It is January. The holidays are over, the decorations are down, and for the small business leader, the “Fear of the Empty Pipeline” has officially set in.
When you look at your bank balance in January, especially with the UK tax deadline of January 31st looming, your natural instinct is to hoard. You want to grab every penny, secure every contract, and say “yes” to every enquiry. The idea of getting rid of a paying client feels counter-intuitive. In fact, it feels like financial suicide.
We are taught that to make more money, we need to add. Add more clients. Add more hours. Add more services.
But what if the quickest way to increase your profitability in 2026 wasn’t addition, but subtraction?
Our money-saving blog this month argues a controversial point: Your “bottom 10%” of clients are not just annoying; they are actively costing you money. They are an invisible overhead, draining your resources, inflating your operating costs, and capping your income.
If you want to “save money” in your business this year, you don’t need to cancel your Spotify subscription. You need to fire the clients who are making you poor.
Part 1: The Mathematics of the “Bad” Client
Let’s move away from feelings and look at the cold, hard data. In almost every service-based business, the Pareto Principle (The 80/20 Rule) applies, but often in a way we don’t realize.
- The Revenue Rule: 80% of your revenue comes from 20% of your clients.
- The Headache Rule: 80% of your problems come from 20% of your clients.
The problem is that for most small business owners, the “Revenue 20%” and the “Headache 20%” are different groups of people.
The “Effective Hourly Rate” Trap
You might have a client, let’s call him “Budget Bob,” who pays you a retainer of £500 a month. On paper, that is £6,000 a year. If you fire Bob, you lose £6,000. That looks like a loss.
But you have to calculate the Effective Hourly Rate (EHR).
If Bob’s work takes you 5 hours, your rate is £100/hr. Great. But Bob sends emails at 9 o’clock on Sunday evenings. Bob disputes invoices, requiring you to spend an hour with your bookkeeper. Bob changes the brief three times, requiring unpaid revisions. Bob causes you stress, meaning you work slower on other projects.
If Bob actually consumes 20 hours of your mental and physical bandwidth, his EHR drops to £25/hr.
Meanwhile, your best client, “Premium Sarah,” pays you £2,000 but is organised, trusts your judgment, and pays on time. She takes 10 hours of your time. Her EHR is £200/hr.
Every hour you spend servicing Bob is an hour you cannot sell to a new Sarah. By keeping Bob, you are not “making £500”; you are blocking the capacity to make £2,000.
The “Saving Money” Angle: When you fire Bob, you save:
- Administrative Costs: Less time chasing invoices (or paying a VA to do it).
- Software Costs: Do you pay for seats on project management tools or cloud storage? Bad clients often require more storage and more admin seats.
- Opportunity Cost: The most expensive thing in your business is a missed opportunity.
Part 2: How to Identify Your Bottom 10% (The Audit)
Before you start sending termination emails, you need to conduct a forensic audit of your client list. Do not do this based on “who annoyed you yesterday.” Do it based on data over the last 12 months of 2025.
Create a spreadsheet with four columns:
- Total Revenue (2025): How much cash did they actually put in your bank?
- Actual Hours Worked: Be honest. Include phone calls, emails, and “thinking time.”
- Payment Friction Score (1-5): 1 = Pays instantly. 5 = You have to chase them three times.
- The “Gulp” Factor (Yes/No): When their name pops up on your phone, does your stomach tighten?
Who makes the cut?
Your “Bottom 10%” are usually found in one of these three profiles:
1. The Scope Creeper They bought a package, but they constantly ask for “just one quick thing.” They treat you like an employee, not a B2B partner. They don’t respect boundaries.
- Financial Impact: They dilute your profit margin by expanding the work without expanding the fee.
2. The Late Payer They pay, but only after 45 days and three awkward emails.
- Financial Impact: Cash flow is the lifeblood of a small business. A client who pays late forces you to dip into savings or use credit facilities, costing you interest or lost investment growth. In January 2026, liquidity is king.
3. The Legacy Discount These are clients you picked up three years ago when you were cheaper. You have raised your prices for everyone else, but you were “too nice” to raise theirs.
- Financial Impact: You are effectively subsidizing their business with your own lost profit.
Part 3: The Psychology of “Firing” (Overcoming the Fear)
Why do we keep these clients?
1. The Sunk Cost Fallacy: “I’ve worked with them for five years; I can’t lose them now.” 2. The Scarcity Mindset: “What if no new clients come along? A bad £500 is better than £0.”
This is the most dangerous mindset for a small business. A “bad £500” is not better than £0 if earning that £500 burns you out so badly that you can’t market yourself to better clients.
