Turning down new business is never easy.

But when you’re in the service industry, saying “no” can be a crucial skill for both growing and sustaining a profitable business. Marketing agencies are no different.

However, some agencies often feel like they can’t afford to say “no.”

Newer agencies feel like they need to say “yes” to anyone willing to open their checkbook.

But not every client is a great fit, and the bad ones can often cost you more money than you earn back.

So how do you know when to say “no”?

We found that in many cases, it’s when a potential prospect falls outside of an agency’s particular industry or service niche. In fact, in our recent poll of dozens of marketing agencies, 90% said that their agency specializes in a specific area. (Tweet this stat.)

We also asked agencies how they specialize. Almost two-thirds said that they specialize by having unique service offerings, while the rest specialize within a specific industry niche. (Tweet this.)

Being specialized means that not every client will be a fit for an agency’s services, skills, or expertise. This would seem to be a logical starting point for saying “no”, but as we said, there’s nuance.

We dug in further to find out the specific reasons why agencies pass on potential clients. Some of the reasons—inability to pay, unrealistic expectations—didn’t surprise us. But a few did.

Let’s start with the more obvious ones.

Inability to Pay

This seems easy: if the client can’t pay you, don’t take the job. But it’s often more complicated than that, and it’s one of the most common responses we saw from agencies.

QuantLayer‘s co-founder Vikram Ramakrishnan told us about a startup that was referred to his company. After doing some research, QuantLayer discovered that the startup hadn’t yet raised any capital.

It’s conceivable that they would have been able to pay once they’d gotten funded, but QuantLayer would have been taking a big risk taking on the job. So they passed, even though they’d already started technical discussions.

“Typically we bill on a time and materials basis, and sometimes, if the product is well scoped or the team is capital constrained, we can work on a fixed-bid basis, but this team hadn’t raised capital at all,” said Ramakrishnan. “We don’t work with clients on an equity-only basis as that doesn’t fit our business model (since we have our own products we build internally), so it was a pretty clear decision.”

David Jackson, CEO of FullStack Labs, also discussed a situation in which they his company passes on startups: when they offer equity. “We never accept equity in lieu of payment,” he told us.

Other Payment-Related Warning Signs

Sometimes it’s obvious that a potential client won’t be able to pay. But a few agencies dig deeper.

Roxanne Williams, marketing director of Full Stack Talent, once ran a credit check on a potential client. The company was new, so the agency wanted to make sure that they could pay for recruitment services.

The check came back with poor results, so they passed on the client.

“It was a shame since the money from the fees would have been great,” Williams said. “[B]ut the risk, if they weren’t able to pay, was even greater.”

Ripen Digital‘s founder James Bowen reports that hesitancy to pay can be a warning sign of potential churn.

“I’ve found a strong correlation between penny-pinching and high turnover in the digital marketing industry,” said Bowen. “The ROI isn’t always immediate.”

In any field where results don’t happen overnight, this is something to keep in mind.

Asking for Discounts

It’s not always that the client can’t pay. It can also be the case that they just don’t want to.

Sarah Moe, co-founder of Flauk, says that the most common reason they’ve said “no” to potential clients is that they ask for discounts.

“In our experience, working with people who ask for discounts without cause or offer up a trade instead of payment leads to us resenting the client and thus not rendering our best work,” said Moe. “It also tends to be the case that people who ask for discounts are difficult clients.”

In the end, Flauk has found it better to pass on these clients, even though they could be a source of revenue.

Dallas Maids‘ founder Greg Shepard agrees.

“Very demanding customers seeking discounts tend to be the customers that will cost us,” said Shepard. And not just financially. These demanding customers are also an emotional drain on Shepard’s employees, and he places a high value on taking care of his people.

(Shepard also noted that when potential customers call with a long list of demands and ask for a discount, his team tries to dissuade them from being a customer. They often quote a higher-than-normal price to make up for the potential difficulty.)

Unlikely to Succeed

Agencies want to do great work for their clients.

Their livelihood depends on it. So when it doesn’t look like a project will succeed, it’s in their best interest to not accept the client.

It’s not always an easy decision. But according to the agencies we heard from, it’s one worth making.

Kyle Golding, chief strategic idealist at The Golding Group, says that the most common reason his agency turns down potential clients is inflexible leadership in the client company. These projects can be doomed from the start, he says.

“If you’re not willing to make changes, then why are you hiring us?” added Golding, who looks for executives that are not only comfortable with his agency’s ideas but excited about them.

Piedmont Avenue Consulting‘s founder David Mitroff shared a similar thought.

“Some companies just can’t be fixed with the agency’s help,” Mitroff said. “Sometimes branding or digital marketing isn’t enough to help a potential client solve their problems.”

Mitroff also points out that some clients don’t want to do what his agency recommends. And that’s never a good sign. If the customer doesn’t trust, listen, and do the work required, they won’t make it to the next level. And that’s not helpful to the agency, either.

Consider Your Reputation

Freelance digital artist Jess Perna summed it up when discussing a client he had to turn down: “our reputation for doing excellent work was on the line. Our reputation was more important than one fee.”

Interestingly, one of our respondents actually mentioned a boost to their reputation after turning down a client. Akateko was approached by a wholesale distributor of high-end salon hair products. The agency determined that search engine marketing wasn’t the way to go, as prospective customers weren’t searching for wholesalers online.

They turned the contract down and encouraged the client to pursue different avenues that were more likely to succeed.

Instead of being angry, the client was immensely grateful, and has even sent referrals to Akateko, says Giorgio Cassella.

It’s not common to gain business by turning down clients. But if it’s the right decision—and you still find a way to add value—you’ll benefit from it.

