I am a web designer / developer (front end and back end). I do that proficiently since more than 10 years, and I am appreciated and good skilled in designing and programming. I work alone in a home office.
My target business are local clients, small to medium companies, hotels, shops, restaurants, etc.
I don't do any marketing, clients come to me by word of mouth by other satisfied clients.
My area of business is very inflated and now there is a lot of offer for web design / development and not that much demand, so the prices are getting lower and lower and I know there are some freelance or studios that for getting new clients redo sites for free (or almost) then apply a yearly price for maintenance.
For that reason I am moving in other areas such as product photography for e-commerce and other similar things at fair price to make me and clients happy, and seems that this is going in a very good direction since I have already a small but good photo studio and I have a good experience in Photoshop post production.
Now my problem is that when I started as freelance (and later too) I used to get all the possible clients because I needed to make money, so I took also some not good ones including some friends, friends or friends, somewhat relatives, and other common people but known in the town.
I would like to stop working for many of them, because although they were useful for me in the past years, now they are more a loss of time and very little earning, in some cases I do even updates for free since years, or in other cases there are companies who refuse to pay small invoices while they would pay for bigger works, or they don't answer emails for billing, etc.
(I also have very good clients of course, along with these not good ones.)
In some cases I have contracts and other I don't.
I would like to set up an exit strategy that will free me from them but that also will not cause problems to the client's business or upset the client, because I work mainly in the local area, I always worked for good reference of others and if I upset one or more, they have the power to spread bad news about me, also in other cases they are people that I may meet with friends and family so I don't want to create any unpleasant situation.
What I have thought is to talk with some other web agency or freelance, and when I am contacted from the "bad client" I would inform him/her that they will talk to that new freelance for the work. But I am not very covinced because: 1) is not easy to take agreement with competitors; 2) who would have the wish to get all the "bad clients" of another freelance?
Another thing that I thought about is to inform these clients that I have changed job and don't work anymore in this field, but this is actually a lie and people would know sooner or later.
What is the best "exit strategy" in this situation?