One of the main purposes of setting up a business is to be profitable, of course. But at times, we have to trim profit or bend over backwards in order to secure a deal and a client. While flexibility on pricing or value added extras can be wise for either starting or building a relationship, or for keeping an important client from jumping ship, make sure that you’re analyzing things closely to make sure client relationships are profitable overall.
Check out below some of the reasons why your client is becoming a liability:
1. You haven’t had a price increase in a while
If you’ve guaranteed specific pricing but your own costs have fluctuated, it might be time to do an increase. If your current contract with someone doesn’t allow for an increase yet you might have to buckle down for a while but if able, you should increase prices to be sure it’s not costing you to do business with someone. You don’t want to double prices overnight but it could be advantageous to slowly increase prices over time. It may take some creativity to turn things around into being profitable. Also, look for other ways where you can make bigger margins, such as services or add-ons that allow for more margin.
2. Chasing payments is hurting your cash flow
Do you have to chase to get payment? Regardless of the fact that your invoice says net 7 days, your client may be on a longer cycle. If your accounts receivable staff is wasting a lot of cycles chasing for payments this could become cost prohibitive and if the client and if the client is a big one for you, their delays could be hurting your cash flow and your capacity to perform your business operations. Perhaps you can incentivize your client by either offering a slight discount or by charging a steep late payment. Consider talking to them to find ways to iron things out. It may even be to your advantage to work with an invoice factoring company that buys your invoices from you so you can continue to do business with your slow payer without impacting your cash flow too much.
3. Unreasonable demands or bully clients
Does your client constantly want expedites and for you to bend over backwards? Some clients are demanding and sometimes, they can be bullies. Yes, there is a benefit to demonstrating value and in going above and beyond but if it’s happening on a continuous basis, it could start to whittle away your margins and your patience. It may be prudent to re-define the parameters of your products and services and in some cases, you might consider implementing an expedite fee, for instance. The same applies for returns and cancellations. You might need to implement a cancellation or restocking fee if in case it goes out of your control. Your time is valuable and if one of your clients is taking up too much of your time, it could start to feel less profitable.
In some cases, you can start to recoup losses. In other cases, it might be time to move on or to “fire” the client. Sometimes, we outgrow our clients or business climate dictates the need for change. And sometimes, a nightmare client is just too much of a thorn in your side and while giving up that income is frightening, moving on from that relationship will actually feel like a relief.
Whatever you do, always be cautious. Look at everything carefully so you can decide on the best and most effective way to proceed for the welfare of the customer, your reputation, and your bottom line.