The Beautiful Exit - The 4 times saying Goodbye is better than keeping the ARR
Updated: Mar 7
At Upturn, we like to help B2B SaaS focus on healthy, value-driven client relationships and we've seen these relationships work beautifully to help companies like yours scale sustainable growth. Sometimes though, things don't go as planned. Maybe there was a poorly targeted sale to the wrong client. Maybe the client ran out of resources during deployment and the platform is only partially implemented. In some cases, the platform really was vaporware. Yup, I went there.
It's all OK. This situations are fixable for everyone's benefit (sidenote: please, stop selling vaporware) but it's time to have a heart to heart with your Client teams about who you are serving and why. Then, you'll need a framework to shift your company objectives (OKRs anyone?) in a way that motivates your teams to achieve the results you need for growth.
Sometimes, in order to achieve the growth you need, you'll need to walk away from toxic client relationships, and the associated revenue. While this is clearly very hard in young SaaS companies and not the outcome anyone wants, it remains among the most strategic tactics you can lead for your company, and your growth.
In 2002, several very smart Finnish researchers wrote about gracefully exiting a business relationship. (read the abstract). Of particular note, they theorized that
"the dissolution of a business relationship can be desirable, freeing badly deployed resources, as indicated by the customer portfolio approach".
Seems legit, right?
By the same token, they also theorized that "dissolving a business relationship can be harmful, involving costly legal disputes and the loss of company reputation".
Uh oh. So.........should you ever consider 'firing' a client? Yes, but for the right reasons and in the right way. Far too often B2B SaaS stays stuck in unhealthy, abusive relationships with a few 'key' Clients. Here's the thing: Few objectives are more important to your Board than growing YoY ARR/MRR but these unsuccessful client relationships are directly impacting your ability to serve a broader market, and the rest of the client base.
Want to know the first thing that happens when you end these kinds of relationships? Resources and capital are no longer tied to maintaining one or two problematic clients who will NEVER buy more from you. If that's not enough motivation, here are four (4) reasons you should consider 'firing' a client as an important Growth Strategy:
Freeing up resources to develop a sustainable product roadmap that isn't only about one customer. You know the one - the BIG client that pays more than anyone else and abuses the heck out of your teams, your product roadmap, and their relationship with the CEO who 'sold' them the product. Look, if you want to be a custom development shop, by all means, continue to be that at the risk of losing the 30 other customers who need your product exactly as it is. It is your choice, adjust your business strategy accordingly and please, stop talking about your plug and play platform when you're really just Client X's hired hand.
Because you need an actual product roadmap. The Product Officer is probably going to balk and give you 10 reasons why s/he can't product a roadmap but the truth is that you need a product strategy and clients need to be a part of what is being built because after all, what are you building, if it is not for clients? When your dev teams are in constant firefighter mode EX: 'fix this' or 'move that blue button 3 pixels up the screen' for the biggest ARR client, you'll never have a product strategy and you'll always have a 'me too' product. Without a roadmap framework, you will likely also inherit an incredibly large backlog of requests in Support that are really just.......enhancements. Stop talking about it and actually build the roadmap.
Because Over-Delivering has NEVER worked. Going in strong to under promise and over deliver? 70% of the time, it works none of the time. Your team's job is to deliver to contract - no more, no less. Stop trying to over-deliver. "Over-delivering" is unsustainable and not scalable, and does little to set the relationship up for success. It's bad for our teams. Customer Delivery by nature is never done. Delivery is what we do, all day, every day.
Because you're not getting paid. The customer is consistently >90 days past due and it's nothing short of producing a Broadway musical to get payment on an invoice. It's simple - you may have $1M in ARR on your books but what you really have is debt to a customer who is likely not creditworthy. When the Days of Sales Outstanding is >90 days, your platform is likely seen as a liability at that customer site and not a value-add. It's time to engage with value-driven platform optimization discussions focused on mutual success with this client (READ: pay your bills , here is proof this platform is valuable to you ) or......exit the business liability this client has become and take steps to get paid immediately.
Obviously, you should strategically engage with high-maintenance clients. Help them become part of the solution and invite them to the conversation but make sure you're taking control of where your product needs to go and how you're going to deliver it. Relationships take work (thanks, Mom!) and our customers deserve our effort but as we all know, sometimes forever and ever just wasn't meant to be. If that's the case, don't do a French Leave or an Irish Good-bye. Try these tips instead:
Start TODAY with client relationships that are value-driven and not only owned by Sales. Sell to the right clients for the right reasons. It's true, not everybody wants/needs your stuff and just because you can sell, doesn't mean you should. Sell the right things to the right clients and have value-driven engagements after the sale. Now is a good time to start.
Create insights into client performance on your platform. If you don't have analytics, start with a spread sheet that shows clients how they're performing against peers of similar size and their competition who may be using your platform. Then...build analytics. Here's an idea: put performance Analytics into your roadmap because once you rid your business of the chaff, you'll have the time and the resources to do it!
Stop setting the expectations with your teams that they need to over-deliver. What they need to focus on is delivering to the contract. Help them read/understand your contracts. This can be game changing in early stage B2B companies where contracts are secretive and magical things.
When clients aren't paying their bill, ask them why but don't just ask your buyer, ask their finance department. Seriously. And one more thing: Stop offering these particular clients 'free' anything to get them to engage. No, No and No. Please. Just stop. No more mixed messages. You're better than that!
We love MRR/ARR as much as you do! It is truly what makes the world go round. But it's important to sell to the right clients, drive value and optimization into the relationships, deliver to contract, and expect to be paid to contract. Do that, and go get MORE MRR/ARR.
We work with your teams to create a model in which clients love your products, love doing business with you, and can't imagine not having the partnership with you.
Schedule a free consultation HERE.