Selecting Good Clients
A friend recently shared an issue with one of his clients. The project had concluded, the client was invoiced, and the client refused to pay. The matter was taken to the small claims court with a verdict in favor of my friend. However, a counterclaim by the disgruntled client is in the works that will prolong the issue.
Unfortunately, for professionals, the aforementioned scenario is not uncommon. Even so, it may be difficult to justify turning down a prospective client when you have put so much time and energy into finding new clients. I’m not suggesting that you should reject every client, rather recommend that you create safeguards as part of your client vetting process that will protect you. By rejecting a more risky client, you may end up saving yourself a lot of time and money.
When you consider the impact of my friend’s situation, what comes to mind? Loss on the project? Legal expenses to resolve the matter? The time suck of the distraction? The opportunity cost of serving existing clients or finding new ones? The negative publicity the disgruntled client may create? Increased cost on your insurance policies you tap into? What about the mental drain something like this can have?
We all can agree that the consequences of a problematic client can have a material impact on you and your business. Acquiring quality clients is both a risk management tool and influential factor in the success of a business. There are several actions you can take as part of your client selection process to better identify problematic clients
Don’t be afraid to ask tough questions so that you can make educated decisions in choosing clients. Here are some questions that will help identify warning signs:
- Is the client replacing you with someone else? If so, why?
- What is their reputation amongst other clients?
- Has the client made odd or disparaging remarks about existing or prior clients?
- Is the personality and work style a fit with yours?
Agreement or Engagement Letter
Outline the agreement with your client in writing in order to set the expectations of each party before the project. While it does not have to be a formal legal contract, each party needs to agree to a clear set of deal terms and expectations. Be skeptical of clients who are reluctant to do so. In a separate article we offer suggestions on how to formalize the scope of the agreement with you client.
Sourcing the Client
While not a major factor, it is always good to understand how you were paired up with the prospective client.
- Did they come from a referral or existing client?
- Did you build a relationship with the client over time?
- Did they find you and, if so, ask them how?
Evaluate the client as best as you can. In some cases, even with your best due diligence, the client only later becomes problematic. Make sure you are being proactive from start to finish of the working relationship with your clients.
Establish the expectation of transparent communication from the onset of the project. Keep an open dialogue with your client and receive feedback as you make progress or hit certain milestones. Asking your client to sign off on certain deliverables or maintaining good documentation is a great way to protect yourself in the event of a dispute.
Invoicing / Payments
The first sign of a disgruntled client often is reflected in the payments for your services. Simplistically, if the client is unhappy with what you are delivering, they feel they should not pay you. If they are slow to pay, or do not pay, stop your work and directly address any concerns they may have.
Disgruntled clients are more likely to sue. Make sure you notify the carrier of your professional liability insurance policy if a claim is made against you. The carrier may be helpful in resolving a matter.
The good news is you can control which clients you choose to work with. By improving your client selection practices, by identifying the “bad” and “good” clients, you can elevate the results of your business.