When To Politely Turn Down A New Business Opportunity

When To Politely Turn Down A New Business Opportunity

By: Jeff Heybruck

New business opportunities are, for good reason, exciting. But wise business leaders are able to take off the rose-colored glasses and view each opportunity with objectivity.

Our advice? Temper optimism surrounding new opportunities with a healthy dose of realism. The scenarios below signal it might be best to politely turn down a potential new client, before the new relationship turns into a drain on resources – and profits:

1. Not a Good Industry Fit

Taking on a client in a completely different industry – if done just for the sake of earning a new client – can lead to mismatched expectations and poor results. If the business was already planning to enter new industries and markets, then that’s a different story. The key here is ensuring that management is driving industry decisions, rather than letting new sales opportunities take the wheel.

It might be tempting to say “yes” even if the industry is not a fit, but sticking to core competencies and the business plan will ensure the best possible service is delivered. It just takes one mis-matched closed sale to damage a good reputation. It won’t be long before leadership is asking: “How did we get here?”

Lucrum has even run into a situation where an existing client (that was a good fit) decided to create a spin-off organization, one that that did not align with our business vision. Thankfully, we were able to politely decline the client’s request to support the new business and find a competitor to service that new opportunity, while still keeping the original entity as our client.

2. Suspicious Activity or Numbers

Unexplained fluctuations in cash flow, discrepancies in the books or large payments made in cash can all be cause for concern.

However, we advise taking the time to understand the situation fully before jumping to conclusions. Hanlon’s Razor states: “Never attribute to malice that which is adequately explained by ignorance.” Maybe the client is simply inexperienced and needs guidance.

Start by inviting them to a meeting to discuss the observations and seek clarification. If, after clarification, things still don’t add up, it may be best to walk away. Otherwise, your business risks its own reputation if the suspicious activity does turn out to be fraudulent. Or even worse its own financial health if it ends up being the result of the client struggling financially (and can’t pay their invoices).

While securing new business is important, it’s crucial to prioritize ventures that align with long-term goals and ethical standards. We’ve had several clients where our “sketch alarm” was going off so we either declined the opportunity or, if we did start working with them, made our exits as soon as possible.

3. Lack of Organization

A messy, disorganized office or warehouse can be a window into deeper management issues. If a potential client’s workplace or property is in disarray, it raises questions about their professionalism and approach to business.

Getting the chance to peek inside a physical workspace won’t happen in every case. But for virtual relationships, there can be similar indicators.

Maybe the prospect is already coming unprepared to meetings or having trouble providing basic information needed to scope services. Or maybe initial Zoom meetings are cut off at 30 minutes because the client refuses to invest in paid Zoom accounts for its employees (read: not willing to invest in tools to achieve organizational alignment). We had one business where the son had taken over from the father but all the awards, framed pictures, etc. were all from the Dad’s era. The IT situation was a mess and even in the late 2010’s, they had several folks with a single 17” Dell monitor. Clearly no desire to reinvest in the business.

If an unwillingness to invest in organization is apparent now, imagine how this will translate into working with the client day-to-day. It won’t be pretty and it likely won’t result in the profitability projected due to wasted hours herding cats.

4. Showing Disrespect

Every client reserves the right to give feedback to vendors and service providers, even during the sales process. It matters, however, the way in which that feedback is given. A prospect showing disrespect before they are even officially a client is a big red flag.

A caustic client’s impact on your bottom line may take time to be felt, but it could even go as far as to affect your ability to retain employees. No one wants to work with a disrespectful or problematic client. Losing good staff can be incredibly costly. The time and money spent on recruitment, training, and the potential drop in productivity during the transition period can be significant.

Another variation on this same theme is clients who won’t take recommendations. If your company has been hired to provide strategic advice, it’s imperative to have clients respect that advice. Few things are as frustrating as a client who won’t listen, and then blames you when things inevitably fail. Best to prioritize the health of the organization and happiness of employees and politely decline.

Pro-tip: Find a small but insightful suggestion to include in the sales process and use that to gauge the client’s willingness to listen.

5. Can’t Scale to Support the New Business

Be honest about capacity and bandwidth. If taking on a new account would mean stretching the team too thin or jeopardizing existing client commitments, it’s wiser to decline. A good reputation is invaluable, and overextending resources could damage it.

Worse yet, an inability to scale risks alienating existing A-tier clients when their quality of service suffers. Losing long-standing, right-fit clients as a result of taking on more new clients that can’t be adequately staffed and supported isn’t exactly a model for long-term profitability.

In Conclusion

Remember, a healthy business is built on strong foundations and a healthy client base. By recognizing the above scenarios, businesses can make informed decisions about new business opportunities and ensure long-term success and profitability.

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