Firing Clients? Why and Under What Circumstances

In the beginning

When Kona Impact began in 2006, we would take on almost any project (for which we were capable) for almost any client. I think most businesses start like this.

Soon, though, we learned that all customers were not equal. Most were easy to work with, paid on time, and would, on the whole, allow us to make some profit. 

Others, though, are a challenge to work with, had to be reminded multiple times about past due invoices, and, for a number of reasons, were not very profitable clients. In many cases, we would lose money on their projects. 

Now

It took a bit of a change in our mindset, but we now are more cautious about our clients. We also refer some to other providers, our way of “firing” a client.

Many have found that Pareto Principle–80% of outcomes from 20% of inputs–to be a good way to conceptualize ideal clients. Eighty percent of your profits will come from 20% of your clients. We also like to flip this principle and say that 80% of our difficulties will come from 20% of our clients. Identifying that 20%, or it might even be 10% or 5%, is how we identify clients that are just not a good fit for Kona Impact.

How to get “fired” as a Kona Impact client

Here is what we look at:

  1. Any new client that will try to negotiate a price that won’t allow us to make a profit. We might hear, “I can get this online for $XX. Will you match that price?” or “Help me out on the first project and I’ll bring you a lot more business.” Our experience tells us that if a customer won’t let you make money on the first project, they will expect the same in the future. Avoid these customers.
  2. Lying. Everyone lies to some extent, but some clients will use bold-faced (obvious, shameless) lies. They might lie about a sign we made and say it was scuffed or dented when they picked it up and we need to replace it. We double inspect and photograph all signs, so this type of lie is easy to prove. It’s a symptom of an untrustworthy person. 
  3. Revisions on revisions. Design time is one of our largest expenses, so when a customer changes something they asked to be changed and then makes additional changes on the changes, we incur excessive costs in the design process–costs we can’t often can’t recoup. When customers make changes on changes, we know they aren’t taking our time seriously. Most 
  4. Expecting designs that go way beyond the value of the project. For one $50 sign, you get a percentage of that in design time, materials, production and profit. Sorry, but we’re not in the business of losing money on projects, so set your expectations commensurate with the value of your project. You don’t get an hour of design time for a $50 sign. It would make no economic sense for us to do so, as we’d lose money.
  5. We only get small jobs from you. We had a client several years ago that would have us do 3-5 very small door placard signs a year, which we would lose money on each one. We do these small projects for clients because we want to do their bigger projects. When I inquired about doing other work for this client she replied, “I get my bigger stuff done online. We only do small projects in town.” Bye-bye!

We realize that our products, services and costs may not be right for every client. That is to be expected. There might be a provider that is a better fit, and it is our job not to continue win-lose relationships; we only want win-win.