Pop quiz: To take your reasonably successful business to the next level, you're pretty sure you have to fire half of your clients.

Do you have the guts to do it?

Michael Hsu wrestled with that question a couple of years ago. He decided to take the leap.

After attending a conference in 2010, Hsu — founder of Southern California's DeepSky Accounting — made a decision: To really make a difference in his clients' lives, he needed to build deeper relationships with them and bill according to the value his firm was creating.

The problem, he said, was that most of his clients didn't care about building relationships. “(Many of them) said, 'We don't care about your business insights. We just want bookkeeping as cheap as possible,'” Hsu told me at the AICPA's 2012 Tech+ Conference and Practitioners' Symposium. “They were toxic to my company in such a way that staff morale was lower, and we were so focused on putting out their fires that it was impeding our ability to serve our good customers.”

So Hsu fired them. Forty percent of his client base immediately got the ax. Two weeks later, after further internal review, he fired another 20 percent.

“It was hard,” Hsu admitted. “There's nothing sexy about firing your clients. It's tough.”

Within a year, though, the move had paid off. Revenue was the same as before the firings and profits were up — all by building relationships and adding true value and insight for clients.

The lesson?

“You have to understand what your value proposition is, what you're trying to create,” Hsu said. “Once you know who you are, why you do what you do, and who you're serving, your decisions are always flowing through those filters. Steve Jobs said it best: What he was most proud of at Apple was not what they did, it's what they chose not to do. That puts your company in a laser-focus mode where you align your team, your owners and your customers, and that defines you.”

Listen to Hsu tell his story here.

On the surface, it's hard to cut ties with someone who's paying you, isn't it? But if you're not providing them with real value and they're not helping you grow your business, making that decision gets a whole lot easier.

Using that criteria, how many clients should you fire?

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