Every business has one. The client everyone sighs about. The one whose emails arrive at 9pm, whose scope moves weekly, whose invoices get queried and paid late.
The question is not whether they are annoying. It is whether they are profitable — and those two things correlate less often than you would think.
First, prove it
Do not act on a feeling. The client everyone complains about is sometimes the most profitable one in the book, and the quiet, pleasant client is sometimes the one losing money.
Build one table:
| Client | Annual revenue | Direct cost to serve | Hours consumed | Gross profit | Profit per hour |
|---|---|---|---|---|---|
| Client A | $180,000 | $96,000 | 620 | $84,000 | $135 |
| Client B | $95,000 | $61,000 | 540 | $34,000 | $63 |
| Client C | $74,000 | $79,000 | 480 | −$5,000 | −$10 |
Include the hours nobody bills for. Meetings, rework, chasing information, chasing payment, out-of-scope favours, the emotional overhead of a difficult relationship translated into the time it displaces.
That last category is where unprofitable clients hide. They rarely look bad on revenue. They look bad on hours per dollar.
Set a target profit per hour — your break-even rate plus your intended margin. Anything below it is being subsidised by everything above it.
→ Gross margin by service line for the full method
The three routes out
Firing is the last of them. Try the first two first — they frequently solve it without losing the revenue.
Route 1 — Reprice to profitability
The most common right answer, and the one people skip because they assume the client will leave.
Do not give them a 5% rise. A client who loses you money at $74,000 loses you money at $77,700. Price to what the work actually costs plus your margin — which might be a 30% increase.
Two things happen, and both are good:
They say yes. The relationship becomes profitable and everyone carries on. This happens far more often than owners expect, because the client has been getting an unsustainable deal and frequently knows it.
They say no and leave. You have recovered 480 hours of capacity to sell to someone who pays properly.
The script:
“I’ve reviewed how we’re resourcing your account. To keep delivering at the standard we want, the fee needs to move to $X from [date]. I wanted to give you plenty of notice so you can plan, and I’m happy to talk through what’s driving it.”
No apology. No hedging. Give them the number and a date.
Route 2 — Reduce scope to what pays
Sometimes the relationship is fine and the scope is the problem — usually because it expanded gradually and nobody repapered it.
“Looking at how this has evolved, we’re doing quite a bit that sits outside our original agreement. I’d like to reset it so we’re clear on what’s included at the current fee, and price the additional pieces separately.”
This is often the least confrontational option, because it is factually true and the client usually knows the scope drifted.
Route 3 — Exit gracefully
When repricing has failed, the relationship is genuinely damaging, or the work is simply not what you do any more.
Give real notice. 30 to 90 days depending on the work. Leaving a client stranded is how a quiet exit becomes a reputation problem.
Refer them on. The single most powerful move available. A referral converts “they dropped us” into “they found us someone better suited” — and the business you refer to may genuinely be a better fit, particularly if they are cheaper or more specialised.
Never make it about them. Even when it is.
“We’ve been reshaping the business around [specific focus], and I don’t think we’re the right fit for what you need going forward. I’d rather tell you now than let it drift. I’ve spoken to [name] at [firm] who I think would serve you well — happy to make the introduction.”
Finish properly. Complete work in progress, hand over files and documentation cleanly, send a final invoice promptly. How you leave is what they will tell people.
When it is not about profit
Some clients are worth keeping below your target rate. Be deliberate about it rather than accidental.
Strategic value. A recognisable name that opens doors, a reference client in a sector you are entering, work that builds capability you intend to sell.
Capacity filler. Genuinely idle capacity is worth filling at any price above marginal cost. But be honest — “we’re quiet” is a real reason; “we might be quiet later” is not.
Genuine relationship. It is your business. You are allowed to keep a client because you like working with them.
The distinction that matters: a decision to subsidise a client is fine. Not knowing you are subsidising them is not.
The pattern worth noticing
Run this exercise across your book and a consistent shape appears: the clients who consume the most attention are rarely the ones who pay the most for it.
The reason is structural. Demanding clients demand. Reasonable clients do not. Over time, the reasonable ones subsidise the demanding ones, and your best clients are quietly funding your worst.
Fixing that is usually worth more than any cost-cutting exercise, and it costs you no capacity — which is precisely why it should come long before you consider making anyone redundant.
Where to go next
- Gross Margin by Service Line — prove it before you act
- How to Raise Prices Without Losing Customers
- Pricing for Profit
- Five Things to Do Before You Make Someone Redundant
- The Profit Lever Hierarchy
Worked figures are illustrative. General information, not financial or legal advice — check your contractual notice obligations before terminating any client agreement.