Not all clients are good clients. While every agency owner dreams of a full roster, the reality is that some clients can cost you more than they’re worth. Profit-draining clients—those who demand excessive time, resources, or discounts—can erode your bottom line and prevent you from focusing on higher-value opportunities.
Let’s dive into how to identify these problematic clients and what to do about them.
Recognizing the Signs of Profit-Draining Clients
Profit-draining clients often exhibit these characteristics:
- Excessive Demands: They require constant hand-holding or frequently request work outside the agreed-upon scope.
- Delayed Payments: They consistently pay late, creating cash flow challenges.
- Unrealistic Expectations: They expect perfection at a discount and are rarely satisfied, regardless of the results.
Pro Tip: Review your client roster quarterly and flag any accounts that meet these criteria.
Calculating the True Cost of a Client
To understand which clients are draining your profits, calculate the true cost of servicing each account. Factor in:
- Direct Costs: Labor hours, tools, and resources dedicated to the client.
- Opportunity Costs: Time spent on low-profit clients that could have been allocated to high-profit opportunities.
Use this analysis to identify clients with a low profit margin or, worse, a negative contribution to your bottom line.
Fixing the Problem
Once you’ve identified profit-draining clients, you have three options:
- Renegotiate Terms: If the relationship is worth saving, renegotiate the scope of work or increase pricing to reflect the true value you’re providing.
- Set Boundaries: Clearly define what is included in the agreement and stick to it. Politely but firmly decline out-of-scope requests.
- Part Ways: If a client consistently undermines your profitability and efforts to fix the relationship fail, it’s time to let them go.
Pro Tip: Offboarding a client should be done professionally. Provide a clear explanation and help them transition smoothly to avoid burning bridges.
The Long-Term Payoff
By addressing profit-draining clients, you free up resources to focus on high-value accounts, creating a more sustainable and scalable agency. Potential buyers will see a clean, profitable client roster as a sign of operational excellence, increasing your agency’s appeal.Conclusion
Not every client is worth keeping. Identifying and addressing profit-draining accounts is essential for maintaining profitability and scaling your agency. Take action today to build a client roster that supports your long-term goals.