Should you fire clients? – Salesforce insights

Jeremiah Owyang wrote a recent article about the strategic value of firing problematic clients during a recession.

In particular, the best candidates for termination are those who lead to some sort of net negative that lowers profitability.

Makes sense to me – although I’d look at the situation in any economic environment.  The question then is how you determine who those net-neg clients are.  The answer is to balance anecdotal information with hard analytics.

Let me show you how you can use your Salesforce solution to determine a thumbs up or down on a client.


Factors impacting lowered client profitability

  1. Under-quoting a client for expected resource requirements to deliver your product, solution, or services.
  2. Delivery of solutions/services outside of your expertise, leading to steeper learning curves to complete projects.
  3. Client demands for resources exceeding your promised deliverables.

Let’s look at these three primary factors in more detail.


1. Under-quoting clients

To determine your quoting success, you’ll need to compare the expected to actual deliverables.  In Salesforce-speak, that would be the Opportunity versus the Project. 

One dandy way to compare results starts with a detailed Product or Services catalog.  You can then use detailed line items to clearly delineate all proposed project activities.  Be sure you have line items for the more intangible project activities like client review or other account management activities.

While you may not want to submit a proposal to a client with such detailed line items (that is, you may want to lump project costs), by capturing granular activities in the Product catalog, you’ll be better prepared to track activities during the Project phase.

And do keep track of detailed resource spends during the Project phase, based on time and expenses, use the same line-item detail you captured in the Opportunity.  While the project unfolds, it will also help you track where you are.

Make one of your recurring project activities be a post-project assessment where you compare what you planned to do versus what you actually did.

Benefits gained:  This approach allows you to make knowledgeable adjustments in your quoting process.  It will help you determine if a profitability “problem” is really you (because of under quoting) or due to some other client issue.

In a tight economy, you may also learn that your projects are so profitable you can afford to make some downward adjustments in future proposals while still maintaining a healthy margin.


2. Delivering solutions outside your expertise

Should you or shouldn’t you take projects outside your expertise where you will encounter a learning curve?  Maybe.

It makes strategic sense for you to take projects like this if you plan on using it as a way to broaden your solution or services offering with on-the-job training.  In this scenario, though, it might not make sense to charge your client for all or part of your learning time because it may make the proposed costs too high for the client to willingly bear.

However, you will want to track your learning curve time to help you determine the value of the strategy.  As with Scenario 1 above, consider adding Internal Training line items to your Product catalog so you can compare proposal versus actual time spent.

Over time, you may discover the value of delivering solutions this way doesn’t pay out in terms of expanding your offerings.  In this type of situation, it might not be that you fire such a client but instead simply decline their business.  But to know this, you’ll need to have captured information about time spent.


3. Excessive client demands

Defining “excessive client demands” will vary from company to company.  Such demands can include:

  • Some form of unpaid project creep, either because the client misunderstands the required deliverables or because the client wants something added for free,
  • Higher than average time chasing after the client for needed information, to tickle them for payment, etc.,
  • Redoing activities for clients due to some error on their part,
  • Need for excessive schmoozing, meetings, etc.

No doubt you can think of other demands.

Project scope.  Managing project scope is a matter of good communication and we recommend you start by giving your clients a detailed Project Summary that clearly delineates your deliverables and deadlines.

Be sure to attach a copy of your Project Summary to your Salesforce Project record.

Additionally, set up your Salesforce Project record so that you pull in all the relevant Product line items from the Opportunity to help you stay on top of exactly what you’re supposed to deliver – and what exceeds deliverables.

The value of this one-two punch is your entire internal team members have visibility to expected deliverables in terms of what you told the client via the Project Summary and also by seeing the line-item activities.

Keep in mind too, it might not be the client making demands.  You may find your own project team has slipped in something for free that should have been charged. 

For example, on one of our projects, my partner discovered that one of our client’s other contractors in the project neglected one of his deliverables so she did it for him instead.  The problem was we didn’t have approval for the client to pay us for the work rather than their other contractor.

The better solution would have been to go to the client and tell them of the problem and offer to perform the extra work as a chargeable Change Order (CO) – and then add that CO to the Project and continue to track it like other Activities.  The way to stay on track is to have a clear view of your project activities.

Chasing clients for information.  Keeping detailed Activity Histories for a project will help you keep track of just how many times you’ve had to touch a client during a project.  Additionally, you can automate some notification activities such as notices for late payments or queries for information to lower the time demands.

Redoing activities.  We recommend defining clear Milestones for your projects and getting clients to sign off on each milestone as it’s completed.  Store client approvals in your Salesforce Activity History or Notes section.

If a client then needs a “re-do,” you can make the call on whether to make it chargeable.

Excessive schmoozing.  Again, keeping track of your Activities will help you put clients – and your staff into perspective.  You may find you have a delightful client who just likes to talk a lot.  It may make sense to bolster the needed project time to allow for this – or it might make more sense to consider it non-chargeable relationship-building time.

Conversely, you may find you have an employees who has a time management issue that needs to be addressed with training.

Additionally, you may also find that you’re client makes enough demands that impede your efficiency that you feel the demands outweigh the benefits.

Is the schmoozing good or bad?  It depends on how your business strategy but you’ll want to have some idea of how much time it’s taking.


Pulling it all together

Once you weigh the anecdotal evidence with the analytical, you can make a reasonable decision of whether to fire a client.  In some cases, the answer may be to charge more for their projects rather than firing them.

The value of having analytical data to refer to is that is helps strip out the emotionalism from the discussion.

And you may be surprised by the results.  For example, a customer you experience as  “difficult” (for example, because of personality) may actually be very profitable – and that makes difficult folks much easier to bear.

Conversely, you may find, sure ‘nough, a client is really, truly unprofitable or at a less than acceptable profitability level.  When that happens, the analytical data will clearly show you which of your clients are the ones to focus on and which are the ones you should fire.