When you're a small business owner—particularly one of the consulting or for-hire type—the idea of ever turning down work sounds ludicrous. But the truth of the matter is this: sometimes it does make sense to turn down new business. The key is recognizing when...
Turning Down Business Starts with a Framework
Determining whether or not you should turn down a piece of potential business starts with a repeatable framework. In that framework are clear questions that you answer or actions you perform in the context of a given piece of work. Why develop a framework? Because without one, you'll follow your gut. And no offense your gut (or anyone's gut), but guts aren't always accurate, consistent, etc. OK, let's leave this analogy alone and start tossing out some framework criteria...
1. Do You Need the Work? This is a very fundamental question. Does your business need this piece of work? If you're currently in the red, will this piece of work push you into the black? Will this new business cover certain expenses—from payroll to rent—for a forecastable period of time? Is your business's very survival depending on not just this piece of new business but any new business? Asked a different way, do you need new business, no matter the business to stay afloat? If the answers to any of these questions are yes, then you're probably not in the position to turn down the new piece of business. If however, you're not in "need mode" make note of such and move on to the next question...
2. Do You Want the Work? If you're asking this question, you're in a pleasant position. That said, there are a number of possible reasons that the answer might be no. Do you want to work with this client? Are they people you would want to work with? Does this client need exactly what you do or are you going to have to stretch out of your sweet spot? Is this potential client on to something big or at the frontier of it? If so, maybe you want to be involved. The point is this: If you don't want the work at the pitch stage, it's unlikely you'll ever love it. That matters to some; to others, not so much.
3. How Did this Work Come Your Way? How a new piece of business came across your desk might directly impact whether or not you take it. If you were referred by a happy current or former client, you might be more inclined to take the business. If past or existing relationships matter to you (and have potential future value), be thoughtful in how you process referrals. One way to do this: set the standard with your clients that you're more than happy to entertain referrals but would always appreciate a heads-up before intros are made so that you can communicate whether or not taking on new work is even possible at the moment.
4. How Does this Work Align with Your Capacity? This is one of the most important questions to ask. Are you capable of taking on new work of this scope? Do you have the bandwidth? If you have a handful of employees, do they have the bandwidth to tackle it? If the answer is no to any of these questions, that doesn't necessarily mean that you have to turn down the business. But if you want it, you're going to have to figure out how you'll get it done—in which case we might suggest a quick read on how to hire your first employee.
5. Is Getting Paid Going to be a Challenge? A harsh question indeed, but one you absolutely need to know the answer to. If getting paid is going to be a challenge, you might want to save yourself the time and risk. But how do you gauge this? How do you figure out if securing payment on your invoices sent is going to be a slog? You can start by gauging the potential client's reaction to your payment terms. If they scoff at your 30 days and insist that terms be 90 days, that tells you something. If they only want to pay by a single antiquated method rather than by any of the faster, more instantaneous payment tools out there, that tells you something too. You can also get a sense for how much money they have in the bank by eyeballing their headcount, new job listings and related benefits packages. And if you feel the need to do so, angle to talk to other vendors that have worked for this potential client. Do you want to talk to competitive vendors? Probably not. So if you provide, say, graphic design services and this maybe-client-to-be has a freelance copywriter on the books, give him or her a shout and see what their experience has been like.
Customize Your Turn-Down Criteria
The questions above are just the beginning, but can largely be considered standard for most small business that operate in the consultative realm. What you need to do is add more criteria based on your industry, your personal business philosophy and your business model.