Every business owner encounters it- the realisation that a client isn’t profitable. Whether they require too much time, constantly push back on fees, or simply don’t align with your services, these clients can be unprofitable.
But what should you do next? Here’s how to turn this challenge around.
Step 1: Decide if You Even Want the Unprofitable Client
Before taking any action, ask yourself: Is it worth it? Do you really want to continue working with this client? This is the first and most important decision you need to make.
Assess whether they are a good fit for your business in terms of qualitative risks, reputation, cultural alignment, and whether you enjoy working with them.
If it’s clear that the risk outweighs the reward, or if the client doesn’t align with your values, you might decide that it’s not worth saving the relationship.
Step 2: Identify the Problem
If you decide to continue working with the client, the next step is to pinpoint exactly why they are unprofitable. Regular profitability tracking is key here.
Use the Client Value Calculator to break down:
- Time spent servicing the client
- Costs associated with winning and retaining them
- Revenue they generate versus the profit margin they deliver
By gathering this data, you can uncover whether the issue lies in pricing, time investment, or the product mix you’re offering. Does the product mix still fit the client’s needs?
Step 3: Renegotiate Terms
Once you have the numbers, approach the client with transparency. Here are a few options to discuss:
- Propose adjusted pricing or service packages that better reflect the value you’re providing.
- Highlight the additional services being performed (in detail) and how they contribute to the overall relationship.
- Offer add-ons or premium services that can increase the value of the relationship for both sides.
By framing the conversation around value, the client may be more open to adjustments that benefit both of you.
Step 4: Optimise Processes
Ask yourself: Can this client be served more efficiently? If they can, you could reduce your time cost.
- Use automation tools to handle routine tasks, freeing up your team for higher-value work.
- Assign lower-cost resources or more junior team members to complete the work (provided the quality remains consistent).
- Tweak your processes to maximise productivity for minimal input.
Optimising these aspects will help reduce the cost of servicing the client, potentially turning them into a more profitable relationship.
Step 5: Make the Tough Call
If renegotiation and optimisation don’t lead to better results, it may be time to part ways. While it’s never easy, ending an unprofitable client relationship can free up resources better opportunities.
- Offboard clients respectfully, ensuring the transition is smooth and professional.
- Use the opportunity to reallocate resources towards higher-value clients that are a better fit for your business.
- Learn from the experience and refine your client acquisition process to screen out clients with low profitability potential in the future.
Conclusion
Unprofitable clients don’t have to be a drain on your business. By taking a proactive, data-driven approach, you can either turn them around or cut them loose. Start by using the Client Value Calculator to assess your client relationships and make smarter, more informed decisions today.
