Firing Clients

It may sound like business blasphemy, but it could be the best thing for your business.
Magazine Contributor
4 min read

This story appears in the February 2001 issue of Subscribe »

You know the Pareto Principle: Eighty percent of the wealth is in the hands of 20 percent of the population, says this law put forth by 19th century Italian economist Vilfredo Pareto. Later adapted into the context of inventory management by renowned quality management expert Joseph Juran, the principle is also known as the 80/20 law, and salespeople in particular use it to proclaim that the top sellers get most of a company's results. But there's another side to the Pareto Principle, one a homebased entrepreneur had better digest-or suffer the consequences.

Your worst clients are destroying your business. They're demanding 80 percent of your time and energy and producing only 20 percent of your profits.

Think about that ugly flipside of the Pareto Principle. And when it's put that way-80 percent of our clients are yapping dogs that should be delivered to the pound-it's a serious mouthful.

You know what? It's basically true, too. Yikes! For years, I've followed an annual ritual: I "fire" at least one client, the one I determine to be the least profitable after studying my spreadsheets that track work performed and money earned. Sure, some years-the ones where I feel anxious about future income-I blink and don't actually fire that client. But always, it's a mistake.

Why? There are many more clients out there who will pay me better-and what's more, there are many, many consultants and writers who would drool about getting the work I don't want. So when I fire clients, it's win-win-win. I come out ahead, and so do they, because they wind up getting someone who truly wants to do their work for them.

When was the last time you fired a client? Say never, and it's time to give this process a hard look. It just may be the most liberating and profit-producing step you take all year.

Here's the thinking I use: I figure out roughly how much money a client generates for me per day of work, and I count everything involved in doing the work: lining it up, agreeing on what's to be done, chewing it over afterwards and pursuing payment (when that's necessary). This year, I will work for 16 clients, each generating somewhere between $1,000 and $50,000 in revenues for me. But note: The client who pays you the least in the year isn't necessarily the one that should get the ax. Sometimes, in fact, it's the one you least expect.

Twice in the 1990s, I walked away from my biggest client in that year (OK, once I was shoved)-and in the following year, in both cases, I had much more productive, interesting and profitable years. I had fallen into what performance experts call "a comfort zone," meaning I had a cozy enough deal, but it didn't excite me and neither did it produce as much money as I might make doing other things. So when I severed those strangulating ties, suddenly I was free to really pursue the work that turns me on and puts money in my pocket. Are you in a comfort zone? How many of these sound familiar:

I've never fired a client.
I would never fire my biggest client.
I'm no longer turned on by my job, but it's easy enough.
I don't have a clue which of my clients are profitable and which aren't.

You already know how to score that quiz. Did you pass, or are you in a comfort zone that is, in fact, keeping you down?

If you are, go ahead and fire a client before the day is over. You'll be amazed how exceptionally good it feels-and what wonders it does for your bankbook.


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