You Lost a Big Client - Now What?
Losing a big client is never fun, but it's an inevitable part of business—just as much as landing a dream account. It's important not to take the loss personally. Sometimes, you might get so focused on your work that you forget to separate what you do from who you are. Admittedly, I might be talking to myself here as well. Often, the decision to part ways is a business move by the client, unrelated to the quality of your work. So, recognize this separation as a business decision, not a referendum on you as a person.
Here are a few questions you'll want answers to before losing a big client. It's much easier to think through these decisions when you are thinking clearly and not simply reacting to a bad situation:
1. Why is the client leaving?
Make sure you know the exact reason why the client is not renewing with your agency. Consider conducting an exit interview to gather feedback directly from your client. You want to understand whether the departure was due to internal changes at the client's company, budget constraints, or dissatisfaction with your services. Sometimes the new marketing head brings in their preferred agency, or perhaps they've decided to handle things internally.
Just because the door is closing now doesn't mean it won't open later. Whatever the reason for the departure, document it in your CRM system. Tag them as a past client and review this list annually. Before your leadership offsite, look over your notes to see if circumstances have changed and decide whether it's a good time to pursue them again.
2. Was this your mistake?
Here's the glass-half-full approach if this was your mistake—now you know what needs improvement. Address these shortcomings immediately to prevent a mass exodus of clients. Consider conducting a client satisfaction survey via third party so clients can provide open and honest feedback about your service.
3. What was the strategic purpose of this client?
Aside from the obvious financial benefits, reflect on why you originally engaged with this client. Was it for their prestigious name, access to a certain network, or as a stepping stone to larger projects? Many agencies take on smaller projects in hopes of a larger project sometime down the road. Reflect on the strategic purpose of this client—you might have already reaped the benefits you were aiming for.
4. How will this impact your finances?
If the departing client accounted for less than 20% of your business, then you can find creative ways to absorb this loss with minimal impact on your business. On the other hand, if this was a whale client responsible for more than 20% of your business, then you'll need to make some quick cost-cutting decisions. First, do the math to determine how much in expenses you need to cut to avoid cash flow issues. Your biggest expenses are likely labor, office rent, and software/technology. When you lose a client, you lose the revenue a lot sooner than you lose the costs. Try to get ahead of your costs as soon as possible.
Here are Some Suggestions to Help Soften the Blow
Reduce Non-Essential Expenses: Regularly (at least bi-annually) review your agency's expenses to identify potential savings. You might want to look at consolidating software subscriptions or renegotiating some of your contracts with vendors.
Leverage Your Network: Ask for referrals or introductions to potential clients who may benefit from your services.
Upsell Current Clients: Analyze your current client list to identify additional needs that align with your services. It's during these times of despair that you will be forced to work on your business as a whole and find creative ways to increase sales.
Offer a Referral Incentive: Implement a referral program for your team, excluding leadership. This can motivate your staff to contribute actively to business development efforts. I recommend excluding the leadership team because it's their job to drive new business.
Evaluate Your Client Portfolio: Conduct a review of your current client list. Categorize the stability of each client relationship as follows:
Strong relationship: The client is satisfied with your services and is unlikely to leave.
Growth potential: Identify any clients with opportunities to expand your current scope of work.
Room for improvement: The relationship could be at-risk, so you need to fix what's broken to strengthen the partnership.
Unprofitable: Some clients bring in lots of revenue, but they take a lot of resources to service the account. If the work is unprofitable, this might be the best time to get them off your books.
Key Takeaway
While losing a client is tough, it also presents an opportunity to critically evaluate your business. By trying to understand the reasons behind the departure and adjusting your business strategies accordingly, you can not only mitigate the impact but also strengthen your business for more sustainable growth in the future.
Bonus Section: Handling Unpaid Invoices
It pains me to write this section, but unfortunately, I've seen it happen. So, let's talk about what your options are when a client leaves without paying their bills.
Contact Accounts Payable: Start by reaching out to your client’s accounts payable department to find out the status of unpaid invoices. A simple misunderstanding or an administrative hiccup could be holding up payment.
Escalate If Necessary: If the response from accounts payable isn't satisfactory, escalate the issue to your client's management team. They may not be aware of the payment issue, and a direct conversation might smooth things out.
Negotiate Payment Terms: If payment issues persist, propose a payment plan or negotiate a partial settlement. This approach helps recover some funds and often preserves the relationship for future opportunities. However, consider if you really want to continue working with someone who makes you jump through hoops to get paid.
Consider Legal Counsel: Consult with your legal advisor to evaluate whether pursuing legal action makes financial sense. Legal battles can be costly and may end up costing more than the amount owed, not to mention the potential for relationship damage.
I hope this helps, and I truly hope you never have to reference this bonus section.