April 16, 2018 | Sarah Danks
When should you terminate a client contract?
You’ve moved from “wantrepreneur” status to a full-fledged business: you have an LLC, logo, office space and — oh joy! — employees. And, of course, you have clients.
Clients are the driving force of what you do — because, let’s face it, you need them to pay you to do what you’re good at, amirite? Of course, there’s always the fear a client will fire you — or, much less dramatic, they move on to another company, or hire their own person to bring the services you offer in-house.
Scary, but it happens! It’s okay — move on to the next opportunity.
…what happens when the opposite occurs: what if you don’t like having a client as a client, and you want to end the relationship? As in, “it’s not me; it’s YOU.”
In the beginning of your tenure as a business, you’d probably take any client, regardless of whether they’re a good fit or not. You’ll know you’ve “arrived” when you have to decide whether or not to fire clients — because trust me, troublesome clients aren’t worth the headaches they cause.
It’s okay to cut them loose and move on (with a sigh of relief).
5 Reasons to Fire a Client
These examples could fit into any aspect of marketing, but they’re specific examples we’ve run across in our years of working in the online marketing industry.
1. They don’t pay their bills.
This one’s pretty straight-forward: if you’re doing work and fulfilling your end of the bargain — i.e., you’re adhering to a signed contract — and the client isn’t? Well, it’s time to sever the relationship.
Also fitting into this category: clients are abnormally needy and respond poorly to paying you for time that is out of scope of the contract.
Icky. Give ’em the ax.
2. They pull all other forms of marketing and rely solely on your efforts…
…after you worked around their existing strategy to implement yours. Which then causes you to start pulling your hair out.
Example: You meet with the prospective client and learn their objectives. They’ve got budget allocated to other forms of marketing; now they want to add pay-per-click to the mix. You agree upon terms and sign a contract.
Then, once your efforts get underway, the client pulls all other forms of marketing and begins to rely solely on your PPC efforts, (wrongly) assuming it can pull the entire weight of all their goals.
Talk about frustrating!
Doesn’t sound like a good enough reason to cut ties? Well, here’s the deal: regardless of expectations that were set upon signing the contract, our efforts just aren’t going to be enough to pick up the slack left by the void created when the client cut the budget on all other forms of marketing that were factored into the original strategy.
In other words, we’ll be unable to fulfill our original expectations we set with the client.
Now we’re in scramble mode, trying to readjust the marketing campaign and all the while the client is becoming increasingly more difficult to please. There is a level of desperation and then trust issues since we’re not “doing our jobs.” In essence, they’re putting all their marketing eggs in one basket and hoping for a miracle…
…and it just isn’t going to happen.
3. The client sets un-realistic demands.
Before we sign a contract with a prospective client, we discuss their needs, their goals and expectations, etc. After we sign the contract, we go about fulfilling those expectations. But, sometimes you can get a client that — out of the blue — starts to insist upon weird items not previously discussed or laid out in the signed contract.
PPC example: they begin threatening to leave unless you grant them exclusivity within a specific geographic area. Most notably: our own geographic area. Obviously if a client ever wanted this up front (pre-contract), we’d state we don’t do that and we’d both agree the relationship wouldn’t work and move on.
Yes, this has happened to us. No, it’s not fun to have that conversation.
4. They hire a competitor at the same time and play you off each other.
Once you’ve signed a contract and entered into a service provider/client relationship, you trust your client not to “go behind your back” and hire another company to do, well, what they hired YOU to do.
And believe me, this ties into #3 — the client is making unreasonable demands and/or not listening to what you’re telling them needs to be done in order to meet the expectations laid out in the contract.
So they start to get cold feet (or are so jaded from previous relationships with other companies) and they doubt your work and hire the competition. It’s best to let these clients go — as soon as you’ve fulfilled your contractual obligation, of course.
5. They’re inappropriate.
Or jerks. Or, both.
Seriously. Some clients are just so difficult to deal with it’s not worth the amount of money they’re paying you. Period.
Case in point: I used to work for the Mad Men (honestly). There were a couple of clients who blatantly treated me like an object — both on the phone and in person — with extremely inappropriate comments and sexual innuendos. And my boss said nothing nor took any action. Because CLIENTS! And clients equal money. And I was just a lowly employee…so what did it matter how I was treated?
Yeah. That wouldn’t fly here at my current employment. Get rid of those kinds of clients.
The Steps to Terminating a Client Relationship…
It’s all well and good to have come to grips with the realization you have to “fire” a client…
…but how do you actually go about it? Here are some things to think about, and make sure you have in order, before you have to have The Talk with a problem client.
Have you tried to work it out?
As with any relationship that’s not working, have you talked about it? Maybe there’s just a miscommunication issue. Don’t rush immediately to judgment and tell them it’s over.
That said, just because you’re making money off them isn’t enough of a reason to stay in a bad situation.
Have you already made concessions, knowing there is potential for future business? What if the next project progressed similarly to this one? Would you accept this situation again? Weigh the value of this client, if additional communication cannot turn this project around, then your valuable time may be better spent with other clients.
What are you contractually obligated to do?
What are the terms of your contract or agreement for termination initiated by you? (Do you have a written agreement for all projects? You should!)
