How to Manage Clients Out

Earlier this month I wrote a post for EBN about how to manage your company and clients when the classic 80/20 rule applies.  That is, when a small number clients generate 80 percent (or more) of your revenue.  In the post, I made the recommendation to manage clients who are not a good fit with your model out of your portfolio.  Several people responded to the post asking how to go about doing this.  Here’s how.

Once you have determined that a client is not a good fit with your model, manage them out. Managing a client out of your portfolio is tough, tricky, and essential for you and for your client. If your client isn’t the right fit with your model, then you will not be able to provide your client with the best service.  This is the crux of the issue.  You, as a company, need to do the best job possible for your client. If the client doesn’t fit your model, you are not doing a good service by keeping the client in your portfolio.

Saying good-bye

Begin by doing a thorough audit of your relationship with the client.  Identify why the client doesn’t fit your company’s model.  That is, pin-point the disconnect between your client’s needs and what your company offers.  As you do this exercise, look at the relationship with your client over time.  Have you grown apart as your businesses have changes/grown?  Has the relationship never been a good fit?  It is important to drill down and truly assess the relationship.  Document everything.

Next, set up a meeting or a call with the client – breaking up over text or email is unacceptable.  Begin the conversation with honesty and tell the client that you believe they could receive better service and better value if they worked with a company that better fit their model.  If possible, provide the client with names of companies that would be a better fit.

Talk with the client about putting together a transition plan.  Let the client know that the relationship isn’t over immediately and that the lines of communication will always be open.  Alleviate fears that the transition will be difficult.

It is vital that when you talk with the client, you talk about your client’s needs and focus on these.  For example, look at the difference between these two approaches:

#1: You tell your client: “Your business is a niche company not only in terms of product offering but also in terms of location.  I have really enjoyed working with you and watching your company grow.  Because I value you as a client, I believe you would be better served by a company that is well-positioned in the Atlanta metro area and really knows the model car industry.  We just aren’t that company, and I feel we are holding you back.”

#2: You tell your client: “Your business isn’t right for my company.  We don’t have the time or people to devote to your needs.  Our model and yours doesn’t match, we need to recognize this and move on.”

Approach #1 shows your client you understand their needs and that you value the relationship.

Breaking up is hard to do, but if you do it right you will likely receive a call down the road from the client thanking you for breaking up with them.