, there's a sense that an owner-to-owner decorum will prevail. With employees, that's not required.

Of course, with the best clients, politeness is the order of the day. It's not that there will never be a disagreement, but issues will be handled professionally, and frustration will not be taken out on your employees.

I don't want to be cavalier with your money, but there are plenty of nice people in the world. You will find another client. And your business will be better off for it.

The Unmanageable Client

The next time we fired our largest client, it was because they were unmanageable. That means they refused to follow our systems and processes. They literally did whatever they wanted to do and expected us to clean up after them.

One clue of what was to come was their very hierarchical structure. There were managers, at least in title, but they couldn't make even small decisions without the approval of the owner. So even though they were close to seventy-five employees, everything had to go through the owner.

Everything included all of our activities. 

We worked hard to be treated like a team member, and to take ownership of their technical spending. But time and time again, the owner would override our decisions and then want to know why we were over budget.

This was also the owner who though he'd get a faster response if he told everyone to flood our systems. So we'd get a massive flood of twenty tickets all at once, all urgent, and all about the same issue. At the same time, every phone number they could get their hands on would get twenty calls and leave twenty messages about the same issue.

And, you guessed it, the issue was rarely urgent.

I could go on, but you get the message. While this client was about twice as much revenue as the one we discussed previously, they were far less profitable and caused no end of frustration and anger inside my service department.

We calculated the actual profit on this client, and it was significantly lower than it should have been. So, we wrote them a note and informed them that they needed to find another company to provide tech support. We told them why, and explained that they needed to find someone who was more consistent for the way they wanted to operate.

We did find them another IT service provider. We were honest about our reasons for departing, but they were mesmerized by the top line revenue and took on the client. A year later, that client called me and asked if I had another recommendation because the new guy would not renew the contract.

The key to managing your business profitably, and providing good customer service, is to align expectations for both parties. Ultimately, you cannot make good money if you give too much service and don't get enough money. There's always a balance.

We knew our business model worked, and that we could make great money when we provided service our way. But when one client disrupts our entire system, we make less money on all clients.

Once again, we lost a lot of revenue when we fired this client (about $150,000), but we knew we didn't have to replace that revenue: We needed to replace the profit we were earning, which was unreasonably low. And once again, with the extra time and energy, we were able to fill that gap and grow from there.

As I mentioned before, we haven't fired very many clients. But when we have, it has always improved our business.

All comments welcome.

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Episode 45

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

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