Do you have the following breaches built into your contract? Lack of payment, unprofessional or abusive behavior, unreasonable expectations, lack of timely responses, changing scope or scale, client will not accept need for contract revisions, etc.
Ensure you have a carefully worded statement in your contract – e.g., “Termination of Contract – Provider reserves the right to terminate the contract with or without cause at any time. Fees for services rendered will be due as invoiced; any other fees or expenses will be refunded or waived.”
All it takes is for one client to squiggle their way out of payment because something’s not worded correctly in the contract for you to re-word everything carefully for next time.
How do you collect what you’re owed?
What fees or service charges have been earned and what fees will be refunded or waived? Be fair, document the services provided in detail, and the amount due and payable.
Be sure to specifically state the fees/expenses that are being refunded or waived. Provide any materials, files or work produced to the client. Consider billing and receiving payment for the services provided prior to firing the client.
Having detailed invoices, keeping everything current and leaving a paper trail will make it easy to prove payment is still owed. Most clients — even the bad ones — won’t argue with a clearly defined bill for services rendered.
Whose job is it, anyway?
Who within your firm should handle this communication and the resulting termination?
Depending upon the factors for firing the client, the person closest to the project and client — like the account manager — could be the one to handle this situation.
Or, if the situation is emotionally charged, a neutral person in the company (one effective at keeping his/her cool is helpful) should be the one to terminate the client.
Which brings up another aspect: letting them down easy.
…and How To Get Rid of Them Nicely
Once you’ve decided to terminate a client relationship, how to go about it? Given the previous communication with this client, where they’re located, and how well you’ve interacted previously, you need to choose the best form of communication to use I.e., phone call, email, letter, face-to-face conversation.
Just be sure you don’t do it on a Post-It note, ok?
In each of the five situations listed above, there’s a way to let the client go — if not gently, at least tactfully.
Here are some pointers.
1. Not paying the bills? Okay, fine, it’s time to terminate the relationship. But don’t just throw the client out the door — especially when they owe you money!
You can phrase it in such a way that their feelings aren’t hurt that you’re shuffling them out the door. After you get the final payment (and the contract is fulfilled — BE SURE OF THIS), send them a polite “Dear John” letter or email stating it was great working together, and thank them for choosing your services.
Might want to take your phone number off your signature on this one.
2. If the client stops all other forms of marketing that fit into your strategy and expects you to do it all with the original (read: small) budget, don’t leave them and you twisting in the wind.
Sure, this one can be hard to manage — again, always make sure you’re fulfilling your end of the contract before you terminate the relationship — but if they’re setting you up to fail, no one wins.
Politely tell them the original scope of work was based off all their other marketing efforts, and you can’t be expected to pull the entire weight of a marketing strategy with the budget you proposed. If they don’t understand that, then tell them you know a couple other companies you’d like to refer them to.
PS: give your friends a heads-up that you’re referring a potential problem client to them.
PPS: don’t tell your competitors you’re sending them a difficult case. Let them deal with it.
3. If the client’s setting unrealistic expectations — after you’d discussed goals and strategies, and the contract’s signed — you need to sit them down and have a chat. Re-outline the original discussion, scope of work, timeline, etc.
Gently remind them this is what was agreed upon, and you’re more than happy to answer any questions they might have. If they’re not getting it and still want you to fulfill services that weren’t included, or they want to rush the timeframe, point out the contract verbiage that states scope of work. (Again, this is important to have in place!)
Still giving you grief? Tell them due to their demands you won’t be able to help them — again point out where it states this is grounds for termination in the contract — and cut ties.
In this instance, it’d still be nice to give them the names of at least a couple other options for them to get these services.
4. When a client hires your competitor to do what you’ve signed a contract with them to do…
…that’s just wrong.
Again, sit them down and have a conversation about how this a) won’t work for them and b) it goes against the contract.
If they won’t back down and refuse to fire the competitor, tell them you’re sorry but you’ll have to terminate the relationship. In this case there’s no need to refer them to someone else, since they’ve clearly already found another option.
5. Inappropriate behavior? There’s really no need to beat around the bush here — if a client makes one off-color remark, tell him/her it’s not appropriate and please not to do it again.
If they do, you know it wasn’t just an innocent slip and they’re not going to change. Politely let them know the relationship isn’t working out and fire him/her. Immediately.
The best way to do it in this instance is via email or letter so there’s a paper trail — evidence, if you will — of the exchange and the reasoning behind it.
When firing a client, you should offer minimal and direct explanation – after all, you’ve already tried to work things through and it hasn’t worked — keep it matter-of-fact, without apology. If you are firing this client, you should have already covered what could “fix” the situation, so there really isn’t a response from the client that would change the outcome. Best to just get it over with.
When there’s potential for an angry client, know what steps you can take to minimize impact. Always communicate with professionalism and diplomacy. Stick to the high road, no matter how much mud you could sling.
Your actions should be above any reproach.
Sometimes relationships just don’t work, and that’s okay. It’s not the best outcome, but parting ways can often be the best for both parties involved.
Try to keep in mind: it’s business. You’ll get more clients — ones that are ready to build a partnership with you.