The Challenge of Lower-Value Clients
This week, I was asked a question that many service-based businesses struggle with: “Nicola, how do I decide where to cut off my lower-value clients?”
It’s a brave question, and an even braver decision. But if you’re planning for growth, it’s one you’ll need to face.
Why It Matters: The Impact of Low-Value Clients
Low-value clients often consume a disproportionate amount of time, energy, and resources. They can clog your order book, stretch your team thin, and distract you from serving your core market.
One client I worked with had 300 active accounts. After a strategic review, they reduced it to under 100. The result?
- Gross profit margins shot up
- Average order value increased
- Team capacity was freed up to pursue higher-value opportunities
How to Decide Who to Let Go: A Strategic Evaluation
Start by evaluating:
- Revenue per client
- Profit margin per transaction
- Time and resource drain
- Strategic fit with your growth goals
- Risk exposure (e.g. over-reliance on one client)
If a client is low value and high maintenance, they may be costing you more than they’re worth.
Four Offboarding Strategies for a Graceful Exit
Once you’ve made the decision, here are four ways to exit gracefully:
1. Price Your Way Out
Raise your renewal or minimum order value. If they accept, great, you’re compensated for the effort. If not, they’ll likely opt out.
2. Sell or Refer
Package that segment of your client book and offer it to a competitor or partner. You might even negotiate a referral fee or ongoing revenue share.
3. Self-Serve Model
If they’re low touch, consider moving them to an automated platform or resource hub. Let them access your services without draining your team.
4. Polite Exit
Send a respectful notice at contract renewal, explaining that you’re no longer best positioned to serve them. Point them toward alternative providers if possible.
The Upside: The Benefits of a Focused Client Base
Letting go of low-value clients isn’t reckless; it’s strategic. It allows you to:
- Focus on your core niche
- Increase profitability
- Reduce operational strain
- Serve your best clients even better
And yes, it’s a brave pill to swallow. But for the right business, it’s the smartest move you’ll make.
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