Eventually many client and customer relationships must come to an end.
However, it can be a tricky situation when the business is the party making the decision to discontinue the partnership. Service-based firms in particular can fire clients for a variety of reasons, especially when it is the type of business where ongoing and regular consultation is required, such as a CPA firm or marketing agency.
However, doing so should be managed with considerable care given the lost revenue and potential reputational damage. There are plenty of examples of when it is in the best interest for two parties to part ways. However, it should be executed in a professional way that provides an acceptable level of closure, especially for the client. After all, firing a client will impact firm revenue, its reputation, and its internal team, especially team members who spend a large percentage of their work time on that client.
Professional speaker and national business consultant Tony Robbins says on his website that the most vital piece of advice for how to fire a customer is “not to let emotions get in the way.” He recommends always fulfilling a contract, if relevant, and suggesting other options for a client, such as referring to another firm or offering access to helpful resources as part of a manageable transition.
Firing a client who does not share the same values in the personal finance and investment space is good business, according to Sean Sparkman, a principal and certified financial planner at Safe and Sound Retirement, a financial planning firm with clients in Southeastern Michigan and throughout the state.
Sparkman says relationships in his sector are largely based on personal values and shared philosophy of financial planning. He enjoys working with clients who desire financial security and seek a path to achieve their short- and long-term financial goals. However, clients or new prospects occasionally want to make “the most money they possibly can right away” which can have an adverse effect on a personal portfolio down the line, Sparkman says.
Long story short, a client should have goals that align with the financial planning firm they are using. While Sparkman does not expect a client to adhere to all his suggestions, clients who prefer to personally make their own stock and mutual fund trades may not benefit from his services.
“Our approach is that you need to consider risk and the longer-term approach,” Sparkman says. “The key thing is that you need to be open to advice so we can have conversations that (support the strategy).” Clients who don’t value such guidance can work with a stockbroker, or an “order taker” Sparkman says. They can also conduct online trades on their own.0
One of his favorite sayings in business is that it is good to “empty the cup.” According to Sparkman, that refers to being open to constant learning, whether you’re an advisor or a client. Sparkman believes one of his roles is to provide that education and guidance, which often leads to a fruitful, long-term relationship.
Jason Brown, owner of PublicCity PR in Royal Oak, says that after owning his media relations firm for 15 years, the incidents when he has had to sever a contract with a client were mainly because of client ethics or personality reasons. Brown has also discontinued relationships when the client did not treat an employee with the professionalism and respect they deserve.
Brown once had a client tell him, “I’m the client and what I say goes” before adding some expletives. Letting that client go was an easy decision. “We treat our clients, and people in general, with the utmost respect and I never want anyone talking that way to me or our team,” Brown says.
Kim Stricker is the owner and president of Detroit-based Social Motto and has been providing social media services to businesses and non-profits since 2008. Like Sparkman, Stricker believes that initial conversations with a prospect can help uncover potential poor fits. Yet she has experienced a few examples of “cutting the cord” with a client.
It’s never easy, no matter the reason, but when handled with grace and positivity, it can be a positive experience.
One common reason that Stricker has had to split from clients is because her boutique firm had outgrown them from a budget perspective. Inflation over the past two years has increased Stricker’s expenses and payroll costs, making some small clients unprofitable based on the time commitment required to service their account and their available budget.
When such a client has been identified, Stricker has sought an open and honest conversation, that always included one or more recommendations to other experts that could offer similar services.
“We’ve suggested a couple of sole proprietors in the social media space that had (lower overhead) and thus might be in a position to take a client with a smaller budget,” Stricker says. “It’s tough because these are clients we loved to work with, but at some point, you have to make a decision that is best for your business.”
Stricker and her team regularly review their client’s goals to ensure they align with the full range of services that Social Motto provides. The firm is designed to be a strategic advisor as well as a content provider in the social media space. In the past, Stricker has made the decision to let a client go when goals between the client and her firm no longer align on strategy, much like both Sparkman and Brown.
Personnel changes on the client side is a common reason for this, she adds, especially when a client team member who was involved in the decision to hire her firm leaves for another employer. Regardless, Stricker doesn’t want her team to merely serve as order takers.
“We’d rather be a strategic (resource) rather than operational,” Stricker says. That focus allows Social Motto to remain nimble and creative, while giving Stricker the chance to interact with all accounts as the top executive.
