Work out what an hour of your delivery capacity earns across your best existing work, then compare any new commitment against that figure before you answer. If the new thing earns less per hour than the work it displaces, saying yes is a decision to earn less, and it needs a reason beyond not wanting to disappoint anybody.
A flat refusal is rarely the best option. There are three alternatives: price it, scope it, or refer it.
Why is no such a hard word for a business owner?
Early on, saying yes to most things is correct, because you need revenue, customers and to learn what the market wants. The habit often continues after that phase ends.
A yes also costs nothing today. The cost arrives later in hours, spread across weeks, and no report links it to the decision, so you have to calculate it.
What does a yes cost?
Saying yes buys an outcome with hours you could have spent on something else, and in a small business capacity is fixed in the short run — you cannot conjure another delivery week when the extra work lands. Compare what you bought with what you gave up.
Which number makes the decision?
Use contribution per delivered hour. Take a piece of work, subtract the direct cost of delivering it, and divide what is left by the hours it consumed. That is the right currency for comparing one commitment against another, because hours are the thing you are short of.
Direct cost means the people doing the work, costed properly — salary plus employer’s National Insurance, plus any software or licences that exist only because the work exists. It does not mean premises or your own drawings, because those do not change when you take on one more job. Use hours time-recorded for a few weeks, not remembered hours.
A worked example: the retainer that grew
In this illustrative example, a client pays £1,200 a month on a retainer, £14,400 a year. The retainer was written for eight hours a month.
Time-record the account for three months and the average is 21 hours a month, so 252 hours a year. On top of that you spend around three hours a month yourself on the client’s escalations, another 36 hours. Call it 288 hours of firm time.
At a fully loaded delivery cost of £32 an hour, those 288 hours cost £9,216. So the client contributes £14,400 less £9,216 — £5,184 a year, or £18 per hour of firm time. Across the rest of your work you earn £62 of contribution per delivered hour.
Put the same 288 hours on work that performs like the rest of the book and they produce £17,856 instead of £5,184. The gap of £12,672 a year is the price of the yes.
Late payment is a separate issue. The Late Payment of Commercial Debts (Interest) Act 1998 entitles you to statutory interest at eight percentage points above the Bank of England base rate, plus a fixed sum for recovery costs — £70 on each debt between £1,000 and £9,999.99. On a retainer of this size that entitlement is worth a four-figure sum across a year. The misallocated capacity is the larger problem.
Should you drop the client?
Not necessarily. Look again at where the 288 hours came from.
The retainer was written for eight hours a month — 96 hours a year, plus perhaps a dozen of your own. At 108 hours and the same £32 cost, the contribution would be £14,400 less £3,456: £10,944 a year, or £101 an hour. On your own numbers that would make this one of the best pieces of work you have.
The problem is the scope, widened by small unpriced yesses such as a favour here and a quick extra there.
What are the alternatives to a flat no?
- Price it. Work out the fee that makes the commitment worth doing at your own benchmark. In the example, 288 hours at £62 of contribution plus £9,216 of cost is £27,072 a year, or £2,256 a month. Quote it. If the client declines, they have made the decision for you.
- Scope it. Go back to what was bought — eight hours a month, defined — with anything beyond it quoted separately before it is done. It keeps the full £14,400 and hands back the capacity.
- Refer it. Pass work that is wrong for you to somebody it suits, with a recommendation, and the relationship stays intact.
Our guide to difficult client conversations covers how to start one of these conversations without a row, and if the exercise shows that almost nothing clears your benchmark, the problem is pricing rather than selection — pricing for profit is the better place to begin.
What should you check before the next big yes?
Take two steps before any significant commitment, such as a client, a service line, a partnership or a speaking slot.
First, estimate the hours, then add half again. In the example above, eight contracted hours a month turned into 21.
Second, divide the expected contribution by those hours and compare it with what the same hours earn on your best existing work. If it is lower, the yes is a decision to earn less, so make it deliberately.
When is a low-value yes still the right answer?
There is one exception. A strategic yes — the first client in a sector you intend to enter, work that builds a capability you need, a relationship that opens a door — can be worth taking below your benchmark. The discipline is to say so out loud, write down what it is buying, set the date you will review it, and price it properly once it has served its purpose.
Telling strategic yesses from comfortable ones is part of business coaching. If the arithmetic keeps pointing at capacity being eaten by a handful of accounts, improving margins is the natural next piece.
What to do this week
- Pick your three largest clients by revenue and time-record them properly for four weeks.
- Calculate contribution per delivered hour for each, using salary plus employer’s National Insurance as the cost base.
- Do the same across your whole book to get your benchmark figure.
- List every client below half the benchmark and decide, for each: price it, scope it, or refer it.
- Put one of those conversations in the diary this month.
Get the next one in your inbox
One practical guide for business owners each week. Unsubscribe at any time.
Frequently asked questions
How do I say no to a client I have already said yes to for three years?
You are repricing or rescoping the yes, which is a normal commercial conversation. Lead with the facts and skip the apology: the retainer was written for eight hours a month, the last three months averaged twenty-one, and here are the two ways to put that right — the fee moves to match the work, or the work moves back to match the fee. Give them the choice and a date. Long-standing clients can often see how much they are asking for.
What if I need the revenue and cannot afford to lose anyone?
Then rescope rather than reprice, because rescoping keeps the whole £14,400 and hands back the capacity. In the worked example, holding the account to its contracted eight hours a month takes it from £18 to £101 of contribution per hour without losing a penny of turnover. Doing nothing still costs the gap each year, so cash pressure is a reason to act sooner. Write the scope down, tell the client what it covers from a set date, and quote anything beyond it separately before you start the work.
Is turning work away not dangerous in a quiet period?
It can be, so in a quiet period a flat refusal is rarely the answer. Quiet capacity has a low opportunity cost, so work that would fail your benchmark in a busy month can be perfectly rational to accept in a slow one. Two conditions make that safe. Price it as a one-off rather than as your new rate, in writing, so it does not become the price the client expects next time. And put an end date on it. The risk is still carrying it eighteen months later, when you are full and it is displacing better work.
How do I stop the scope creeping back in again?
Make the boundary visible. Three things do most of the work. Write what is included and what is not into the agreement in plain words, so the conversation is about a document rather than about you. Quote extras before they are done, even at a small figure, because the habit matters more than the amount. And keep recording time on the account, then review the hours against the agreement once a quarter. Scope creep accumulates slowly, and the quarterly review makes it visible.