FOR MSPs who work hard to land and retain clients, it can seem counterintuitive to “fire” some. But, in fact, many experts advise doing just that.
Profitability, for instance, is a key determinant in whether to keep or release a client, according to IT business consultant Richard Tubb.
“We’ve all worked with clients who want the moon, but do not want to pay for IT or never pay on time,” Tubb says. “Whenever I’ve worked with MSPs, they have had these types of clients. And when we’ve looked into whether they’re profitable or not, they inevitably are not.”
Shawn Walsh, CEO of Encore Strategic Consulting, says keeping unprofitable clients is one of the biggest mistakes MSPs make. “We think all revenue is good revenue, and we put up with crappy clients,” he says.
Moreover, he adds, “We often mistake cash flow for profit. We have a big client we think we can’t lose. But I’ve dug into a lot of those ‘big clients,’ and it’s not uncommon to find out they’re not profitable.”
MSP consultant Manuel Palachuk also values profitability but recommends an even deeper analysis to include other factors. “There’s a handful of reasons why you might fire a client—a disconnect of expectations, costs, understanding of the technology, how they treat employees,” he explains.
He advises scoring clients on these and other metrics, such as whether or not they pay on time, listen to your advice, understand that they’re IT dependent, and are aligned with what you offer. If the client gets low scores in any area, Palachuk suggests troubleshooting first. “You don’t just throw away a perfectly good client,” he stresses.
Tubb concurs: “MSPs should be managed by metrics, not just by gut feeling. You should be making fact-based decisions. An MSP can often jump in there and resolve that root cause.”
Indeed, all three consultants consider firing a client to be a last resort. Tubb encourages regular, open dialogue to resolve profitability issues. “Tell the client, ‘Hey, look, we enjoy working with you, but this is not a profitable endeavor for us.’ Most business owners understand a business has got to be profitable.”
If, despite your best efforts, the client is not willing to change, be sure to part ways professionally.
“I’m a great believer in not burning bridges,” says Tubb, who points out that while the client may not be a good fit for you now, they might well become one in the future or, perhaps, refer you to someone else. “At the very least,” he says, “if you part ways on good terms, they’re going to speak well of you to other companies.”
Walsh recommends the dating breakup stalwart of, “It’s not you; it’s me.” He suggests telling the client, “We can’t give you the attention you need. We want to recommend another company who can take better care of you.” You can even go a step further, he says, by establishing joint-venture partnerships with smaller shops that can transition certain types of clients.