Last year, entrepreneur Jennifer Vallez turned down a $34,000 order from one of the largest retailers in the country.

Vallez holds a day job, but explores her entrepreneurial side on nights and weekends with making fabric dolls for her company, Sophie & Lili. When a purchase order for more than a thousand dolls came in from Nordstrom, Vallez was forced to turn to overseas production to fill the large request.

"After three months of sampling I wasn't satisfied with the final product and had to cancel the order," recalled Vallez, "They were very nice about it, but I was devastated."

Turning down an account can mean losing revenue and the opportunity to expand a business and establish a brand. However, saying no can also help an entrepreneur establish a set of values to always operate under.

"You may think it's good to have even a little bit of business--even if it is outside of what you may want to serve--but that type of relationship tends to snowball," warned Richard Meekins, operations management and business strategy consultant at Aepiphanni Business Consulting in Georgia. 

Meekins suggested entrepreneurs conduct an interview to make sure the potential client is a good fit. "We recommend that entrepreneurs have a courageous conversation and clearly articulate what the concerns are.” 

Martin Steinhobel, managing partner at small business consultancy Valens Point, advised business owners develop a key customer profile to help determine who to do business with. "By determining who the key customer is, you can identify customers who may be problematic," Steinhobel said.

Even referred customers can cause headaches for small businesses. Sam Lazarus of ServiceMaster, a commercial and residential cleaning and restoration contractor in Kansas, encountered one such customer through an insurance referral. "They did not want to sign additional documents and authorizations for various things that were needed in the restoration process since they had fungal growth," recalled Lazarus, "We stopped the services short of completion due to difficulty in dealing with the client.

Another situation that should raise red flags for small business owners is if the client is strictly focused on cost.  "It is OK to negotiate and come up with an agreement," said Meekins of Aepiphanni Business Consulting, "but when that type of conversation becomes the main conversation, what you find as a service provider is that you can put yourself into a situation where you can't provide the level of service that is appropriate for your brand."

Knowing how to turn down an account is just as important as identifying bad-fit clients. "Be 100% truthful to the client," advised Patty Briguglio, president of MMI Public Relations in North Carolina, "When I turn down an account, I try to explain to the client in detail why I cannot take their account and why we are not a good match."

Steinhobel of Valens Point advices entrepreneurs take the referral route by telling the "rejected" account, "we will do you a service and do our partner a service by getting you connected with them."