So you've started and are growing your business, are happily delivering your services and then you open an email one day to find out one of your client unexpectedly wants to cancel their contract... ooooph.

Now what? 

If you find yourself reading this post - it’s likely because the inevitable has happened to you either recently or somewhere along the way.

First, take a breath and know that the longer you’re in this wild world of business ownership, the more likely you’re going to find yourself with a client who wants to cancel their agreement with you. This might happen mid-way through a contract, or maybe before you've even started! 

Dealing with contract cancellations is an inevitable aspect of the business landscape. While it's never pleasant, understanding how to navigate these situations can be crucial for both parties involved. 

If you’ve found yourself in this situation, this post will help you navigate how to deal with client cancellations in your business. 

Contacting the Client: An Opportunity for Resolution

Upon receiving notice of your client's desire to cancel a contract, the first and most crucial step is to initiate a conversation. This isn't just a courtesy; it's an opportunity to understand the client's concerns and explore possible resolutions. Sometimes, a simple clarification or adjustment can salvage the relationship and the project. Approach this conversation with an open mind and a genuine willingness to address the client's issues. If you end up negotiating an amendment to your contract in order to continue working with your client, that’s great if it feels right to you. Before moving forward remember to document those changes in writing, with the best practice being to set this all out in an amending agreement. 

Reviewing Contract Terms

If your client still wishes to cancel their contract with you, it’s time to go back and take a look at your contract. While your cancellation clause is your starting point of reference, it’s also important to consider other clauses that are impacted as a result of your client wishing to cancel. These include, but aren’t limited to: 

Notice Period

Check your contract for any stipulated notice periods for cancellations. These are more common in client agreements where there is an ongoing monthly retainer, such as social media management, bookkeeping, virtual assistants or other providers that provide ongoing services. 

Retainer

If you collected a retainer at the beginning of the contract, your contract should have clear guidelines as to what happens to this money collected in the event your client cancels the contract. In this case, a ‘retainer’ could also be called a ‘deposit’ in your contract. In a lot of cases, the retainer is forfeited (not returned) in the event of cancellation, but it’s important to ensure this is clearly set out in your contract terms. 

Kill Fee

Some contracts include a "kill fee" – a predetermined amount payable to the service provider in the event of cancellation. If applicable, clarify the terms surrounding this fee and its enforceability in the given situation. 

Understanding Copyright Ownership of any Deliverables

If you were hired by your client for the creation of tangible assets or deliverables (like social media content, blog posts or branding, logo or design elements) it's important to have a clear understanding of what happens to these items in the event of a cancellation.

Clearly outline:

Ownership: Specify who retains ownership of the deliverables.

Usage Rights: Detail any rights granted to the client regarding the use of completed work.

Compensation: Clarify whether the client is still liable for compensation for completed deliverables.

You then need to relay this information to your client. For example, if you’ve only created mockups, and have only paid you a partial payment, they may not get any right to continue using the design mockups. 

Oops…I didn’t have a client contract…

If you didn’t have a contract in place, go back and look at your written correspondence. There might be some language in your emails you could try relying on if needed. In a lot of circumstances, you might just have to chalk this up to an expensive, time consuming and annoying business lesson. Big takeaway: Never start client work without a contract!

Take a Breath and Moving Forward

Regardless of the circumstances, the cancellation of a contract can be emotionally challenging and a blow to your ego. In order to preserve your own peace of mind, and your reputation, it's important to navigate these with curiosity and grace. 

If and when this happens, it’s a good time to reflect on the experience and learn how you could have honed your client processes or communication for next time. It also could 100% have been a “them” situation that likely couldn’t have been avoided. Whether it's refining your contract terms, enhancing your communication skills, or getting better at  identifying potential red flags during client onboarding - learn the lesson, take a breath, and move on.  If you want to learn more about avoiding bad clients, you should read this blog!

Whether you provide ongoing monthly services or provide project based work as a freelancer, service provider or coach, cancellations are an inevitable part of the journey. By fostering open communication, understanding contractual terms, and embracing the importance of preparation, you can navigate these challenges with resilience and professionalism. Remember, every experience, even a contract cancellation, is an opportunity for growth and improvement in your business practices.