How to Fire a Customer

Posted by Deepshikha Shukla

Although every business needs customers to succeed, sometimes having particular clients on board can be more trouble than they’re worth. If a client is causing you and your business undue issues, it is probably time to tactfully let them go. An entrepreneur’s goal should be to end the relationship gracefully and preserve their business’ reputation in the process. Try not to burn any bridges with these clients along the way if possible.

The way business owners approach firing a client will often depend on the issues they experience with them. Therefore, it’s worth taking some time to consider justifiable causes for firing a customer.

Here, we’ve listed different situations where firing might become necessary, along with steps and strategies to help you fire a customer professionally.

Chronic Complainer or Overly Demanding – Such clients rarely appreciate you or your business. They often consider your service or products either too expensive or not good enough. They tend to request more and more changes to the work beyond the agreement.

Costly and Time-Consuming – Sometimes, a customer is not a great fit for your business. Such customers can take up more time for less money and contribute the least to your business’ income. It can be a waste of your resources and effort to spend too much time on these customers.

Late- and Non-Payers – These customers tend to prolong your accounts receivable amounts. Their remaining balance steadily increases with each passing year. It's better to avoid such customers and instead focus on more consistent customers.

Unethical Behavior – Most of the time, it’s worth making the extra effort to fix unsatisfied customers’ problems and keep them happy. However, there’s never a good reason to put up with abusive behavior. You’re more productive by working with customers that operate in an ethical manner.

Steps to Firing a Customer

Firing a customer is an uncommon business proposition; however, businesses can take the following steps to ensure that the separation goes as smoothly as possible so the customer doesn’t damage your business’ reputation or cause other problems down the road.

Step 1: Confirm You’ve Exhausted Other Options

Before firing a customer, it’s necessary to ensure that there’s no other option left. Review every support ticket or complaint, and get feedback from account managers and any team members who have worked with that customer during the relationship period.

Step 2: Check Your Agreement Letter

If firing a customer seems like the most beneficial option, investigate all repercussions. Check the terms and conditions you have in place with that customer and make sure you strictly adhere to what you’ve included in your contract. Consult a lawyer or your company’s general counsel to understand any legal implications and liabilities.

Step 3: Consider the Potential Financial Gains or Losses

Before you end a customer relationship, thoroughly assess the financial risks and benefits of the choice. Consider the possibility of issuing a partial or complete refund, if required according to your Terms of Service. A refund will help you bring the relationship to an end in a cordial manner.

Step 4: Finish the Project

Try not to fire a client if you’re in the middle of a project or would be in breach of your contract. Ending a contract before time’s up may require you to take less pay or to return a deposit from the client, among other consequences. Clearly explain all the details of how the relationship will end to your customer.

Step 5: Pick the Right Person and Channel to Communicate

Ideally, it should be a mutual decision to part ways, where both parties agree that not doing business together is the best path forward. However, that’s not always possible, so any client termination should be handled by leaders with experience and confidence to deal with such situations. A business should use the most personal method of communication, such as meeting in person, video call or phone to fire a customer.

Step 6: Communicate Politely, Professionally and Cordially

Communicate the end of the relationship with empathy and firmness. Maintain your integrity, and always be polite, professional and appreciative – even if your client is not. Don’t play the blame game, just explain your reasons rationally for terminating the relationship. You should follow up with a phone call to talk your client through the process and answer any queries. Resist the urge to talk publicly about the customer you had to break up with to avoid potential slander and libel claims.

Strategies to Phase Out Bad Customers

If you have determined that a customer is no longer worth your time and there aren’t any alternatives available, you must offer them a graceful transition plan out of your business. You can consider the following strategies to subtly end the relationship with them.

Increase Your Job Bids – Increasing fees or adding additional charges for excessive support or requests might solve the problem. Most likely your customers won’t accept your increased bid. If they agree to the increased charges, they may become your most profitable customer, buying you more time to review their status.

Show Your Occupancy – Start by thanking customers for their business. Tell them that due to time constraints, you will no longer be able to continue work with them. If you’ve spent more than the time you agreed upon at starting, then say that you're unable to service beyond the contract.

Scale Back – A convenient excuse will enable you to exit your client relationship without a confrontation. Explain to your customer that you’re taking the business in a different direction or you’re not a good fit for their needs. Provide enough time for your customers to find a new provider.

Wait Until the Contract Expires – When the contract with the customer ends, simply don’t renew it. When you're sure all contractual obligations on your part have been met, prepare and send a termination letter.

Offer a Referral – Explain to your customer that you feel they would be served better by someone else and you're just not the right fit for them. Recommend and redirect the client to another business or firm that may be a better fit for them. Doing so will lower the chance that they will spread ill will about your company and make parting ways feel like a mutual decision.

Explain the Problem Clearly – If your client has done something so outrageous it needs to be addressed, you need to tell them straight away and in no uncertain terms. Inform customers about the difficulties that you’re facing with them and why you can’t deliver on their expectations anymore. You can minimize the likelihood of a misunderstanding with a clear explanation.

The only consistent thing in business is change. A company’s budget may increase or their team or leadership may shift with time. Therefore, try to leave on the best terms so you can keep your options open in the future.

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