Meetings & Conventions: Firing a Client December
Firing a Client
How to recognize when it's time to cut your losses
BY MARIA LENHART
When Bonnie Wallsh first hung out her shingle as an independent
meeting planner, she had the idealistic notion that every client's
business was worth whatever it took to make them happy. But 19
years of experience has taught her otherwise. She has learned to
identify what she calls "toxic clients" and to sever ties with
those who may be hazardous to the health of her business. "You're
better off without them," says Wallsh, president of Bonnie Wallsh
Associates, Ltd., in Charlotte, N.C. "They sap your energy and they
literally poison your life."
What makes a client toxic? For Wallsh, one was a nonprofit
organization whose director made demands she considered unethical.
The problem first surfaced during a meeting in Montreal where
registration fell far short of the room blocks at four hotels. "One
hotel quite reasonably wanted us to release the rooms we didn't
need, but the client refused," says Wallsh. "I had loyalty to my
client, but I felt the supplier was being treated unfairly."
The same problem soon resurfaced during a meeting in Cleveland.
Again, registration fell short of the room block, and the client
not only refused to release any rooms but also wanted the hotel to
waive meeting room charges, claiming inconvenience because one of
the elevators didn't work. "Once again, I was in the awkward
position of agreeing with the hotel, not my client," says Wallsh.
"We had serious philosophical differences that were threatening my
relationships with suppliers, not to mention compromising my
Wallsh further describes toxic clients as those whose demands
are unrealistic, both in respect to what her time is worth and what
a meeting should cost. "I believe in exceeding expectations and
providing top service, but some people take advantage of that," she
says, recalling one client who required her to rework the estimated
meeting budget 10 times. "It was very poor use of my time."
Equally vexing was when the same client, against Wallsh's
advice, decided to allocate just $1,000 for a wine-and-cheese
reception for 300. "You don't have to be a genius with numbers to
predict that we would run out of food," she says. "It put me in a
situation that I hate to be in. I take pride in what I do, and I
don't want to be associated with a bad meeting."
Ultimately, Wallsh had to let both clients go. She honored what
was left of multimeeting contracts and then, with plenty of advance
notice, referred them to other meeting planning companies (she had
contacted colleagues in advance who were willing to take on the
business). That was more than a year ago, and Wallsh has no
Quality vs. Quantity
Was Wallsh being too picky or was she simply using good business
sense? Management consultants agree that trimming your operation of
unprofitable or exceptionally difficult clients ultimately
strengthens your business. "It's tempting to assume that it's
quantity of business that counts, not quality," notes meetings
industry consultant Bruce Tepper, partner in Joselyn, Tepper &
Associates in San Francisco. His own experience has taught him that
"getting rid of an unprofitable client can be best for the bottom
line. If clients are too demanding or won't pay our rates, we don't
However, determining which clients to nurture and which to show
the door is not always easy. Chicago-based consultant Ramond
Silverstein, president of PRO: the President's Resource
Organization, recommends taking three factors into account:
profitability, long-term business potential and "the hassle factor"
-- how difficult it is to deal with that client.
To determine profitability, take a hard look at the client's
ability to pay for your services and how quickly the client pays.
"Do some research on any new client and ask for financial
references," says Silverstein, adding that sometimes the largest,
most financially sound clients may be the worst offenders when it
comes to settling their accounts. "Large companies sometimes delay
payment because they feel they have the clout to get away with it,"
he notes. "That can wreak havoc with your cash flow."
Back away from any client who takes too long to pay or asks for
too much credit, Silverstein advises. "Too much tied up with a
client could mean real trouble if they declare bankruptcy or suffer
a setback. If they go down, you could go out of business."
A Matter of Time
Financial responsibility is only part of what makes a piece of
business profitable. The amount of time spent serving each client
and the fees involved are also major considerations. David Hakins,
president of Hakins Meetings & Incentives, in Wyckoff, N.J.,
believes so strongly in this that his company has set up an
automated accounting system that tracks each and every expense
involved with a project, including the number of hours spent on the
"Each staff member has an hourly billing rate, and, regardless
of whether we are charging on a cost-plus basis or on a fee basis,
we track the hours," says Hakins. "This allows us to determine the
profitability of each account and also gives us an idea of what we
need to charge for future business."
Sheer profits are not his only concern. "It's not cut and
dried," says Hakins. "You have to balance a lot of factors." Among
them: long-term business potential. Says PRO's Silverstein, "If a
client isn't too profitable at the moment, they might be in the
future. Clients with growth potential are worth retaining, even if
they're not as profitable as others." But if a client is squeezing
your profitability, even the promise of getting more business won't
be worth the effort, he warns.
Perhaps the biggest drawback to retaining toxic clients is that
they take valuable time and energy away from attracting and
servicing a better class of business. "It's a matter of defining
who you are and where you want to be," says Steven A. Jacobs,
president of Conference Solutions in Lake Zurich, Ill. "From there,
you can determine who you want to do business with."
