With five years of experience in software sales, I’ve worked with some of the best brands on the planet, but I’ve also been put in situations where clients wanted out of their contracts.
There will almost definitely be at least one client who wants out of their contract with you this year. It is an issue you will be faced with. Clients break contracts for a variety of reasons. Sometimes cash flow issues keep them from paying their bills. Other times they just decide to go in a different direction or they're dissatisfied because your product or service doesn't meet their expectations. If you find yourself in a situation where a client wants out of their contract, here are six tips on how to handle it:
No matter the reason, you need to let your client know that breaking the contract will not work for your company. Your company has dedicated resources and delivered on your side of the agreement, and they need to do the same. Be firm here. If the business is struggling, ask them which vendors they are paying first. They were aware your partnership existed when they chose to leave the contract early. If they aren't satisfied and the perceived value is low, highlight some areas where they could take better advantage of your solution.
Pick Up The Phone
If the request goes beyond two emails back and forth, you need to pick up the phone and call them. Having a human conversation is important to better understand client sentiment and will help you resolve the issue at hand.
Come Up With A Plan To Fix Their Issues
Who is ultimately at fault doesn’t matter, both companies are in bed together and it's in both of your best interest to work together to quickly get back on track. Try to understand why they want out of their contract, address any issues and come up with a plan to fix the issues if they re-commit to the terms of the agreement.
Remind Them Of The Terms Of Your Agreement
If you have clients with high numbers of overdue, unpaid bills that demand to get out of their contract when you start pressuring them, I’ve found that reminding them of the terms they agreed to is the best place to start. Clearly outline everything they committed to paying and bring it to their attention they are still responsible for the entire term of the agreement, including all future invoices, even if they do not use your service or technology. Think about your Netflix account -- you still owe them $8 every month even if you never turn on your TV.
Don't Get Emotional
You will have to have tough conversations with your clients. Before each conversation, write down the topics that you think need to be addressed, ideally as close to word for word as they can be so you can say them on the call. Try to keep emotion out of it as much as possible. You need to be building a business. The reality is clients that don’t pay and don’t honor their contracts are not good partners for your company.
Consider Restructuring Or Changing The Agreement
When clients want to break contracts, it can sometimes mean that as a salesperson I’ve failed to set expectations correctly, that my communication was not clear at some point or that I missed a major red flag when evaluating whether they were a good fit for our company. I try to approach discussions with these clients with an appreciation for the second chance that I have been given to re-align the relationship.
When you get to the point where you've decided the contract needs to be restructured, you have some options. You could suggest alternative payment terms that scale, extend the length of the agreement by a month or add in some additional product usage or features. Try to find the fit that will win them back and get them to spread the word to other companies about what a great partner you are.
If your client is actually taking advantage of your company, though, you need to walk away. With bad apple clients, trust your gut and use your energy to find new partners that will love your product.
By James Hotson