By Cheryl A. Smith

      Saying no—whether to a neighbor, your child or a client —is never easy. For small business owners it can be particularly hard to turn down new projects or clients. However, for every business owner or manager there comes a point when you realize that not every client has a positive impact on your bottom line.

      At first, most eager new business owners cheerfully sign on every new client—equating more clients with more revenue. Unfortunately, as they soon learn, this isn’t always the case. Sometimes the cost and overhead of providing service or the amount of time and attention the client demands, outweighs the profit.

      In order to quickly determine whether a client will be a revenue generator or a drain, it’s important for small businesses to make a conscious decision about the kind of business they want. Then, carefully analyze what kind of clients can sustain and profit their business.

      Smart business owners should develop a framework for deciding if accepting a new client makes sense, as well as when it’s wise to terminate the relationship with an existing client. By having a clear picture of the kind of client they want and a framework for quickly determining if a client fits this picture, savvy business owners and managers can reduce the financial drain from clients that require too much of the company’s resources. Without the financial burden and time it takes to tend to draining clients, businesses can focus their attention on better servicing and increasing business with their “yes” clients.
     
When To Say No
      How can a business owner determine whether a new prospective client represents a solid investment or an irresponsible risk? The decision can be made by closely examining the prospective client’s case with relation to qualification, cost vs. gain and factors such as geography.

      While every business is different, there are certain situations that may require a decision to turn down a client. Here are a few examples of occasions where it might be necessary to say no:

• The client is not appropriate for the level or type of service your company provides –  Small service companies want to please referral sources. As a result, they may take on clients that aren’t appropriate for their business and/or clients that they don’t have the expertise to serve. Don’t just take on a client because you are worried about the competition getting that client. Rather, it is important to decide whether or not you can provide the service needed and act accordingly.
• The business is too expensive to service – Generating revenue is important, but only if you are actually making money. Keeping a difficult client because it offers good gross revenue might not always result in positive net income. For example: You take on a project that requires four hours a week of service, yet you’re spending two hours a week on the phone with the client explaining things to them. Given the extra, unbilled time spent, did you make any money? The answer is probably no. With all projects, it is important to evaluate your gross revenue, time to staff and service the client, and hard costs. Based upon this information, you can then decide if the client is worth it.
• It’s geographically challenging –  Businesses that travel to clients must also consider geography and service areas when considering whether to accept a client. You might be able to staff a geographically difficult client a couple of times; however, if it is outside your normal service area, you must realistically determine if you are going to be able to staff the client consistently and without a lot of headaches. 

      
      Depending on the type of business, there likely are other unique factors to consider when developing a plan for determining if a client or project is a good fit for the business. It’s important to develop a list of those factors and follow a framework for accepting clients. In the long run, it will hurt your business more to take on a client and fail to perform than it will to just say no from the beginning.
     
How To Say No
      Before you can learn to say no, you must first identify why you always say yes. Most people are automatically programmed to say yes because they don’t want to let people down. Unfortunately, by always saying yes, another project often ends up on the backburner and someone else is let down. Others say yes because they fear losing control of a project or giving the business to their competition. Part of saying no is realizing that certain clients might be better off using a competitor; and, understanding that you’re actually strengthening your own business by turning the project down.

      When turning down work, be polite and direct. Don’t offer unnecessary details or excuses and, if relevant, refer them to someone else. Always stick to your framework and pre-determined set of qualifications and don’t make exceptions.

      Saying no to clients can be difficult and often emotional for small business owners. There’s always the fear that if you turn down work, you may suffer later. But in order to grow a business and build a solid reputation, being selective of clients and projects is important to the long-term health of the company. Although turning down work can be challenging, it’s often the best decision for everyone involved; including the business, the staff and even the client.

      By consciously determining the kinds of clients that positively contribute to the growth and financial health of the company, and sticking to a framework for evaluating new projects, business owners will find that sometimes saying no is more profitable than saying yes.

Cheryl A. Smith is president of Kansas City Home Care Inc., a leading local provider of private, in-home care services and care management for the elderly and the disabled. She is a recipient of the 2008 Enterprising Women award and was recognized by KC Business Magazine as one of the 50 Most Influential Women for 2008. You can reach her at (913) 341-4800 or .