A business owner once told me, with some pride, that they had never lost a customer. I asked whether they enjoyed working with all of them. They admitted a few were difficult: always asking for free work or discounts, disliked by the team, and never given a price increase because the owner could not face the argument.
Those clients were taking a large share of the team’s time, holding down margins and making the work less enjoyable. A retention rate of 100% was hiding the problem.
This guide explains how to decide whether a client is worth keeping, using two simple scorecards: one before a client signs and one while you work with them. It includes example scorecards you can adapt and the options you have when a client scores badly.
Why keeping every client can hurt your business
Many owners treat retention as a score where higher is always better. The costs of a poor-fit client rarely show up clearly in the accounts. They show up in time spent on rework, scope arguments, late payments and a tired team.
A marketing consultant I worked with had a client paying £1,800 a month. On paper it looked like a good account. When we added up the hours the team spent on it and the effect it had on morale, the client was costing the business money.
Owners usually keep clients like this for three reasons: worry about replacing the revenue, reluctance to have a difficult conversation, and concern about what the client might say to others. Meanwhile the time those clients take up is time the business cannot give to clients who value the work and pay properly for it.
Some client turnover is healthy. Needs change, key contacts move on and your business moves in a different direction. The aim is to decide deliberately which clients to keep, using criteria you have set in advance, so the decision rests on evidence you can point to.
Case study: how scoring cut churn at a logistics company
A global logistics company came to me losing 35% of its clients every year. The leadership team believed the problem was in customer service. When we looked at the whole client lifecycle, the cause turned out to be earlier.
The company mainly served American businesses expanding into Europe. The offer was attractive and plenty of companies signed up, but many left after about six months. They liked the idea of expanding into Europe but were not ready to do it.
We built a scoring system that rated prospects on five factors:
- Product fit for European markets
- Previous experience with third-party logistics
- Language capabilities
- Understanding of UK and EU regulations
- Marketing plans for European customers
The scores predicted which clients were likely to leave within six months. Early terminations fell by 55%. Over the following three years revenue grew by 140% while the team’s workload fell by 20%.
The company did not simply turn low-scoring prospects away. The scores showed a gap in the market, and the company built a new service line that helps businesses prepare for European expansion. Prospects who were not ready became clients of that service first.
Scorecard 1: before a client signs
A pre-engagement scorecard helps you spot poor-fit clients before you commit. Choose five to eight factors that predict a successful engagement in your business, and score each from 1 to 5. The example below suits many service businesses; replace any factor that does not apply to yours.
| Factor | Scores 1 if… | Scores 5 if… |
|---|---|---|
| Budget fit | They want your full service at well below your price | Your price is within their budget without negotiation |
| Readiness | They like the idea but cannot act on it yet | They have the people, time and data to start now |
| Decision-making | Several people must approve, and you have not met them | You are speaking to the person who decides |
| Provider history | They have been through several providers recently | They have long relationships with their suppliers |
| Openness to advice | They want you to do exactly what they say | They ask for your view and act on it |
| Fit with what you do best | The work sits at the edge of your services | The work is what you do best |
Set a threshold before you start using it. With six factors, a total below 18 out of 30 might mean you walk away, or that you address the weak areas before signing (for example, a paid discovery phase for a client who is not yet ready).
Being clear about what a good client looks like also improves your marketing and sales conversations, because you know which prospects to spend time on.
Scorecard 2: while you work with a client
Client relationships change. A new finance director may care only about cost, or a client who used to accept your advice may start questioning every recommendation. Score every client each quarter against factors like these.
| Factor | Scores 1 if… | Scores 5 if… |
|---|---|---|
| Profitability | The time spent is out of proportion to the fee | Margin on the account is at or above your target |
| Scope discipline | Regular requests for work outside the agreement | Changes are raised and paid for properly |
| Payment | Invoices are regularly late | Invoices are paid on time |
| Results | They are not getting value from the work | They can point to results from your work |
| Ease of working together | The team dreads their calls | The team enjoys the work |
| Growth potential | No prospect of the account growing | Clear scope to do more for them |
Agree in advance what happens when a client falls below your threshold, for example two quarters in a row. Scoring is most useful as an early warning, because it lets you raise problems while the relationship can still be fixed. Clients who value the work usually respond well to an open conversation about the scores. A client who will not engage with the facts has given you useful information too.
What to do with a low-scoring client
Ending the relationship is one option of several.
- Reset expectations. A frank conversation about scope, communication or payment can change the relationship.
- Adjust the price. If the account takes more time than it pays for, raise the price to reflect the work. The client will either pay a fair rate or leave, and both outcomes improve your position.
- Offer a different service model. A simpler, lower-touch package may suit them better and take less of your time.
- Help them move on. Introduce them to a provider that suits them better, and hand over properly so the relationship ends well.
A client who is wrong for you is often not getting your best work either. Helping them find a better fit is usually good for both sides.
Next step
Score your current clients against the second scorecard this month. Many owners find a few accounts that take far more time than they pay for. Decide which of the four options above fits each one.
If you would like help building scorecards around your own client journey, customer journey mapping is where that work starts. For a wider view of your pricing, profitability and client base, the Value Transformation Assessment gives you a picture in around five minutes.
If you run an MSP, the MSP case study shows how one IT company improved profit without taking on new clients.
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