How Do I Handle Unprofitable Clients?

When is enough enough? I left a previous business that got out of control, and now I have a much smaller, more manageable business. But I have old clients I feel loyal to but who want products that I feel are financially unacceptable. And I have new clients who are more profitable. Personally, I'd like to please them all, but I do not have the time to do everything. Financially, I need to drop the unprofitable accounts. Any suggestions?


Before dropping the unprofitable accounts, consider this: Would you want to keep those clients if they paid you more? Or have those particular projects become unfulfilling at any price? If it's just a matter of cost, let the older clients know that you are refocusing your business and raising your rates. You can do this in person, over lunch or coffee (if it's a client with whom you've cultivated a close relationship), or you can simply send a friendly letter that thanks them for their patronage but also lets them know that your business has grown to the point where you need to re-evaluate it and raise your rates. Include your new rate schedule. When you have a good track record and have been providing a valuable service, clients will usually pay the extra fee to keep you.

If you have determined that these projects simply no longer fit the scope of your business, you need to explain that. Send a letter informing the clients that your business is growing and changing. Make sure you also thank them early in the letter for their support. Then explain that you will no longer be tackling those types of tasks. But don't leave them without alternatives. Refer them to someone else dependable in the field who can better meet their needs. You want to be gracious and professional -- you never know when you may cross paths with these clients again down the road. It's also a good idea to let them know what the new focus (and fee schedule) of your business will be; they may want to work with you again someday, or they may have associates to refer to you.

A savvy mompreneur always keeps her eye on the success meter, evaluating her business against factors such as money, happiness, time and achievements. Besides being financially profitable, make sure the business continues to provide you with the family flexibility and personal and professional fulfillment you desire.

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