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When is it Time to Fire a Client?

Oct 14, 2021

While IT services providers are generally a philanthropic group, and often give a significant amount of time to their communities and clients, they are, first and foremost, businesses. Revenue is required to keep the lights on and employees paid. Their generosity has its limits.

Some clients have a propensity for taking advantage of their IT business partners. For example, MSPs are often asked to perform extra services and unusual tasks, then go months without getting paid, even after going above and beyond the call of duty and with a contract in place. These business leaders put little thought into what happens outside their own company unless it affects their bottom line.

Virtually every MSP can tell horror stories related to their clients’ actions or failures. Running a business is never easy, and an overabundance of challenges frays the nerves of even the steadiest leaders. Some owners simply don’t have the personality or ethics to deal with other people, and the slightest issue can set them off and create angst for anyone they encounter, including their trusted partners.

The cost and complexity of IT exacerbates these problems. Today, relatively few businesses can operate without a fairly robust system of computers, networks and applications, and most organizations require a significant amount of support to keep it all running. MSPs often fill that virtual CTO role for a SMB, but without the title or control of the budget. This sometimes results in failures outside the MSP’s spheres of influence.

All of these combined factors—challenging personalities, complex technology issues and a lack of direct control—lead to difficult situations for IT service teams. No one wants to fire a client, but there are times when MSPs must make that decision. What can an IT services firm do to avoid those situations, or at what point do they pull the plug on an important business relationship?

The Issues that Drive MSPs Crazy

No two clients are the same, nor are the issues that creep up between MSPs and the people they support, but there are general themes. The problems that aggravate IT services professionals the most—and most commonly lead providers to feel the need to walk away from lucrative and hard-earned contracts—usually fall into the following categories.

  1. Technological naivete. Business owners with little knowledge about IT systems, who second-guess or create roadblocks for the experts, tend to create numerous problems for MSPs. Micromanagement and unrealistic demands increase anxiety and a lack of respect for tech professionals, and generally wear on the relationship. It’s exhausting for MSPs to constantly justify new IT investments, especially if they need to pressure clients to improve cybersecurity and productivity.
  1. Scope creep. MSPs are kind to a fault. IT professionals typically step up to solve any technology-related issues for their clients, and some go above and beyond to assist with other business-related concerns. MSPs have to pull back when those emergencies or extra favors become everyday expectations, or the client fails to invest in long-term remedies. As businesses grow and thrive, they often require more services and tech support, so providers must properly track and bill when workloads increase. It only becomes an issue if clients are unwilling to pay for what they receive.
  1. Recurring payment issues. MSPs deserve to get paid on time for the services they provide to their customers. When a client withholds or is slow to pay for the valued IT services already rendered, it not only affects a provider’s cash flow but also makes it harder for that firm to invest in new technologies, hire more skilled professionals, and grow their business. Constantly delayed payments or a major overdue balance can be a sensitive subject. Still, MSPs need to promptly deal with these issues, following the terms of their contracts, before these issues get out of control.
  1. Mistreatment of staff. Employee health and safety is non-negotiable for every business owner. Periodic onsite visits and continual interaction between MSPs’ team members and clients make it hard to police improper behavior. Mistreatment of staff is a zero-tolerance issue that must be quickly and effectively addressed by both parties’ management teams.
  1. Criminal activity. Yes, corruption and misconduct can come into play in a business relationship. Stories of MSPs discovering illegal activities, such as fraud or theft of services, are not uncommon in the industry, though management may not always be aware of the issue (think rogue employees or outsiders). Failure to address or report criminal activities may have legal and financial ramifications for an MSP.

Exhaust All Options Before Firing a Client

IT business owners must realize they cannot save every relationship. MSPs should walk away if a client willingly partakes in criminal activities, tolerates mistreatment of vendors and partners, or has no intention of fulfilling other critical obligations, such as on-time payments. Giving a difficult customer a long leash simply adds to the cost and frustration of the IT firm’s employees and management team.

However, MSPs can address some of the specific issues listed above before severing a relationship.

  • Set clear expectations upfront. Master services agreements should explicitly detail the scope of work, standard operating processes and responsibilities for all parties. Many MSPs review payment terms and conditions with the principals before signing a contract, during the handoff calls, and within QBRs and other client meetings when problems arise.

  • Make autopay the standard. Adding a secure payment portal, like ConnectBooster, is one of the surest ways for a MSP to get paid on time every month. Many providers include autopay as a requirement in all new contracts and renewals. Reluctant or problem-clients may respond to incentives, such as a lesser rate increase in exchange for implementing autopay. The goal for MSPs is to shift some financial control in their own favor to protect cash flow and profit margins from each account.

IT services firms should never fire a good client. However, if encouragement and procedural and policy changes don’t improve the truly bad behaviors of a managed services customer, the MSP may need to sever that relationship. Those decisions, though difficult, often positively impact the business, boost employee morale, increase productivity, and give the team more time to focus on landing more profitable (and agreeable) prospects.


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