The Power of No: How to Fire a Client
Firing clients is rarely easy. But sometimes, it’s the only way to protect your accounting firm (and your sanity.)
If you’re not sure how to fire a client, it’s important to get clear about whether they’re actually toxic for your business.
When you know that they’re affecting your relationships with the great clients, it gets easier to use “the power of no” and bring the relationship to a close.
How to Identify Toxic Clients
CPA firms are facing enormous pressure to retain and attract quality staff right now. And very few people on our staff want to work with clients who don’t value them.
Of course, there’s a big difference between a toxic client and a client that you just don’t like that much. We’ll call the former our “D-class” clients, because there are 4 D’s you’ll need to keep in mind when checking your list for red flags.
If your client has 2 or more of these qualities, you may need to let them go:
- Difficult: Clients that don’t listen to advice can be frustrating, and it’s even worse when they question your competence. Over time, difficult behaviors can wear you and your team down – impacting morale.
- Demanding: “Putting the client first” doesn’t mean you’re on call 24/7 for every last-minute request. Aside from adding to staff burnout, demanding clients can also put your other clients at risk by limiting your responsiveness.
- Disrespectful: Respect is vital for any healthy relationship, and client relationships are no different. If a client frequently disrespects and insults your team, it’s one of the strongest signs to cut them off.
- Don’t pay on time: Few things are worse than having to chase down clients for your hard-earned money. It’s good to offer grace in extenuating circumstances, but if your client consistently pays late or fails to pay at all – you may need to re-evaluate their spot on your books.
Okay, So I Have a Toxic Client. Do I Really Have to Fire Them?
Yes. In fact, firing them is sometimes essential to your business.
The CPA profession is shifting to new models, like CAS and its fixed monthly fee work, more niche advisory, and virtual CFO services. Your best clients will not stick around for long if you’re too distracted to adapt.
Just think of it this way: It’s certainly not fun to fire the D-class clients, but it would be much worse to learn that an “A-class” client is leaving your firm forever.
It’s also important to remember that your team is more valuable than any one client. You have to take their concerns and experiences into consideration when building out your client list. In 3 Reasons the Customer Isn’t Always Right, Candice Galek writes:
If you’re telling a demanding customer that he or she is right, aren’t you essentially rewarding bad behavior? Don’t give bad customers – ones who are giving your staff unwarranted difficulty – more attention than they deserve.Candice Galek
Choosing Quality Over Quantity
Over the last two years, CPAs have gone to incredible lengths to help their clients survive during a rapidly-changing economic landscape.
With high inflation, increasing interest rates, and supply chain challenges, your best clients desperately need your advice again. Let’s call these A-class clients our “advice class clients,” because the A-class clients will actually want and follow your advice.
A-class clients deserve your attention. And every D-Class client you eliminate creates time to do more meaningful work for the A-class clients.
Some additional benefits of this “quality over quantity” approach:
- Shorter client lists. This may not sound like a benefit on its own. But when you’re very short-staffed, it can help to focus your efforts on a smaller group of dedicated clients. Staff will also be happier and less prone to burnout.
- More powerful results. With all that extra time saved, you can dig deeper into the A-class clients’ financials and really deliver more for them. In return, they’ll be more satisfied with your services – creating a positive feedback loop.
- Stronger brand identity. Believe it or not, your client list has a direct impact on how your brand is viewed by prospects. When all your accolades are from great clients who are deeply aligned with your purpose, you will continue to attract similar clients.
What Makes a Client a Good Fit?
A Target customer and a Prada customer may both want to buy the same thing: a pair of shoes. But each customer is prepared to pay a dramatically different amount.
This comes down to two factors: 1) The customer’s capacity to pay, and 2) the customer’s perceived value for the shoes. The Prada customer is both willing and able to pay for the higher quality. They’re a good fit for the shoes, and vice versa.
Using this analogy, we can see that many of your D-class clients just need to shop at a different store. They may not even necessarily be “bad” clients – but their expectations don’t match up, and that can cause conflicts.
How to Fire a Client with Grace
It’s easier said than done to fire someone (even when they make your life miserable.) In the early days of your firm, you may have needed to rely on a few D-class clients, and you may feel anxious about “burning bridges” or permanently losing income.
To help you make the shift from quality to quantity, here’s how to fire a client with professionalism – no bridge burning required.
1. Explain they are “shopping in the wrong store”.
One of the easiest ways to let a client go? Explain that between your current service levels, pricing model, and time constraints, it will be difficult to continue working with them.
This approach is a version of the classic “it’s not you, it’s me” talk, and it works well to soften the blow by focusing on your firm’s capacity. You can also recommend a firm better aligned with their needs.
2. Be straightforward about the scope issues.
Let’s say the client has been exceptionally demanding and asked for out-of-scope work that does not fall within your agreement.
In this case, it’s best to be clear and direct. Say that the requirements of their project no longer align with what you do, and recommend an alternative firm.
3. Say that you’re moving in a new direction.
It may sound like an excuse, but it can also be true: The toxic client no longer aligns with your firm’s strategic direction. This approach is best when you don’t want to get into the details, but you still want a clean break.
4. Increase your fees.
If you’re firing a client due to a numbers problem or late payments, you can always try increasing your rates. In the best-case scenario, they will pay up and you will finally be compensated for your time.
Thinking about giving that late-payer a second chance? You may want to consider offering them a payment plan so they can pay in installments. In our 2022 Payment Plan User Survey, we found that 77% of clients think it’s important for an accountant to offer these options.
Firing the “Bad Fits” Can Be Liberating
At a CPA conference I attended years ago, the speaker was leading a session on client selection and the importance of getting rid of bad clients. Less than an hour into the session, one accountant stood up, left the room, and returned 10 minutes later.
The accountant looked quite happy when he came back, so the coach leading the session asked what happened. He replied with a huge grin: “I’ve just fired my biggest client and I’ve never felt better!”
It’s an extreme example, but one of the great things about having your own business is that you have every right to choose who you work with. In this specific example, the temporary risk of reduced income was replaced with happiness.
Our e-invoicing solution also liberates your time so you can focus on your best clients. Learn more about it here.