Though it may seem an oxymoron to fire clients, the lifeblood of a business, there is a strong argument for terminating contracts in order to improve the future growth of a company. Stagnant growth, tight budgets and smaller bonuses have been the norm in the past few years, but some believe this climate creates fertile ground for pruning the external dead weight that holds a business back from growing.
One person who backs this view is Roger Southam, chairman and chief executive of Chainbow. The company, which was founded in 1989, specialises in residential, mixed-use and commercial property management on behalf of owners, freeholders and investors.
The company manages just under 120 developments, with more than 5,000 units, several Eastern European shopping centres and commercial units totalling more than 1m sq ft in the UK.
Given these credentials, Southam feels well qualified to state that firing unreasonable clients has assisted his business in growing an average of 22% each year in terms of the number of properties managed and by 25% in annual revenue. He is adamant that this approach is especially vital for service-based firms.
Benefits of client culling
Southam believes the benefits of “client culling” are more opportunities for new business by increasing efficiency, and better time management so a more even, better quality service can be delivered to all clients rather than devoted to a handful. Additionally, staff morale can be positively affected.
Southam says: “This is not a case of putting certain clients in the too-hard basket, but really assessing the strain they can put on internal and financial resources. For example, an apartment block we managed at a prestigious West End address was given notice because, for three years, they prevented property managers from doing their job effectively.
“Incidences included directors appointing contractors without us knowing, and without checking there was money in the service charge fund, which there was not. Another time, they refused to pay a contractor who responded to an emergency out-of-hours call.
Southam says that it was not just the fact they would not pay contractors, but that so much of the property managers’ time was spent trying to avoid disputes and “fire fighting”. “The final straw was the manner in which directors treated my staff. My team delivered a first-class service and yet were treated like second-class citizens.”
Southam goes on to give another example of a Docklands development. “The directors were trying to coerce my staff into hiring porters on illegal contracts and not pay VAT and other taxes. The worst, however, was a New Cross development where we fought for several years to have the National House-Building Council finish their development after leaseholders bought off-plan and the developer refused to finish the building. After physically and financially improving the block, leaseholders responded by gradually stopping their service charge payments.
“Financially and for staff welfare, I believe it has been the right decision to fire these clients, and would do it again to ensure the progression of my company.”
‘Find the bad apple and throw it away’
Keeping problematic clients is estimated to add an average of 1.5 working days to each staff member’s workload every month. At a modest charge-out rate of £120 per hour, or £900 a day, this will indirectly cost a business an estimated £16,000 per client each year. In addition, this estimated loss is compounded by the 18 work days each year that could be devoted to new clients.
Staff retention is also an issue. According to the Chartered Institute of Personnel and Development, the cost of replacing staff is between £2,930 and £8,333, depending on seniority. When employees leave due to difficult clients, a company spends these sums searching for replacements while adding to the workload of existing staff.
Finally, the old adage of one bad apple spoils the barrel could be true in terms of reputation. Clients who cannot be satisfied risk compromising the company’s image, which curbs new business growth and devalues the worth of a company.
Roger Southam, chairman and chief executive of Chainbow, says: “Service-oriented businesses can improve their bottom line by looking at grass roots operations and efficiencies. To fully know your company’s worth is to assess workload against revenue. If revenue is weak compared with hours spent servicing your client, then you have a choice to increase fees or find the bad apple and throw it away.”
Use spider sense to identify a troublesome client
Heed the tale of the troublesome client, the one who:
• Starts off with a demanding e-mail, saying that they desperately need help by this weekend
• Tries to lock you into an hour-long “interview” on the phone, once you respond to that e-mail
• Insists that the project is a five-alarm fire, but cannot afford to pay you what you are quoting and asks for a discount
• Tries to get you to tell them what to do before they sign a contract
• Says they cannot possibly get you a deposit in time
• Tells you they have already interviewed half a dozen consultants and “no one seems to know enough to handle this”.
According to an industry commentator: “If a client seems like trouble at the beginning, there is a very good chance that they will turn out to be a major pain later. Over the years, learn to turn and run at the first sign of trouble, know how to trust your gut. Most clients are dreams to work with. But every once in a while you will meet a prospective client who will get your spider sense tingling. And that’s when you say, ‘No thanks. It’s not a good fit’ – and move on.”
Source: www.consultantjournal.com/blog/warning-troublesome-clients-are
