Firing Clients the Right Way: Knowing When to Let Go
In this episode of A Look Into the Future, Paul Latham from Hayden Rock Solutions explores a challenging topic for accountants: firing clients. While client turnover is natural, sometimes it's necessary to take control and let go of clients who aren’t the right fit. Paul shares insights on defining the ideal client, establishing boundaries, and gracefully disengaging from clients who don’t align with your firm's values.
The Importance of Defining the Right Client Mix
Paul emphasizes that not every client is meant to stay. To create a balanced client base, it’s essential to define the type of clients you want to work with. Early in his career, Paul accepted any client who walked through the door, but he eventually realized that a selective approach would lead to a more sustainable, enjoyable practice. Paul encourages firms to focus on clients who align with their values and goals, ideally those who:
- Meet Revenue Criteria – For example, only accepting business owners with a minimum revenue threshold.
- Have Strong Vision and Desire – Paul asks new clients about their vision, plan, and desire, with desire being a non-negotiable.
Four Scenarios for Firing Clients
Paul identifies four main scenarios where firing a client might be the best course of action:
1. Pre-Qualification: Firing Before They Start
Sometimes, you can identify a client as a poor fit before they even sign on. Paul explains that he often “fires” clients before they start by assessing their vision and commitment. If a client’s desire doesn’t meet the firm’s standards, he advises them to return when they’re truly ready for a collaborative relationship.
2. Natural Wastage: Reshaping the Client Base
As part of maintaining an ideal client mix, Paul suggests a process of “natural wastage.” For every new high-value client, consider letting go of lower-value clients. This approach allows firms to refine their client base without drastic measures. Paul shares how his firm celebrated new clients while also releasing clients who didn’t align with their long-term vision.
3. Scope Creep: Addressing Misaligned Expectations
Clients sometimes push boundaries by expecting more than what was initially agreed upon. Paul recommends setting clear scopes with “fixed-fee” structures and making it clear that additional services come at an added cost. If a client continues to ask for more without adjusting fees, it may be time to part ways.
4. Values Conflict: Clients Who Don’t Respect the Team
The final category involves clients who mistreat staff or otherwise conflict with the firm’s values. Paul shares stories of clients who were abusive to his team and how he promptly dismissed them. Standing up for team members not only protects morale but also reinforces that the firm values respect and integrity.
Strategies for Firing Clients Effectively
Paul offers several strategies for handling client disengagement in a professional and respectful manner:
- Raise Fees – A straightforward way to signal a misalignment is to increase the client’s fees. If they stay, the additional revenue offsets any issues; if they leave, it’s a clean break.
- Set Boundaries with Scope Definitions – By clearly defining service levels upfront, firms can avoid misunderstandings and pushback when clients ask for extra services.
- Use Disengagement Letters – For more formal disengagements, a disengagement letter keeps communication brief and professional.
When Converting a Client is Possible
While most cases lead to disengagement, Paul highlights situations where it’s possible to convert a challenging client into a good one. By setting firm boundaries or increasing fees to reflect added value, some clients can be persuaded to align with your firm’s expectations. Although rare, these instances can strengthen the client relationship and reinforce your firm’s values.
Conclusion: Know Who You Want to Serve
Firing clients isn’t just about removing difficult people—it’s about creating the right client mix for a thriving practice. By defining your ideal client, setting boundaries, and knowing when to say goodbye, you can foster a client base that aligns with your firm’s goals and values. Remember, the ultimate goal is to work with clients who respect you as a partner, not as a servant.
