Salvage or Scrap? What to Think Through When it's Time to Divest a Client

It seems counterintuitive to let a client go when the driving force of any business is to acquire and keep new customers. Yet there are times when doing so is necessary, for instance, if a client has become a burden on your resources or bottom line.

In this blog post, we look at considerations for resigning or divesting a client and how to go about it without disrupting your business or harming you or your client's reputation.

Why Let a Client Go In the First Place?

Every client relationship is different. Moreover, your relationship with a client can change over time, especially when new players are introduced or situations such as a worldwide pandemic change how you operate.

Profitability Issues

A client that's no longer profitable comes in many iterations. Some clients may choose to order fewer products or services, putting you in a position to consider how to boost their orders. Others may become so dependent on your support staff that they drain valuable resources from more profitable clients.

Personnel Issues

Sometimes the players in the client relationship change, leading you to consider whether new personalities are workable. A new representative on a longstanding account may have different expectations from your business reps. Conversely, a new rep may not have the means or tolerance to deal with a demanding long-term client.

Priority Issues

In some cases, your business model changes, and you find yourself assessing which of your clients will fit and which ones may need to be offloaded. This can result from internal forces, such as a change in leadership within your organization, or external factors, such as shifts driven by a worldwide pandemic.

Regardless of the reason, you will, at some point, face the prospect of resigning a client. While it's an easy concept to understand, executing it correctly can be tricky. Moreover, fumbling the opportunity can lead to long-term damage to both parties.

To Salvage or Scrap?

The signs usually become apparent over time when a client no longer fits your business model. As they do, you'll have to choose whether the relationship is salvageable or not. It pays to do internal research to help you in this regard.

• Talk to the team that supports this client. These are the employees who deal with day-to-day issues. They'll have insights into what's changed and whether the relationship is salvaging.
• Talk to the client for their perspective. There may be factors you're unaware of that are impacting the relationship you can control on your end.
• Look at the trends and calculate their impact. If you feel client profitability over time has been dwindling or support hours have amped up, the numbers will clarify this for you.

The Harvard Business Review has also created an in-depth customer divestment continuum outlining further steps you can take to evaluate the relationship beyond profitability.

Customer Divestment

If, in the end, you decide it's time to offload a client, there are factors to consider before going through with it.

Impact on front-line employees

Divesting a large client can impact the employees who serve and support it. Will the move affect your ability to keep them engaged and employed? In some cases, you could lose qualified candidates in the process. Moreover, they may find work with one of your competitors.

Perceptions

People within and outside your organization will process a divested client on their terms. While some may do so without all the facts, you can minimize the spread of rumors by managing the messaging around the event. Being transparent to the extent you can be is critical here.

Institutional Learning and Awareness

No matter how the process of divesting a client plays out, your organization will learn from the experience. Consider what went well, what could have gone better and how the knowledge gained from the process will impact future divestment decisions.

Divest as You Would Want to Be Divested

When it comes down to divesting a client, an adaptation of the golden rule applies. Treat the process and the players with dignity and respect, just as you would prefer to be treated. Preferably, an in-person meeting or a zoom call at a minimum will allow you to explain and defend the position if needed.

Furthermore, please do your homework and provide the client with options for finding the services they need elsewhere. Sometimes, your divested client may rejoin you later and be worth keeping.