The way in which you inform a customer that you will no longer serve him can make or break your business's reputation. Customers can easily express their opinions of you and your company on the Internet, so even if he has been consistently rude or demanding, you must communicate your message without being disrespectful. Writing a letter to the customer is the best way to break the news because it gives you time to think about what to say and it saves the customer from an embarrassing public scene.
Address the letter to the customer and write that as of today's date your company will no longer be able to serve him. Use simple, clear, firm language so that the customer understands that this decision is final and is not open for negotiation, argument or pleading.
Address the reason why you have made this decision by focusing on the positives in the situation instead of the negatives. Use a general reason rather than going into specifics. For example, if you are letting the customer go because he is verbally abusive toward your employees, don't write that he is rude. Instead, say that your company isn't able to accommodate his needs and that he would be better served by another company. In reality, the customer's "needs" involve his consistently pushy attitude, but you're letting him think that you have made this decision with his best interests in mind.
As an alternative, use a more specific business reason. For example, you could tell the client that your customer base is growing so rapidly that you are no longer able to provide quality service to all of your customers and, as a result, you have to let some go. If you need to let go a demanding client who takes up too much of your time, say that you can't service his time needs to meet his expectations.
Offer some guidance or at least best wishes. You could, for instance, give the customer a referral to another local business that provides a similar service to yours. This works especially well if you are cutting customers because your small business can't keep up with demand. Customers will be more understanding if you appear willing to help them find a replacement. If you're letting a customer go because of his poor attitude, however, don't refer him to competitors as they should not have to deal with him either. In cases like these, simply close your letter by saying something like "I wish you the best."