The client you signed on years ago, perhaps one of the agency's first clients. This is classic formula for languishing in low fee territory. As new agency, you were probably billing at the lower end of the market and eager to sign clients.
Now your agency is more established and signing clients at the higher end of the market. Perhaps you've made modest increases in the legacy client's rates over the years, but the relative value of his fees only continues to diminish. It's hard to make a big shift in a client's Overton Window of what they'll consider an acceptable fee range. The result is that they are and will always pay low-end rates.
And if by some reason these low fees don't put them in the unprofitable category, they're costing you money by using resources that could be more profitably deployed elsewhere.
2) Stuck in services that you no longer offer
When you signed this client, you were taking any kind of marketing work and would figure out where to get the expertise and skills to deliver. Now, your agency is narrowing its offerings to maximize its expertise and differentiate itself.
But this client isn't interested. His marketing needs remain firmly in strategies and tactics that your agency doesn't want to develop or hire for. Maybe the client's leadership doesn't have the vision to value the potential of new marketing strategies. Or perhaps the client's marketing needs are evolving but just not in the same direction as your agency.
3) Too small a morsel of the pie
We talk a lot about ensuring that no one client accounts for too much of your overall revenue, typically no more than 10%. It's just too risky. Well, there are costs to your agency from a client that's too small a portion of your revenue. Less than 5% is probably too small without a good reason for keeping the client on.
There are fixed operational costs to servicing a client regardless of their billables. So a small client will always cost you more to service than a large client. There are also productivity and administrative costs to juggling too many active clients. Hiring more people is an expensive solution, especially when trying to balance a high volume of small clients means you can easily find yourself overstaffed.
You have some options to remediate this type of client you may have outgrown. Are there upsell opportunities with them you've been overlooking? Are they good a referral partner to you? If so, you could consider continuing to work with them.
4) Believes their history with you entitles them to special treatment
Another unique risk of a long-time client, especially one that's been with you from your earliest days.
Those were the days when the agency was basically two to three people doing everything from business development to account management to writing the press releases. You had no systems or workflows; you just got work done somehow.
Now those same two to three people are senior management who don't have as much time to be hands-on as they used to, but this client still expects it. This client wants to get grandfathered in and not have to use the collaboration portal you've set up to help your team execute projects more effectively with clients.
The special treatment they expect just doesn't make sense when managing a mature agency.
You Know Which Clients You Need to Leave Behind
If a client is no longer good fit for your agency, you probably already know that on some level. Do you dread their calls? Perhaps they're the account your people try to avoid or the account is where you place low performers.
This is perhaps the greatest risk such a client presents your agency -- you're not giving them your best effort.
They'll eventually figure that out when they start missing targets. Why let the relationship degenerate to that point? You can break up with a client in a way that preserves the good will between you.
Outgrowing clients is a challenging situation, but also a good one. You can only outgrow a client if your agency is growing.
Originally published May 31, 2016 9:00:00 AM, updated January 12 2018