TFYW #075: Four Ways To Say Goodbye

Feb 16, 2024

Today, I want to share a framework to maximize your profit and minimize the opportunity cost of low value clients.

Saying Goodbye

While preparing for the sale of my firm, I removed a handful of low-value clients from the roster.

I got stuck, though, on the lowest-value client I had.

She was one of my first clients, and I knew she needed the extra (free) advice I gave her.

Now, the reason I had this client in the first place was that she was my neighbor.

The idea of telling her to find another accountant was incredibly uncomfortable.

She watched our two older daughters when my wife went into labor with our third in the middle of the night.

She cared for our farm animals and watched our property when we went on vacation.

She babysat our daughters and let them ride her horses.

Here’s a picture of my daughters with her horses.

We were and continue to be close.

I delayed as much as possible, but I knew the firm buyer would discard her business asap when they saw her margins.

I should have turned her loose sooner, but I was worried about wrecking the relationship.

When I decided to say goodbye, I did a few things:

  • Let her know well in advance. I gave 3.5 months’ notice.
  • I found three potential replacements who knew her simple tech stack
  • I gave her written instructions on how the transition would work and what she could expect from me in the future

The transition went well; she’s still in business and remains a great neighbor.

Client Management

Strategic client management is one of the most overlooked components of scalable firm growth.

This intentional approach ensures that your current and future clients are helping you reach your goal.

Remember that growth depends on your current clients, not future ones.

If your current clients don’t have sufficient margin to pay for growth, you’ll always be trapped hiring team members while having enough work to pay them.

To have more control of that dynamic, you have to be prepared to remove sections of clients who carry a low value and a high opportunity cost.

Some firm owners call it ‘firing clients.’ Others raise their prices and let “Supply and Demand’ help clients self-select out of their service.

 

If you don’t remember anything else from this newsletter, remember this:

 

Removing clients from your firm is never easy, but it is your single greatest lever to increase profit margins.

 

While it is not unprofessional or selfish to say goodbye to a client, it can feel uncomfortable.

That discomfort comes from applying the same approach to all clients.

One Size Doesn’t Fit All

Most of the hesitation around leaving a client is thinking that your approach should be the same for all clients.

This doesn’t have to be the case.

You might be thinking, “But Mark, you’re huge on standardization. Can’t I just BCC my low-value clients and move on?”

That’s one way to do it, and it might work for a segment of your clients, but with a good offboarding workflow, you normalize client management.

When I sold my firm, I had to say goodbye to every client. So, I broke down my clients into four categories to deliver the news.

Note: I shared my classification of each client with the new owner so he knew what to expect from my communication with each one.

These can be used to manage to offboard your clients.

Low involvement, Transactional

These clients were the easiest to say goodbye to. These clients were transactional and low value. I was pretty close to a commodity for them.

When I sold the firm, I did not inform them of the change of ownership.

I left it to the new owner to help bridge that relationship. If/when they reached out, the new owner picked up the communication.

Application in your firm: It is entirely okay to respond to these clients when they reach out to you and say that you can no longer service them.

You don’t need a reason. Your discontinued service won’t wreck their life or their business.

High involvement, Transactional

These clients included some monthly recurring services that they came to depend on.

The relationship was primarily compliance-based, and other than knowing their bank balance and the business’s profitability, I did not know much about them.

For these clients, I knew that an abrupt change would impact their business, so when I sold my firm, I helped transition these clients.

Application in your firm: If you’re heavily involved with their business, give them time to transition to another provider. Only giving them 2 weeks’ notice will impact their business.

When you notify them of the change, set a timeline so they know when you’re absolutely done with them. Don’t leave it open-ended.

Low involvement, Relational

Most of these clients were friends and family. Not much value in terms of profit, but there was a personal relationship there, and I was invested in their business and personal success.

For these clients, I gave them extra attention and communication about the transition. Given my low professional involvement, offering a simple explanation and reassurance about the transition were adequate.

Application in your firm: A personal conversation about the direction your firm is heading and the need to focus your efforts should suffice. If the person is worth keeping in your personal life, they will support your professional actions.

A simple referral to a trusted colleague should be all this client needs in a transition.

High Involvement, Relational

For these clients, I was heavily involved in the strategy and operations of their company.

Additionally, I knew them and their families well.

Upon selling my firm, I called each client and explained the transition process and how I would stay with the purchasing firm. (I ended up staying on as a consultant for eight months after the closing date.)

Application in your firm: A transition like this should be no less than two months, from first letting them know to when you fully disengage.

Compiling a list of tech, tasks and documents to be transferred for your client is key to removing yourself successfully and preventing those inevitable emails asking about stuff afterward.

Keep in mind that this transition is not free for your client. You can create a transition engagement and outline what you will do and the cost of your services.

At the end of the day, these are just guidelines, but they offer a framework to remove any hesitation to manage your clients with a more scalable model.

Build The Firm You Want.

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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