Three Good Reasons To Fire Clients In A Tough Market
Remember your initial training? If you're like most, you got the message loud and clear that if someone could fog a mirror, he or she was a "prospect" who should be pursued. It was your job to bully, b.s., and generally bother them until they said yes. You were to be flexible enough to offer them whatever they wanted (so long as it wasn't that you'd stop pestering them). And when, lo and behold, you landed yourself clients, you were to serve them regardless of how unreasonable they became. To keep their business, you were to accommodate every whim, no matter the cost.
With that in your background, it may be hard to swallow the idea that being more selective and even more demanding of your clients will actually make you more successful. What's more, firing clients who don't meet your standards is a necessary part of growing beyond the do-anything-for-you mentality of the salesperson.
Take a minute to digest this. It may be true that jumping when they say jump actually sells more aluminum siding or used cars or vacuum cleaners, but it's a shoddy business practice for someone who aspires to be something more than a salesperson. Trusted advisors seek out a finite number of clients who fit a strict set of criteria-including both a financial and psychological profile, as well as predictable minimum annual recurring revenue-so that the business becomes populated not only with people they can serve well, but with people they enjoy serving, and who provide the necessary income for the business to flourish.
Getting rid of any clients who are a drag on your time and energy and whose financial contribution to your business doesn't far outweigh their cost is just the right thing to do for you and the rest of your clients. You do the math: Take a look at what certain difficult clients net the business, and then consider how much you have to put up with in these relationships. This calculation is what we affectionately call the "pain in the butt to revenue ratio." Of course, you also have to factor in your business's financial outlook, but you get the picture. Of the thousands of financial professionals I've coached in the art of disengaging gracefully, I've never heard one of them say it was a bad idea. In fact, most have said it was the single most important career move they've ever made-and the most gratifying.
You might be wondering, "How does this help me make more money right now? Whatever time and energy I might put into firing people-shouldn't that just go into getting more of the right kind of clients? Can't I just let sleeping dogs lie?"
Well, sure. If you have "sleeping dogs"-clients you never hear from but who aren't really right for your business in the long term-maybe you should just let them snooze while you focus on generating new business. But here's the risk: They come out of hibernation angry because you've been ignoring them and calling yourself their advisor. The risk is they wake up and start sucking your time. The risk is that even if they don't take your physical time, there's a certain amount of guilt and mental energy that goes into maintaining these people. I'll bet there is at least one client you could fire today and actually profit by the experience. Here's how:
1. You can recover the real costs to you and your business. Never mind the psychological costs. But how about the time these people waste? Time that could be better spent on following up with new client referrals, developing yourself professionally, serving clients who appreciate what you're doing for them, improving business systems-all of which contribute directly to the bottom line.
2. You can capitalize on the current environment instead of suffering from it. Today's economic climate provides you with the opportunity to create the kind of business you really want, to generate more revenue. As you labored through the recent bear market, no doubt your clients showed their true colors. Is there any evidence that it's time to disengage from someone? I'm not suggesting you just dump everyone who's irritated you in the last two years and start all over (though maybe that is exactly what you'd like to do). Because I understand the economic realities of this profession, I realize that some people do bring in too much money to consider firing them right now. But it's a rare business that doesn't have a few clients who are real pains in the neck and who don't bring in enough revenue to justify keeping them on. That's the easy decision. That's where to start.
3. You can redefine your relationships and re-examine your strategy. Maybe it's been a long time since you set the ground rules with some clients. Maybe you never did. Now's your chance.
The conversation does not have to be a confrontation. You don't actually have to announce, "I'm firing you!" to anyone. Instead, you can present it as a choice. Share your ideal client profile and explain, "We are restructuring our business and focusing on serving a specific type of client from now on. So far, you haven't met all of these criteria, and I wanted to talk with you about that to see what the best course of action will be for both of us going forward." For example, if the problem is they haven't met your minimum asset criteria, you can give them an opportunity to change that by moving assets if they have them. If the problem is they have been unwilling to follow your advice, you can give them an opportunity to change that, too. If they can't or won't make a change, then you can make a graceful exit with a referral to another advisor. But if you don't know anyone to whom you can confidently refer people, that doesn't mean you need to keep them on. Let them go, and they will find their own way. It's best for both of you-and the rest of your clients, too.