Think of it like your wardrobe. If your wardrobe is stuffed full of old, ill-fitting clothes (bad clients), you literally have no room to hang new, high-quality suits (good clients). You must create the vacuum to fill the vacuum.
Part 4: How to Fire Them (The Scripts)
You have done the maths. You know who needs to go. Now, how do you do it without burning bridges or ruining your reputation?
This is the UK business world; we don’t flip tables. We are polite, professional, and firm. Here are three strategies for the “Client Purge,” ranging from soft to hard.
Strategy A: The “Legacy Upgrade” (The Soft Fire)
Best for: “Legacy Discount” clients whom you actually like, but who aren’t paying enough.
You don’t necessarily want to fire them; you just need them to be profitable. You give them a choice: pay the 2026 rate or leave.
The Script:
“Hi [Name],
I’m currently reviewing my business structure for the 2026 financial year. As part of this, I’m standardising my rates across all clients to ensure I can maintain the level of service and quality you expect.
From March 1st, my day rate/retainer will be moving to [New Price]. I’ve loved working with you, so I wanted to give you plenty of notice.
I completely understand if this doesn’t fit your budget right now. If that’s the case, let me know, and I can help wrap up our current projects by the end of February.”
The Outcome: Either they agree (you make more money), or they leave (you free up time). It is a win-win.
Strategy B: The “Pivot” (The Strategic Fire)
Best for: “Scope Creepers” or clients whose work you just hate doing.
You frame the breakup as a change in your business direction. It’s not “you are annoying,” it’s “I don’t do this anymore.”
The Script:
“Hi [Name],
I’m writing to let you know about some changes to my business for 2026.
Moving forward, I am pivoting to focus exclusively on [Niche/Service Y]. Unfortunately, this means I will no longer be offering the [Service X] that I’ve been providing for you.
Our last date of service will be [Date]. I want to ensure you’re not left in the lurch, so I have prepared a handover file, and I’m happy to recommend a few other providers who specialise in this area.”
The Outcome: They can’t argue with your business strategy. It is clean and professional.
Strategy C: The “Referral” (The Firm Fire)
Best for: The “Late Payers” or clients you simply cannot afford to keep.
The Script:
“Hi [Name],
As I plan for the year ahead, I’ve realised that my capacity has changed, and I am no longer able to give your account the attention it deserves.
To be fair to you, I think it is best that we transition your account to a partner who has more availability. I will be stepping back from our agreement effective [Date].
I highly recommend [Competitor Name/Agency] for this type of work—they are excellent and might be a better fit for your current needs.”
The Outcome: You are firing them, but you are framing it as doing them a favour (“giving your account the attention it deserves”).
Part 5: The “New Year” Financial Reset
Once you have fired the bottom 10%, you will likely have a revenue dip in February. Do not panic.
You have just bought yourself the most valuable asset in business: Time.
Here is how to reinvest that time to save money and grow profit:
1. The “Top 20%” Love Bomb
Take the time you used to spend arguing with Budget Bob and spend it on Premium Sarah.
- Send her a handwritten “Happy New Year” card.
- Offer her a complimentary 30-minute strategy call for her 2026 goals.
- The Goal: Increase the “share of wallet” from your best clients. It is cheaper to upsell a happy client than to find a new one.
2. Fix Your Processes
Bad clients usually force you to work in chaotic ways (rushed deadlines, messy files). Use the freed-up time to build:
- Standard Operating Procedures (SOPs).
- Templates for onboarding.
- Automated invoicing flows.
- The Saving: Efficiency is money. If you can do a 5-hour job in 3 hours because you are organised, you have just given yourself a 40% pay rise.
3. Marketing for “Lookalikes”
Analyse the common traits of your top 20% of clients. What industry are they in? What job titles do they have? Where do they hang out? Use your newfound freedom to specifically target only people who look like them.
Conclusion: Profit is Sanity, Revenue is Vanity
As we move through January 2026, the pressure to “save money” is real. But saving money isn’t just about cutting expenses; it’s about cutting losses.
Every day you spend serving a client who underpays, pays late, or drains your energy is a day you are operating at a loss, regardless of what the invoice says. You are paying a “stress tax” that doesn’t show up on your balance sheet, but certainly shows up in your life.
This month, be brave. Check the data. Trust the math.
Fire your bottom 10%. Your bank account (and your sanity) will thank you by April.
A Note on Contracts
Disclaimer: Before firing any client, review your contract terms regarding notice periods and termination clauses. Ensure you are legally compliant to avoid any breach of contract claims. If in doubt, consult a legal professional or use FSB membership, if you need to join speak to Glenn.
Call to Action: Have you ever “fired” a client? Did your business grow or shrink afterwards? Let me know in the comments, would love to hear your “New Year Purge” stories.