So it’s happened (again!). We just lost a client who decided to take their digital execution in-house. It was all amicable with a simple call, quick chat to let me know the situation, a ‘thanks so much’ and then it’s done. Client gone. Revenue gone. Team dejected. Well at least it wasn’t to another agency right? Right?
Losing good, and even difficult clients is tough. Really tough. What you envisage running an agency, it’s all about gaining new clients and making them super happy. It’s not often you think about your year ahead and ponder the number of clients you are going to lose. Although we know its an inevitable part of running this type of business, that part seem to skip our mind somewhat as overzealous and confident business owners.
Companies lose clients all the time so what’s the big deal? Some might think it’s because you will lose the revenue associated with that client. Others think it’s because we tend to take it personally. I honestly believe its a combination of many things, including both of these.
Let’s get to the crux of it, the first thing to mind and the most obvious reason losing a client hurts is the loss of revenue that goes with it. I’m not saying that’s the most important factor but no doubt, it’s the elephant in the room when your partnership goes south. Am I wrong?
In some cases you needed to add additional resources to service that client and now there is a huge hole to fill. Where will the next client come from? Is there enough revenue coming in to sustain the current resources? That client may in fact have been pivotal to your bottom line and things may look dim. When I dug deep, this was probably one of the lesser concerning elements.
The conclusion I always came to was that it is much more than purely financial. Resources, time, effort and sacrifice went towards that client. As company we all pride ourselves in delivering quality work and losing a client just cuts deep. It can hurt pride and morale. There is a personal element that really stings. Real people are managing these campaigns and suddenly they question their worth.
Having been running a business for over 10 years now I have experienced the ups and downs so after pondering my thoughts I decided it would be a good idea to jot down what I have learnt over the years when the day comes that a client decides to look for greener fields:
1. Short term pain can be worse that it seems
I recently watched an interesting TED talk by Dan Gilbert. I’ve been watching a lot of these things recently since it’s a little cold here and instead of doing my morning ride outside, I’ve been sitting on an internal trainer watching TED Talks! Anyway, I digress. In this talk, Dan discusses happiness and the concept that our minds focus and makes decisions based on closer futures or anticipation. ie If the negative is in close proximity in terms of time it is deemed much worse than it actually is.
What the hell am I talking about right?
I would recommend to watch the entire video below however to skip to my reference point fast forward to the 18 minute mark and absorb the next few minutes.
Basically in context of this post, it means that the pain of the loss (ie of a client/sale) is directly proportional to the time of which the news was given to you.
This is human nature. It’s normal.
For more reassurance I look to the following 8 points.
2. It is going to happen
Its inevitable. No matter how good of a job we do it’s simply not reasonable to expect that we will retain all our clients. I honestly believe that if we delivered the best service, impeccable results and sent them cake on their birthday, there will come a time a client will decide to go.
In one case we delivered a client a 1400% return compared to prior to us taking over. Thats like 14x for the same spend! Guess what? 5 months later they were gone. Doesn’t make sense does it?
So it may or may not be the results we are achieving but also other factors such as outward pressure, new owners or they simply had a ‘better offer’ from a competitor. It’s going to happen, accept it.
3. It’s an opportunity – get better, more profitable clients. Reallocate resources
One thing I have always drilled into my team is that we need to always be on the lookout for opportunities. New advertising products are opportunities. Emerging markets are opportunities. The latest in tracking software is an opportunity. So is a lost client.
A lost client could be a great opportunity to fill that space with work that is more fulfilling and more rewarding.
A few months ago we lost a relatively small client and no doubt the team was bummed. In fact its the same 1400% client I mentioned earlier. I jumped into Toggl and pointed out that we had spent consistently almost 20hrs per month managing that campaign. That sounds reasonably however when I looked at it terms of an hourly return, this equated to around $20 per hour! This means we just found 20 hours to assign to existing clients to offer them new services, or find a new client where we can not only do great work, but yield a profitable result for the business!
We were lucky enough to have the latter come to us within a few days and now those 20hrs are filled and our margins are protected. If you are unsure what I mean about that check out my post about our new pricing model.
4. It allows us to learn
What can we do better? How can we ensure that we are protected from this situation and minimise the effect it causes of staff morale as well as the bottom line? Are we getting the right clients? Who are the right clients? You may have heard this hundreds of times before but people generally learn more from the setbacks than they do from the wins. You have heard the famous Michael Jordan quote right? (No? Well download instagram.. I’m sure it will come up!) It goes something along to lines of missing thousands of shots which is why he succeeds.. well this is no different.
5. It happens to everyone
You are not alone. Don’t forget that clients that have come to you are generally a loss to someone else. Your once great client is now with someone else. This happens and you are part of the cycle. Wait for the next wave to come in and ensure you learn from the previous one.
6. Prepare for the bad times in the good
Even though losing clients’ is inevitable, it is amazing how complement we can get as an agency when times are good. Knowing that no matter how strong the relationship is, losing a client is going to happen, how big and how important is something we cannot judge. So when times are good think about how you can take advantage and prepare for the dips.
We often make the mistake of assessing our situation after the fact or reacting to situations as opposed to being proactive. As an example when times are tough some of us will go out to get finance or funding to see us through. The situation would be much simpler and far less complicated if we sourced finance during the good times. People are more likely to lend it to you and even though you may not need it, one day it could come in handy. Rough sees could be just around the corner so be prepared, even though it may seem too far on the horizon to think about.
7. There are more
Yes the old saying, there are plenty of fish in the sea. Most importantly it is important to keep fishing even when the boat seems relatively full. Being in digital has its upside… everyone wants to pick your brain. After all we are in an industry booming like no other and businesses need our services. Go out a fish instead of obsessing about the one that got away.
8. Spread your wings and diversify
If you can diversify, do it. Why? Diversifying helps to minimise risk. A diverse client list means when it comes time to lose one you won’t see the entire business topple over. Even better, diverse revenue streams allows for a more robust and more predictable business behaviours and of course, spreads your risk.
All great companies understand they need to diversify, whether it be horizontal, vertical or way left of field. Google started with a search engine and now provides the software that powers billions of mobile phones worldwide… then maybe cars? Apple was simply a computer company but has now changed the way we listen to music and talk to each other. Tesla is a car company… that now powers houses via battery. Uber is ride sharing… and food delivery.
9. Size doesn’t matter.. they all hurt
What I found really interesting is that losing even small clients that are not even profitable can really hurt. Sometimes I am left wondering why I feel so down when a client pulls their business and they only add up to a fraction of a percent of revenue. Why is it that larger clients packing their bags feels the same, some times a little less? Well because of all the reasons mentioned earlier.. regardless of the size of the client we feel responsible towards providing the best service and experience possible. Failure is painful no matter how big or small.
To go into an agency business, or any type of business for that matter, and not expect to lose clients or to experience any churn is setting yourself up for true disappointment. It happens and will continue to happen to me, to you and to your competition. I have learnt the size of the loss is not necessarily proportional to the pain felt. Whether I lose a $5 a month JimmyData subscriber or a $5k+ monthly retainer client in the management business, it affects me.
But most importantly what I have discovered over many years is that no single loss has defined the business. Where we have taken a step back there have been many forward. We have a stronger and more robust business as a result of these learnings. Our processes are better, our product is better and the business foundation strengthens.
You will find that the above will deliver some comfort to those in a similar situation, which is the aim or this post really. For us, year on year as a business we have grown both as a team and also as a business. Breaking client relationships is part of the growth process so embrace it and take it fore what it is.