“We are learning how to be selective,” she says. “We’re looking for clients that are challenging and fun and want to go with us on a journey. Social media is rapidly changing all the time and to stay on top of (industry trends) we need to work with clients who align with our beliefs and have the budget we’re looking for.”
Several Michigan-based lawyers contacted for this article ether declined to comment about their processes for firing a client on the record while others did not respond. One lawyer contacted referred to guidelines set by the American Bar Association (ABA) outlining when a lawyer is allowed to discontinue a client relationship.
The ABA outlined the guidelines for declining or terminating representation of clients in its Rule 1.16 last published on April 14, 2020. One of the most notable reasons the ABA indicates a lawyer may withdraw from representation is if the client is believed to be taking action that is “criminal or fraudulent,” if a client request is made that results in an “unreasonable financial burden” on the attorney, or if the client fails to fulfill an obligation to their lawyers.
The key to successfully unloading a client above anything else, though, is to have an open and honest conversation, Sparkman says. Most current or prospective clients are reasonable and will agree that the move is best for both parties. Occasionally, having such a conversation may help a client “see the light” and they realize the value that Sparkman provides is significant.
Clients with higher financial net worths often have more than one advisor they use for strategic advice, which can be a popular and value-driven approach, he adds. Other personal advisors such as lawyers and accountants may also be involved in the decision-making process.
Revenues need to be removed from the equation, because business owners can always justify keeping a client on just for the money. That decision often ends up being a mistake. Brown says that revenues have little to no meaning in his decision-making, especially if there is a lack of respect for the work his firm provides. One example of this scenario is if a client goes around his firm and makes direct contact with media members rather than relying on the media relations experts at PublicCity PR.
If a move must be made, Brown always attempts to call first. An email will follow shortly alerting the client of the fact that ties must be severed.
“In all of our years, it has happened maybe a handful of times,” Brown says. “Most clients look at us as part of their team and value our knowledge, expertise and relationships we bring to the table.”
Business owners also need to have a measurement system in place to help define which clients are profitable, Sparkman says. That can be difficult in the service sector. But a client that requires a lot of time and assistance even after a relationship has been established may not be profitable if they have a smaller financial portfolio.
Sparkman says that doesn’t mean such a client should always be fired, but setting expectations can help streamline the relationship while still providing clients with the support they need to make informed decisions.
Regularly scheduled portfolio reviews and discussions regarding significant life changes, like pending retirement, loss of a family member, or creating a college fund for a loved one are recommended. However, emotional decision-making motivated by Stock Market pullbacks may signal a disagreement in investment philosophy, which can be difficult for Sparkman to justify.
“It’s like dating … you really want to help manage the emotions throughout the relationship and if that becomes difficult to do, perhaps a decision should be made that is best for both parties,” Sparkman says. “But we like to (incorporate) strategies that generate positive outcomes during ups and downs of the market. That is part of setting expectations that happens throughout a client relationship.”
Entrepreneurs also can’t worry about the public perception of firing a client if you realize it is the right thing to do, Brown says. He relies on his firm’s reputation for results and client service. One negative voice is not likely to have an impact on existing or future clients. “If (the client) is out there saying something negative about me or our firm, I believe most (other professionals in the market) will not believe them.”
Stricker laughs when she says she didn’t get into the marketing and advertising industry to “make the most money I can,” but as her firm has grown to seven professionals, she needs to make decisions based on what’s good for the company. Having worked for larger agencies before she became an entrepreneur, Stricker remembers what is was like when a large client left an agency.
“You would often have massive layoffs and all that turnover wasn’t great for morale,” she says. “It’s why I wanted to keep our firm more of a boutique size with many clients that we can provide a high level of (value) to. To me it’s a mistake to take on projects just for the purpose of revenue and growth. I like the size we’re at and never want to rely too much on one client for the (health) of our firm.”
Like Brown, Stricker referenced the need for a mutual respect between her colleagues and clients. Given her firm’s ability to remain nimble, there’s little worry over the impact of a fired client because with service and experience come new opportunities.
“I never want to be in a position where having to let a client go also means having to make (personnel) changes at our firm,” she says. “I’ve seen that before when I was an employee and I have no desire to see that again.”
If Sparkman does decide to fire a client because the strategic values do not align, he does have the option of finding another advisor to recommend to the individual or couple. Sometimes, the personalities may not match. In those cases, he has even referenced business to a family member in the industry because of the belief that it would be a better culture fit.
“The key is to do what’s best for both the client and your own business,” Sparkman says.
