How To Avoid Getting Stuck With A “Bad” Client

by Peter Osborne on October 19, 2010 · 8 comments

Early steps can help prevent client relationships from imploding

I was irritated the other night so I took the opportunity to ask Chris Brogan how he deals with consulting clients who some might charitably describe as “bad.”  You know the type — slow pays, no-pays, scope-creeps, and/or people who want to steal your time for free (with the promise of more paid work later).  Chris laughed and said (and I’m paraphrasing), “you tend not to have that problem when you write one of the five most popular marketing blogs on the Internet.”

Some people will tell you that there’s really no such thing as a “bad” client….

New consultants seem surprised by the amount of time they spend on business development.  Their list of great friends from their last job doesn’t necessarily translate into actual contracts (referrals, maybe), no matter how interested they seemed in your idea when you left the company.  Within a very short time, consultants in that situation start to get nervous — OK, they panic – and may make some decisions that come back to bite them. 

Add  a slow economy to the mix – many businesses are looking for ways to manage their cash flow (a nice way to say, “hey, I’ve got an idea, let’s save money by not paying our vendors this month”).  If I sound bitter, it’s because I am.  I’ve just gone through that with a client.  Here are a few things I’ve learned in the past few months that you should think about:

  • Don’t discount your rate in hopes of getting more business down the line. Set your price and stand firm. Rather than cutting your rate, look for ways to add value (this assumes your rate is reasonable).  If someone expresses willingness to commit to a longer engagement, that’s one thing (if you’re going to have an hourly rate, also have a daily, weekly, and monthly rate that provides some kind of discount).  But don’t just charge them less to try to get them committed so they “can see what you can do.”  And other reason to be careful around this sort of client: I’ve found that the cheaper a clients wants something, the more likely they are to also have unreasonable expectations that they’ll bring to the project.
  • Listen to your gut (or other people), particularly if the voice(s) is about the person’s willingness or ability to pay you on time. If someone has a history of paying late (or not paying at all), why would you think you’re going to be different? If what they’re saying sounds too good to be true, it probably is.  You can’t put lipstick on a pig.  
  • Get some of it upfront.  Net 30 (or its really ugly stepsister, Net 60) means they may not cut a check for a month or two after you FINISH the work and invoice it.  Unless your cash flow is great or you’re sitting on a pile of savings, that will get frustrating (and painful) fast.  Many service businesses require their clients to put something down before they begin work.  Be that person.
  • Be wary of a client whose primary skill is sales.  He or she will convince you that you’re working for the greatest concept ever (“Huge, I tell you, we’re going to be huge.  I have big investors begging me to let them in on the ground floor…How about I pay you less but give you stock?”).  You’re going to want to believe this is the monster client (as Robert Shaw said in Jaws, “I think we’re going to need a bigger boat.”).  It’s more likely that big fish is a minnow.
  • Collections take time away from doing the work or finding new business.  It’s bad enough when you don’t get paid.  Chasing them down is exhausting. Sending e-mails. Calling them.  Calling them again.  Carefully crafting more e-mails.  Reading their e-mails that say all start-ups have cash-flow problems (“yeah, buddy, including mine, thanks to you.”) or there’s been a family emergency.  Or something.  It’s always something.  Add up the hours you spend chasing them…or thinking about chasing them…or complaining to other people about having to chase them and you’ll find your discounted rate suddenly got uglier.
  • Define your project scope very carefully and get an agreement in writing.  Discussions about a project in a conference room, by e-mail, or on the phone tend to result in less-than-perfect project scopes.  Put it in writing with specific bullets about deliverables, timelines, objectives, and pricing and get the other person to send it to you.  Don’t start a project — no matter how smoothly everything is going — until the paper is signed and, if advance payment is due (see above), the check arrives and clears.
  • Be the expert, not the vendor.  Perception is reality and your clients are less likely to treat you badly if they respect your knowledge and experience.  Frankly, it’s best when clients find you.  That way they’re seeking your advice rather than you asking them for work. As a result, more value is put on your input and you have fewer issues.

And now, I turn it over to you.  We’ve all had bad clients.  What do you do to avoid the problem?

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{ 7 comments… read them below or add one }

Jeremy Powers October 20, 2010 at 2:59 pm

This is a good list. I am finding the best way to avoid problems is to break projects down into smaller projects, with agreed-upon deliverables. 50% payment when we start, and 50% payment at the end of each phase. Break it down, and NEVER agree to take more work until the account balance is paid.

The one item I would add to this list is to work with clients that are familiar with working with consultants or other “expertise” suppliers: tax professionals, estate planners, contract lawyers, etc. I work exclusively with smaller businesses. I have found there are business owners that understand the value of paying experts, and there are business owners that don’t see the value of any specialists. A small business owner that does his own taxes is probably not going to be an easy partner.

Peter Osborne October 20, 2010 at 4:19 pm

Jeremy,
Thanks for taking the time to comment. I think you’ve added two great ideas to the list. I believe there are a number of different “signals” that can help all of us get a feeling for whether a new client may become a problem. While it might be difficult to tell whether an owner does his or her own taxes, it might be a great indicator (unless that person is an accountant).

Again, thanks for commenting!

Peter

Rachel Baker October 20, 2010 at 11:52 pm

The best advice I have received goes along with your second point; be okay with walking away. My services are not aimed at everyone, so if I meet a prospective client and we are not a “fit” I try to recommend someone else, but I don’t try to force the relationship.

Peter Osborne October 21, 2010 at 7:59 am

Rachel,
Thanks for responding. I’m with you. The sad situation is in those cases where you can see how you can help the client on a go-forward basis. You want to work with them so much (they’ll benefit and it will be a great case study for you) that you overlook the warning signs.

Wood Dickinson October 21, 2010 at 6:59 pm

If the problems your going to be diving into deal with the financial de lima a company finds itself in there’s a problem. Right out of the gate you see payment as a problem and possibly a company that won’t make it. To me if the principle owners are dedicated to change (and you can tell that at a lunch meeting) Then I look at the project as a challenge. I love puzzles. Especially ones with no lid to look at. If the owners will go down that road with you no matter how hard it’s going to get, I’m more than happy to take installment payments. I bill at my normal rate. I’m in an engagement like this now and I’m dedicated to saving this company. The owners know the rules I work by and know I speak the truth. Teaching process mapping, systems diagraming and then move into the “real” systems thinking within the company is fun. If I do my job right I will get all my money and some fine people will keep their company. I make it clear it will be painful and most of the time they already know it. They can map out where trouble comes from. What’s most interesting is working with a business run by a husband and wife team. I think I need to learn a bit more about marriage counseling!

Peter Osborne October 21, 2010 at 9:22 pm

Wood, I agree. I love a challenge and love the idea that the client may look back someday and say that I helped save his or her or their company. But I think that the trick is figuring out who wants to work with me and who is going to take advantage of me (or at least push the envelope with me). I’m glad your approach works, but I suspect you’ve got a bit more wiggle room to take chances than a new consultant who is walking a tightrope.

Thanks for your comment.

Peter

Patrick Nicholson November 3, 2010 at 12:53 pm

For as long as I was at Smith Barney supporting the 14,000 member sales force, there were constant recitations about partitioning one’s “book” and working hard to eliminate the “C” clients. By and large, “C” clients comprised smaller buy-and-hold accounts, inactive account, and the like. The real effort, however, was to be devoted to those clients that “brought you down.” You know the ones: your assistant says so-and-so is on the line, and your whole attitude changes for the worse. No matter how much revenue such a client brings in, it’s never worth the emotional and mental corrosion he/she inflicts not upon you, but your team as well.

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