When to fire a client you actually like

What if your favorite client is the reason you’re losing money? Maybe they pay on long payment terms. Or they regularly take more time than you billed for. Or maybe you haven’t raised their rate for years because they’ve been with you so long and you really enjoy them.

You’re not wrong for prioritizing relationships or being dedicated to your craft. That kind of loyalty and care is part of what makes you great at what you do.

But when the financial numbers no longer work, it’s time to reevaluate, because holding on too long can be holding you back.

In this guide, we’ll show you how to audit your clients, identify those that are no longer financially viable, and make the tough but necessary decision to let them go

What it’s really costing you to keep that client

Let’s follow a hypothetical favorite client project. You’ve worked with this client for years. The relationship is great and the projects are fun. But are they still profitable?

Let’s say the numbers look like this:

$15,000 looks like a healthy profit, right? But that’s not the entire story. In reality, this client is on 60-day payment terms. On top of that, their finance department negotiated only paying half upfront, and they frequently ask for small, out-of-scope revisions that you never bill for.

Here’s what that “cash flow” looks like spread over those months: 

When you look at it this way, the only way to survive that project was to have nearly $35,000 in the bank to start. Or to cover it by doing other projects that paid faster. Otherwise, you’re putting your entire business at risk. And what if that had disputed the invoice, or sent a check?? 

Essentially, when you grant clients long payment terms, you are extending that much larger company a loan out of your own savings.

Can you afford to be doing that?

When you grant clients long payment terms, you are essentially extending them a loan.

Audit your own profitability every quarter

We recommend auditing your project profitability at least every three months. If you don’t take this time to evaluate how much each client is contributing or costing your business, your beloved clients could be secretly dragging you down.

To run an audit:

• Export all your invoices per client from QuickBooks.
• Export your bank statements for that period.
• Make a spreadsheet of all the income and costs for each project.
• Measure per-project income to costs.
• The result is your gross margin.

For an even more granular view, add a column for the hours each person on your team contributes to each project and how much they were paid on it. That way, you can see precisely who’s contributing and if margins are thin, who that money is going to.

Gross margin isn’t everything, of course. Sometimes an unprofitable client wins you other business because it’s a great logo, or they constantly refer you. Numbers only tell part of the story. You’ll have to fill the rest in yourself.

Don’t love spreadsheets? Use our pre-built project profit calculator.

How to offboard that beloved but unprofitable client

If your audit shows that a client is consistently unprofitable or requires more time than they’re paying for, don’t rush to fire them. Instead, reach out and let them know that while you value the relationship, the current setup is no longer financially sustainable for your business. Here’s one way to frame that conversation:

“We’ve really enjoyed working with you and want to continue doing so, but the current structure has started to stretch our team more than expected. We want to be upfront and find a way to adjust things so we can keep delivering great work in a sustainable way.”

From there, propose specific changes depending on the problem. That might mean adjusting pricing based on actual usage, reducing the scope, or changing payment terms.

If they’re open to it, great—you preserve the relationship and improve your margins. If not, it may be time to move on; just do it respectfully. Finish any current projects, if your contract requires it, and possibly recommend another agency that may be a better fit.

Yes, we actually do recommend referring a competitor. The world is large and life is long and you never know when that kindness comes back around. Both parties will think highly of you.