Time to sack clients?

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The Imprudent Accountant
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Accountants are now consistently giving out a message that the main constraint on growth and increased profitability is the difficulty in recruiting competent staff. 

In the past, the biggest difficulty that firms faced was generating profitable new work and so personally I take the latest statements with a pinch of salt since, in my experience, very few practices find generating new business that easy.

Having said that, if one can accept the principle, looked at coldly, if you cannot get work done due to lack of resource then the best thing to do is to increase resource. If that is impossible then the next step has to be to reduce volume of output - ie sack clients.

Assuming that you have 10% overcapacity, the theoretical solution to all of your troubles must be to ascertain which are the bottom 10% of clients, ie those that generate the smallest profits, and politely ask them to take their business elsewhere. In this way you will immediately boost profits and quite possibly reduce hassle, since the least profitable clients are frequently also the most awkward.

This proposition does the rounds at most accountants on a regular basis but few have the courage to grasp the nettle and write to the undesirables saying goodbye.

One way of softening the blow might be to enter into an informal agreement with a smaller practice (or regional office), which can service your unprofitable clients with a lower cost base. In that way, everybody might be happy. As a quid pro quo, the recipient might not be able to offer some services that your practice can and may happily pass across discrete projects.

There is another alternative. My spies at AccountingWEB’s Practice Excellence Conference inform me that one of the speakers was advocating a 100% increase in fees for clients that are only of marginal benefit. Clearly, if the clients double the fees then they become worth knowing. More realistically most will depart without too much rancour. However, what they say about you behind your back may not be quite so friendly and could influence the actions of existing and prospective clients so take care.

I love the theory that sacking clients is a universal panacea. However, real life is not always like this. First of all, pretty much every firm with which I have worked has been neurotic about losing clients and can always see the benefit in keeping almost all of them. Recently, I was part of a massive exercise to retain a client where recovery rates struggled to hit 30%, even on valuable strategic projects where one would not normally expect to be discounting rates at all. It goes without saying that everybody involved in the project was moaning about the ability to recruit enough staff to get the current level of work carried out on a timely basis.

Over the years, my best clients have often been those that started out slowly and could not afford to pay decent fees in the early days. In addition, building strong, lasting relationships with clients is the way to optimise your business in the long term, since happy clients will refer you to their friends, ensuring solid future growth.

The other risk is that if you sack the bottom 10%, another 10% leave of their own volition for an assortment of reasons at which point you are only running at 90% of capacity. I have no doubt that many readers will blithely conclude that this will give them time to bring in lots of new clients. In the current economic climate, that may will be a possibility but as an experienced accountant who has seen far too many recessions and dips in trading, I would not want to stake my house on it.

About The Imprudent Accountant

About The Imprudent Accountant

Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.

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30th Oct 2017 11:58

I've sacked several clients over the past few years and have found it generates mixed feelings:

1. Glad to be rid of that liar/cheapskate/bullsh1.tter - delete as appropriate
2. 'I knew I should never have taken them on in the first place'.

Loss of income has never been a driver. Having an inappropriate client has a detrimental effect on the rest of your work. That feeling of dread of having to deal with them.

A 100% increase in fees is not the solution. If you just 'don't like' a particular client - easy - don't work with them.

My 'liar/cheapskate/bullsh1.tter' detector is pretty good now so I usually manage to turn away 'undesirable' prospects who will be better suited to working with the practice 'down the road'.

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30th Oct 2017 15:59

I agree about not upping the fee for an undesirable client. I did this for a prospect who my radar had detected as awkward. She only flipping well accepted! After a year or so, she did turn out to be trouble, threatening to report me to ICAEW.

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30th Oct 2017 23:32

Interesting blog. I remember sacking my first client who was turning into a nightmare. I was chewed up for days before but was like a new man after I bit the bullet and bombed him out, so much so I sacked a few other in quick succession.

The tool Kent uses is very good but I haven't quite refined the 6th Sense he has for spotting the 3 types of client to avoid. I probably filter out a third of prospects at the initial contacts stage, but I have signed up quite a bit of work lately and I suspect a few have slipped through the net which will have to be dealt with.

I also note that some of your best clients are the ones who started out slow and unable to pay high fees, but you worked with them to build a lasting relationship with them, as every other blog on here seems to be about how to double your client fees and tell them its value or an advisory service they need despite just been a window cleaner.

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31st Oct 2017 09:16

I regularly sack clients and I cant say I have ever regretted it.

This is mainly for "emotional time", that is to say not actual time spent, but when you find yourself thinking about them "out of hours" or are forever having to spend 5 minutes here and there chasing up which then distracts from what you are supposed to be doing.

Those are the real stress clients for me, its not about the money, but be removing them you tend to be able to substantially increase fees in the time you have previously spent on them.

"We are not the right accountants for you" should be a key phrase uttered in the first 10-15 minutes of a prospect calling you up.

Of course if you get it wrong, you don't know as you didnt sign 'em up!

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31st Oct 2017 10:22

The problem is with sacking clients is that you never know who they are connected to and what future referrals you are missing out on.

Some of my best clients have come from referrals from 'problem' clients.

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31st Oct 2017 12:44

Increasing fees when you want to continue with the client but need to recover the time they are taking up is fine.

Increasing fees to 'get rid' is cowardly and unprofessional.

Maybe this is why all this talk about "professional courage" is required, since some seem to lack the necessary backbone.

You can sack a client in a polite and professional way you know.

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04th Nov 2017 10:05

May I add to this blog by directing to an article which goes into detail as to 'who should go and who should stay?'. https://www.accountingweb.co.uk/practice/general-practice/when-and-how-t..."
The article also considers the practicalities of sacking a client and describes the process of disengagement.

Kent is absolutely right...I agonized for ages as to whether I should get rid of one particular client who was such a pain and a worry that in the end he made me ill. I've done it now and feel elated.

The first time you sack a client is scary. I dont think the increase in fees is worth it. They may stay anyway and you've still got them albeit with more money coming in.

Sacking the bottom 10% is also something that might be difficult to do. Nearly all of my bottom 10% clients are a joy to deal with, are appreciative of what I do for them and have been with me for years. Invariably the reason that they are at the bottom 10% is that they have reduced their businesses and possibly are retired doing a bit of work or lettings etc. The profit margin actually being not bad for the minor amount of work involved.

You need to remember that you are spending time on this painful client - time that could be spent elsewhere.

Jon rightly comments that you dont know who knows whom amongst clients but invariably I find that should it get out that I have sacked a particular client then those connections agree that that person is a pain.

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By Ammie
07th Nov 2017 10:47

A very interesting article.
With challenging times ahead the efficiency of the professional practice will need to improve and that will involve dealing with clients that drag you back and drain the energy from you.
There will be a lot of awkward clients reaching the point of being unable to appoint a quality professional and turn to the less desirable practice which will fuel their character and attitude further.
The first time I "sacked" a client it was difficult but I went on to part with more and despite loss in fees I was happier for it.
The only way forward is client quality not quantity. Easier said than done.

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