Breaking up with clients isn’t always easy, but it is possible

It’s fair to say that break-ups with clients who have engaged your service are rarely easy and often uncomfortable. Nevertheless, you’ll sometimes need to break up with a client despite these challenges, writes Shalini Nandan-Singh.

Don’t ignore the red flags

When you start working with a new client, especially as a small business, you may occasionally ignore red flags or take on clients who don’t fit your usual niche. These red flags might look like unreasonable deadline requests, repeated comparison of your service with others, repeated complaints about your pricing structure, and insisting on add-ons to the agreed scope to ‘get our money’s worth’.

Once the scope is confirmed and agreed upon, an occasional reasonable request by a client is entirely acceptable; however, sometimes, there are differences in opinion over scope, deliverables, pricing and values that cannot be resolved.

And yet, we continue to accept a client despite the red flags flying. It’s understandable when you are new in your business. Of course there are bills to pay, but you are eager to sell, and someone is ready to say ‘yes’ to your offer. There are times when you can work through these challenges with demanding clients and come out to the other side successfully, having completed the job and been paid.

TIP: Don’t ignore red flags in a business relationship. Take time to understand where these concerns are coming from and address them quickly. 

Do you need to break up with your client?

In other cases, the client relationship becomes toxic, your client journey is upended, you start dreading communication; or the client ghosts you, and you realise that if you ever needed an exit clause, this was the time. You need to break up with your client.

It’s perfectly ok to recognise that you have a client you can’t work with any longer. Here are some behaviours that can often signal the beginning of the end:

• The client repeatedly tries to renegotiate your fee – once is ok, but every other week is not.
• The client indicates directly or indirectly they are a better judge than you of your estimation of your time and effort – e.g. “It won’t take you more than an hour to do that!”.
• The client suggests they would do the work themselves if they had the time – they don’t have the time, so the choice is theirs.
• The client repeatedly questions your advice or expertise or insists you do it their way, even though that is not your advice.
• Your values don’t align with the client’s, either personally or professionally.
• The client does not pay within your business terms (especially if this is repeated behaviour) or ignores the terms altogether.

These red flags could suggest that the client may not be a good fit for you – personally or professionally. It can also indicate that the client will never value your work appropriately and lacks an understanding of your skills.

How do you manage a business break-up?

The strategy you take to break up with a client can depend on why you are firing them in the first place. I never recommend artificially inflating prices or referring them to someone else.

Clients and customers talk, and artificially inflating your prices to avoid refusing a client throws your pricing to potential clients into uncertainty and is not a long-term solution to handling red flag clients.

The best way to break up with or terminate a client, legally and professionally, is through your contract, which a business contract lawyer should write. Your service contract is your best friend when managing a difficult client. A well-drafted service agreement will enable you to manage the relationship from the start of the engagement.

TIP: Engage an Australian small business lawyer to draft your custom small business terms and conditions, or consider a template client contract if appropriate for your business services.

Contract clauses should cover communication protocol between you and the client, specific steps to manage changes in scope (i.e. confirmation in writing and when payment terms are) and, importantly, an exit clause to give you the ability to exit the contract and relationship at any time on your terms.

Does your current service agreement or client contract have an exit clause that allows you to cease working, get paid for your work to date, and recoup any additional expenses without a long and drawn-out battle?

If your service agreement doesn’t have an effective exit clause, it could pay to seek small business legal advice before having the break-up conversation with your client.

Extricating yourself from this working relationship is significantly easier if you have a written contract establishing the rules for ending the agreement in any circumstance.

TIP: Review your client contracts at least every 12 months to ensure your processes are still appropriately reflected in the agreement.

It is best to maintain your professionalism in all circumstances, and your contract, written by a business contract lawyer, allows you the basis for terminating and remaining professional and organised in the process. Therefore, take the time to practice what you need to say, including writing a script and confirming what was discussed via email.

How to avoid the need to fire a client in the future

To reduce risk and minimise the need to break up with a client, your service contract or client agreement should:

• Refer to the nature of your services to provide context.
• Communicate clear terms and conditions regarding payment, including non-refundable fees, deposits and milestone payments.
• Describe how services will be delivered, so clients know what to expect.
• State your business processes, like your hours of availability, deadlines and turnaround times.
• Be clear on refund and cancellation policies that comply with Consumer Law.
• Inform the client about their obligations and responsibilities in engaging with your service.
• Provide a workable dispute management process so that disputes and unhappy clients are minimised and well-managed to avoid business disruption.
• Provide a platform for discussion and negotiation when issues arise (and they do!).
• Include details of intellectual property ownership (who owns the data, the work product and the output) derived from your working time together.
• Get specific small business legal advice, ideally before you sign any clients to your service.

Clear contracts set clear expectations. For many small and startup businesses, a custom small business terms and conditions template can be a suitable solution to this problem. Expectation management is a crucial skill as a small business owner, and it pays to ensure that you and the client understand exactly what solutions you are delivering.

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