But while such a philosophy may work for well-established
planners, can those who are just starting out afford to be choosy?
Jacobs, who founded his company three years ago, admits that in the
beginning he took everything he could get. Now, however, he is more
selective. "I prefer to concentrate on clients who want a full
range of services; if I take on piecemeal projects like
registration, I get bogged down in busy work," he says. "That
leaves little time and energy to focus on the business that I
really want." But rather than flat-out rejecting clients, Jacobs
refers them to colleagues whose specialties are a better fit. "My
colleagues, in turn, refer full-service business to me," he says.
"No one loses out."
Specialization is key, says management consultant John Boyd,
president of Transformation Management, Inc., in Dublin, Ohio. He
recommends that new meeting planning firms define themselves
carefully and avoid taking on clients they're not equipped to
handle. "Consider your expertise. If you work primarily with
low-tech clients who are happy with an overhead projector, think
carefully before jumping into a high-tech project. That doesn't
mean you can't grow in new directions, but don't misrepresent what
Conversely, it doesn't always make sense to keep the clients
you've outgrown. "Perhaps you've done a booming business with state
associations, but are now branching out into more lucrative
national accounts," says Boyd. "You want to focus on more
profitable business. You also recognize that hanging onto some of
your smaller clients won't allow you to grow."
Gently wean away business that is no longer worthwhile. "Explain
your situation and refer them to a reliable company that wants
their business," he says. "Hand them over, but allow them to call
on you for help or advice for a year or so if the need arises."
Can You Say No?
Depending on the circumstance, it may be necessary to try to
work things out before calling it quits. "For many independents,
it's not realistic to just drop a client cold, no matter how often
we may mumble about doing that under our breaths," says planner
Sheryl Sookman, president of Sookman & Associates in Novato,
Calif. "You may have invested a lot of time and effort in that
client and you may not have work to replace it right away."
The answer may be as simple as raising your fees. "When we find
that a client is unprofitable, we level with them and explain that
we need to meet our margins," says Hakins. "In some cases, the
client is willing to pay more for the next project. If not, they
have the opportunity to move on."
"Some clients are only too happy to pay more money," notes
Tepper, recalling the experience of a colleague who tried to unload
a client by asking him to pay an "aggravation fee" of 25 percent
above the usual charge. "Not only did the client go for it, he was
proud. He bragged to everyone, 'I'm so difficult to work with, I
get charged 25 percent more.'"
A Gentle Goodbye
Of course, it's best to end a professional relationship without
animosity. "The industry is too small to make enemies," says
independent planner Sherri Cook, president of Sherri Cook &
Associates in Plano, Texas. "And people change jobs all the time --
you never know when you may be working with someone again."
Ideally, the client should view the parting as a mutual
decision. "Never let a client know that you don't want their
business," says Cook. "It's better to convince them that you're
acting in their best interest. Explain you're not the best person
to handle their needs and why they would be better off with someone
else." Along with diplomacy, timing is important. "Give the client
plenty of advance notice -- don't call someone up on Monday and
tell them they're out on Tuesday," says Hakins.
Here's the Door
Of course, some breakups are uglier than others. "If clients are
really bad, if they verbally abuse you or create dissension among
your staff, just cut them off," says Boyd. "I had one client who
made sexist remarks to female staff members. I spoke to him about
it, but the problem resurfaced at a meeting. I just got up and
Consultant Odette Pollar, owner of Time Management Systems in
Oakland, Calif., also believes there are times to cut your losses.
"If the client is asking you to do something illegal or unethical
and won't take no for an answer, get out of the situation
immediately," she says. "When you get a knot in your stomach, trust
Business You Can Live Without
Enough grousing: Is it time to let that pesky client go? Ask
yourself these questions, compiled from veteran planners and
management professionals. More than one "yes" answer may mean it's
wise to say goodbye.Is the client verbally abusive or otherwise unpleasant to work
with?Does the client have unrealistic expectations of what you can
provide for the price he is willing to pay?Does the client impose unethical demands on you or your
staff?Is the client's business more time-consuming than other jobs
with similar fees?Does the client fail to pay bills for your services on time and
in full?Is this job outside your area of expertise or the direction in
which you want to grow? * M.L.
Making a Graceful Exit
The breakup may not have been mutual, but here's how to present
it as such.Have a reason.
Two examples: 1) Your services
are too costly for the client's needs. Based on their budget and
your overhead, you simply can't provide them with the services they
require; or 2) Their requirements do not fall into your area of
specialty, and they would be better off with another planner.
Give the client plenty of
advance notice before terminating the relationship. Complete the
projects you have committed to, then go your separate ways.
Drop a lifeline.
Offer to refer the client to
another planner who may be interested in taking on the job. A
business relationship that didn't work for you may be fine for
someone else. * M.L.
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