DHH from 37signals:

…You have to start getting into the habit of saying no. No to things that just doesn’t fit, no to things that just aren’t the most important right now, and no to many things that simply don’t cut it.

It’s incredibly rare that I’ve actually regretted saying no, but I dread my yes’s to all the time (sic).

From time to time, even when a customer requests something, the proper answer is exactly that—to say “no.” Sometimes it’s just not part of the scope of a project, especially a project you want to remain simple and uncluttered. Sometimes, it’s a change that could work, but it’s just not the best decision. Sometimes, it’s a good thing for a few people, but not the right thing for the larger share of your customers. Listening to customers and talking to them is important, but they’re not infallible. Occasionally, part of the conversation has to be a rejection.

When making those connections, even more powerful and honest than just saying “no” is telling someone why you are saying “no”. Give them a reason. Be honest. Sometimes, they’ll try to argue with you or turn it into a debate, but that’s OK. It means they’re invested with you and with your company.

Above all, don’t promise people “we’re working on it” or “we’re thinking about it” when what you really need to say is “no”.