Unrealistic Expectations

Sometimes it’s not that you can’t help a client, but that you can’t help the client to the degree that they want.

If a client’s expectations are unrealistic, they’re not going to be happy with your work.

“These relationships will always end in disaster,” says Blue Dog Media CEO Jarod Spiewak. “The communication can turn sour, bills can go unpaid, and reputations can be damaged.”

So what can you do to make sure your expectations are aligned?

“[I]t’s as simple as asking what their expectations are, educating them on what’s realistic, and explaining all of the expectations for the engagement,” says Spiewak. “If the client can’t agree to realistic expectations, you must walk away.”

Mismatch of Specialties

Not all agencies are specialized, but most focus on a certain niche. Porchlight is all about retail creative, and when someone approaches them asking for other services, founder Greg Corey turns them down. “Could we do whatever it was that they asked us to do, sure, but not if it’s outside the realm of our specialties.”

If the client is looking for something that Porchlight doesn’t specialize in, the agency provides recommendations for other avenues to explore.

Corey also noted that it’s not always clear when client work falls outside of their specialty area. But Porchlight has to go with what feels right.

“Our shop does everything from branding to packaging and just about anything that falls under the marketing and advertising umbrella,” said Corey. “But despite our portfolio, we know when a potential client starts to fall outside of our boundaries.”

Stephan Roussan, president of ICVM Group, told us about a time when his agency took a job that was outside of their specialty. They delivered for the client, but they took a loss because of the extra time needed to complete the project. They were also stuck servicing a one-off implementation for a long time.

Take a long view of what a client is asking you to do. You may find that it seems like a good idea, but will be costly in the future.

Not Understanding the Agency’s Business Model

Client expectations aren’t always centered on results. There may be a disconnect between what the client wants and how your company works. And that’s not good either.

The biggest reason that Social Sensei passes on clients is “not understanding the value behind one part, or all parts, of what we are proposing,” says owner Emily Rowe. If clients don’t allocate a big enough budget for photography or don’t want to invest in immediate response, she knows that’s a problem.

Adrian Crisostomo, link builder at SEO Hacker, finds the same in his industry. “We had to say no to potential clients that insist on removing some services from the package that they think are unnecessary because they have this in-house.”

Crisostomo says that even if clients handle some items in-house, it’s different when the agency does them. That’s non-negotiable.

Brian Carter, founder of the Brian Carter Group, deals with a similar issue.

If a potential client wants to buy leads, he turns them down. “We aren’t a lead selling company. We’re a marketing company that develops custom lead generation programs for each client.”

A Bad Client–Agency Fit

In the end, knowing when to turn down a client comes down to understanding what your agency does well and what you’re willing to do.

Imagine Business Development, for example, has a very specific process that they go through to increase acquisition rates for clients. “[W]e help companies develop (or confirm) a model to predict their rate of growth based upon existing data, the plans they have in place and the commitments they’re ready to make,” says founder Doug Davidoff.

Some executives balk at these models’ requirements. And when that happens, Davidoff knows that it’s not a good fit. (Though he says that most potential clients who take the easy way out with another agency get in touch after 6–9 months saying that they haven’t made the progress they want.)

Mark Anderson, director of training at Anderson Investigative Associates, concurs: “[I]f a client attempts to get us to deviate from the main tenants of our curriculum and mission, we won’t take the job. We have empirical evidence as to why our approach to interviewing is the most ethical and effective way to elicit the highest quality and quantity of information.”

Your industry may determine what you feel your agency can tackle, too. For example, Truth in Equity deals with better banking practices. So owner Bill Westrom knows that when a potential client doesn’t show evidence of fiscal responsibility, it’s better to pass.

Just a Feeling

And sometimes it’s just a feeling you get. Josh Lowen, co-founder of The Status Bureau, told us about one potential client. “There was a client from a certain U.S. church, a huge one, that wanted to baptize the dead for a fee. . . . I have few opinions on other’s beliefs so I thought, ‘why not?'”

It seemed reasonable, he said, until he started thinking of the ad headlines.

“Pay to Get Grandpa in Heaven!”

“Grandma in Purgatory? Upgrade for Only A Few Dollars!”

He couldn’t stomach the thought and passed on the client.

Small Details and Warnings

Besides the guidelines above, we got a lot of unique advice that comes down to paying attention to small details that could be warning signs.

The Brian Carter Group often passes on clients that have difficulty getting on a call with the agency (though they’ll reschedule once).

“People who can’t collaborate in the most basic way of respecting your time,” says Carter, “will often get bad results.”

Randy Mitchelson, vice president of sales and marketing at iPartnerMedia, told us about a client his agency turned down.

The client seemed fine, but when it was time to sign a contract, the client’s lawyer sent a heavily edited document back. And a phone conversation left Mitchelson with lingering doubts about how difficult the relationship would be.

iPartnerMedia decided not to continue the relationship, even though the original client may have been a good one.

Secret Bridgwater of The Social Secret turned down a celebrity who had posted inflammatory comments on social media. Surman & Co.‘s Benjamin Surman passes on clients who haggle and take a long time to respond to proposals. David Jackson turns down potential clients who are “rude, disrespectful, or overly demanding during the sales process.”

Brian Winum told us that MAXPlaces has turned down potential clients because the client’s personality or values rubbed his team the wrong way.

There are many reasons why you might turn down a client. But in the end, you simply have to know that a potential client will be a good fit for your company. If they’re not, you’re better off turning them down.

One undercurrent that we saw among these responses was that it’s not easy turning someone down. They’re usually offering good money, but in the end, the wise agencies pass on clients that aren’t a good fit.

When do you pass on a client? What would make your turn a potential client down? Share your thoughts in the comments below.