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Tools Of The Trade
Seven Big Rules to Follow When Firing a Client

By Michael Houlihan and Bonnie Harvey, Coauthors of The Entrepreneurial Culture: 23 Ways to Engage and Empower Your People (Footnotes Press, 2014, ISBN: 978-0-990-79370-0, $9.95, and the New York Times bestseller The Barefoot Spirit: How Hardship, Hustle, and Heart Built America's #1 Wine Brand (Evolve Publishing, 2013, ISBN: 978-0-988-22454-4, $15.95)

Firing a client is one of the most difficult decisions a business owner will ever make. And when push comes to shove, few actually do the deed. First of all, firing clients goes against everything a business owner knows. Clients keep the business going. Clients put food on the table. Clients spread the word and bring in more clients. So, when you consider firing one, it feels like you're purposely harming your business. Second, it's a hard, uncomfortable conversation to have. And that's why so many business owners never do it. They just hope the bad clients will eventually go away.

But the truth is bad clients hurt your company a lot more than they help it. And often, getting rid of them frees you up to do so much more productive work toward building your business that cutting that one terrible client loose means you can bring in several other better clients.

So, how do you do it? Here are seven rules to follow when firing a client:

Do it in a measured, planned way. Firing a client should not be a quick decision. If you're angry, cool off before you even think about having this kind of conversation. And when you do it, avoid using the words, "You're fired." You need a plan. You need to know exactly what you're going to say ahead of time so that bad feelings and harsh words don't come into play. So, once you've decided to fire a client, create a plan. Think about when it's best to do it (will a project be coming to an end soon?), where it's best to do it (should you go to them or meet in a neutral location?), and how it's best to do it (what will you say?). Then do it quickly, succinctly, and move along.

Line up a replacement first. Close a new client. Then, sit your old client down and say, "We've recently begun work with a new client and due to time constraints will no longer be able to continue our work with you. We recommend that you reach out to [insert competitor]."

Phase them out. Explain that you're taking the business in a different direction, and as a result, you're transitioning away from certain projects. Bring any projects you have with them to a closing point and then opt not to renew the contract.

If you can, give them a time frame. For example, "In three weeks, Project X will be complete. At that point, we must devote our time to other clients. We wanted to let you know now so that you'll have plenty of time to find another vendor."

Hand them off. Set them up with your competition. Yes, you read that right! At first glance, it may seem odd to hand your competitors a shiny new client. But think about it. You're not exactly handing over a gem. Let your competitors deal with the client's bad habits. While they do, you'll be growing a much healthier business.

And the great thing about handing clients off to your competition is that you can do so without permanently burning any bridges with the client. Tell them, "I've changed the direction I'm taking my business. I think you'll find that [insert competitor] will be better able to meet your needs at this time."

Call it like it is. If a relationship with a client has been especially contentious, the best route may be directness. You might say, "I think you'll agree that our working relationship has become strained. I don't feel that my company can satisfy you. As such, I believe it is best if we cut ties. [Insert competitor] provides similar services to ours. I recommend that you reach out to them for your ongoing needs."

Tell them how you'll wrap things up. Clearly state how you'll be bringing your work together to a close. If any of these details are unclear, you run the risk of drawing the separation process out, which won't be pleasant for you or your client. Tell them what duties you'll fulfill and give them a hard end date. Meet those fulfillments and stick to your deadline.

Stay strong. It's not uncommon for bad clients to suddenly realize just how wonderful you are as you're showing them the door. They might start to promise that this time they'll really change, offer to pay more, give you a bigger chunk of their business, and on and on. Don't give in. Know that chances are a year from now you'll find yourself in the same situation with them. Let them go and focus your time on clients who appreciate you and your company from the get-go.