Sins of an Agency: Parting Ways With Our Biggest Client
The author's views are entirely their own (excluding the unlikely event of hypnosis) and may not always reflect the views of Moz.
Running a digital marketing agency demands tough decisions daily, especially when faced with challenges like the rise of AI, economic downturns, and changing consumer behavior. In such a volatile environment, every decision feels like a high-stakes gamble.
One of our most challenging decisions was deciding whether to part ways with our biggest client, who contributed a substantial part of our revenue. Given the current economic climate, this was a risky move.
But what do you do when your values clash with your commercial goals?
In this article, I’ll share how we made this difficult decision and the lessons we learned along the way.
Customer concentration: a double-edged sword
Customer concentration originates from financial and business management contexts. Simply put, it’s the degree to which a company relies on a small number of clients for a significant portion of its revenue. For instance, if a single client accounts for 10% of a company’s revenue or a group of five clients brings in 25%, the company has high customer concentration.
At Vixen Digital, we had this problem. We were aware of the risks of over-reliance on a single client, but it wasn’t a deliberate strategy. It evolved naturally as one lead expanded into multiple retainers and upsells. A single lead grew into a retainer, followed by several upsells, ultimately making them a huge client and creating a high customer concentration problem.
The relationship was excellent for years, and the results were outstanding across all services. Here are some client highlights from 2023:
48% increase in total customers YoY
20% decrease in Google Ads cost per click YoY
26% increase YoY on paid social
522% increase in organic search sessions and 714% increase in inquiries
More importantly, our values seemed aligned, and the relationship felt like a true partnership.
Until it wasn’t.
When client relationships turn sour
In an ideal world, delivering on KPIs would depend on the great work done by digital marketers. But campaigns don't live in a vacuum—they’re influenced by numerous external factors beyond the agency or client's control.
After years of successful collaboration, our relationship with our biggest client began to change. Despite consistently hitting and exceeding the agreed-upon KPIs, the client was no longer satisfied with the results.
Mid-year, they altered how KPIs were measured. They asked us to optimize campaigns based on data we didn’t have and couldn’t accurately measure. Additionally, the new KPIs relied heavily on external factors, making it difficult to achieve goals that now felt misaligned with our capabilities.
Adding to the perfect storm, the client suffered a cyber attack, and the economic downturn caused some promising leads to pull out at the last minute.
As pressures mounted, we observed the client no longer heeding our advice. The client changed campaigns without our input and altered strategies that were working against our recommendations.
We had a choice: stick to our values or pursue the agency’s commercial goals.
Six steps we took to fix the relationship
No one likes to lose a client, particularly when that client is your biggest one and you’ve had a great relationship with them for years. We loved being part of their team and wanted to try to mend the relationship.
Here are six things we did to fix the client relationship:
1. Revisit core values
At Vixen Digital, we turned to our core values—honesty, transparency, and respect— to try to mend the relationship. We reflected on where to adjust and grow to realign with the client.
2. Manage client expectations
Managing expectations is critical, and it starts during the discovery call. We strive to set realistic goals and communicate openly about what’s achievable. Unfortunately, managing expectations is difficult if the client doesn’t listen to your advice.
3. Collaborate with partner agency
We deepened our collaboration with the client’s CRM agency to find common ground. By aligning our efforts, we enhanced first-party data integration into advertising platforms and developed several new recommendations for data accuracy and campaign optimization.
4. Implement advanced data strategies
We introduced new data-driven tactics, including:
Setting up a cross-channel custom dashboard
Integrating more data into Looker Studio
Enhancing tracking across Ad platforms
Developed a new testing framework for paid services
These steps aimed to improve campaign performance despite the challenges of reduced data accuracy due to privacy regulations.
5. Maintain proactive communication
We remained proactive and motivated throughout the process, ensuring open communication with the client. Also, we implemented rigorous channel alignment, with weekly client meetings and regular internal check-ins to keep everyone on the same page.
6. Reassess client relationships
Despite our efforts, communications with the client did not improve. After months of trying to fix the relationship, we faced a pivotal moment where we had to ask ourselves: Do we continue, or is it time to part ways?
Making a decision with a risk vs. benefit analysis
The decision to part ways was not taken lightly. It involved a thorough risk vs. benefit analysis involving multiple meetings and employee feedback. After much discussion, we identified key factors that guided our decision to part ways with our biggest client. We even made a Miro board to help us visualize the risks and benefits of the decision.
However, it came down to a few important factors, and we share them here in hopes of helping other agencies in a similar position.
Key risks included:
Revenue loss and cash flow impact: Losing our biggest client would likely impact our revenue and cash flow, particularly in the short term. We also needed to consider the effect on team members dedicated to this account.
Resource allocation: Reallocating resources posed challenges, as team members would need to adjust to new clients or services, potentially affecting quality and efficiency.
Reputation impact: We were concerned that ending this relationship could harm our reputation, both as a service provider and as an employer, particularly if it was perceived as an inability to manage complex relationships.
Internal uncertainty: The decision risked creating uncertainty within the team, potentially raising concerns about the agency’s stability and future growth plans. The worst-case scenario could involve downsizing or slowed growth.
Key benefits included:
A happier team: Letting go of this client could reduce stress and tension within the team, leading to a more positive and productive work environment.
Resource reallocation: While reallocating resources posed risks, it also presented opportunities. The freed-up capacity could be redirected towards acquiring and managing new clients, thereby improving service quality for existing ones.
Enhanced reputation for integrity: By prioritizing our values over short-term gains, we could reinforce our reputation for integrity and commitment to a healthy work environment
Improving our processes: The experience highlighted the need to refine our processes, making us better prepared to manage client relationships and future challenges.
The decision
Deciding to part ways with our biggest client was incredibly tough, but ultimately, it was the right call. After years of collaboration, we chose to end the contract, a decision that wasn’t made lightly.
After extensive consultations with HR professionals and accountants, we made the tough decision to end the contract, prioritizing our long-term values over short-term gains. This helped us better understand the possible impact on our business and employees.
After the split, we held several meetings with all team members, both in groups and individually, to discuss the implications of this change and to address any concerns or questions they had.
What we learned
This scenario is all too common in agencies, though it often goes unspoken. Another agency might have approached the situation differently, but here’s what we learned from our experience.
Address customer concentration risks early
Monitoring customer concentration is vital to avoid dependency on a single client for a large portion of your revenue. While expanding services for a big client might seem beneficial, failing to assess the long-term impact can lead to financial instability if the relationship sours.
Make decisions based on values
While the recovery process has been challenging, the lessons learned have set a new foundation for sustainable growth and reinforced our commitment to our core values. While growth is essential, it shouldn’t come at the expense of the company culture you’re striving to build. Parting ways with a major client was necessary to uphold our values and ensure our team’s well-being.
Final thoughts: We’ve diversified our client base with less than 17% tied to a single client
Reflecting on the decision to part ways, I’m still unsure if it was right. The aftermath has been challenging—recovery is slow, and we’re still filling the revenue gap through new business and upselling. However, our customer concentration is now healthier, with less than 17% of revenue tied to a single client, which is progress.
This experience forced us to innovate and refine our client acquisition and retention strategies. Finally, we’ve implemented measures to diversify our client base and reassessed the importance of our core values.
