Welcome back to another Ask Me Anything, a weekly series where we talk to our friends, our viewers, and our community about all of their pressing needs, questions, wants, and desires.
Let’s take a look at the mailbag to see which questions are burning this week:
“I’d like to talk about unethical clients. We’ve been in business for nearly two decades and, during that time, we’ve had clients who wouldn’t pay, which resulted in legal action, and others we’ve had disputes over getting paid. Curious to hear how you’ve managed this throughout the years.”
Dealing With Unethical Clients
We had a client during the Groupon days when everyone wanted to build an online shopping deal site who, during our very first meeting with his team and mind, made his chief operating officer cry. At the end of that meeting, he looked at our managing supervisor in the eye and said, “Don’t F this up, or I will fire you.”
We left that meeting and were like, “What in the heck just happened?”
I really, really should have taken that as a red flag and figured out a way to get out of the relationship because it didn’t get better from there. And, even though we had an approved strategy and project plan—and we were getting results every month—he tried to do the whole, “You didn’t do what you said you were going to do so I’m not going to pay you.”
He took me to court. That was fun. He ended up not winning because I had all of the processes and copious notes and highly descriptive entries in our time entry and his signature on approved documents, but it was still a very expensive, very time-intense experience that I never want to go through again.
But the best part? I mean, the very best part? After he lost and he was ordered to pay us, he showed up to our office in his brand new Ferrari and dropped off a piece of art he had commissioned for us—of a man flipping the bird.
I kind of feel like he got the raw end of that deal because I’m certain that piece was not inexpensive—and I’m mad at myself for throwing it right in the trash instead of keeping it. That would have been a great reminder of never ignoring the red flags and always obeying your gut.
We’ve all been there and experienced some jerk who won’t pay or requests a refund or cancels their credit card so you can’t get paid.
Because of those experiences, we’ve put together a three-part process.
Find the Red Flags
I’m big, big, big, big, big on red flags. That first meeting with the client was a massive red flag. I should have walked away right after that.
But, because of that experience, we know have a crazy process we go through with prospects that allows us to unearth red flags.
There are, of course, some we’d be willing to forgive—and then there are some we are not (like treating other people around you like crap).
If it’s only one or two tiny red flags, we’ll likely go ahead. But if it’s 10 red flags, we really evaluate whether or not it’s a client we want to work with, day in and day out.
Be really, really diligent in the work that you do upfront to try to find a reason not to work with that prospect.
If you can’t find a reason—or there are only one or two tiny things—they’re probably a great fit for you.
Always Bill In Advance
We require that clients pay us in advance. I know, I know. Some large clients don’t work that way. I am here to tell you, if they want to work with you badly enough, they will figure it out, but you have to set that expectation upfront—not six months in when you’ve only been paid for 60 days’ worth of work.
If they have procurement teams or they won’t pay for 60 days or longer, we always say, “Great. Let’s get all of the paperwork and invoicing done and we’ll start work in 60 days.”
Trust me, when you do that, they always figure out a workaround. Or they wait for 60 days.
Either way, you get paid in a timely manner and don’t have to float payroll and expenses for your team while you wait to get paid.
Require Digital Payments
The last thing we do in our process to avoid the not getting paid issue is that we require either a credit card or a wire transfer.
We do not invoice. We do not accept checks.
There has to be a valid credit card on file or we have to be paid monthly via wire transfer.
Our CFO is giddy about how effective it is—and it makes it lots, lots easier when you go to the bank, looking for some debt to invest into growth.
Plus, I no longer have to stress about how I’m going to make payroll because no one has paid us for 60 days.
I know some people have an issue because there are fees associated with both credit card payments and wire transfers but those fees outweigh the time you have to spend chasing payments down.
If you do only one thing, that’s what I recommend you do.
Accept credit cards for payment.
Stop accepting checks and stop being paid in arrears.
Have a Question?
You’re in charge! Set expectations and hold true to what’s going to make your business most successful, especially when it comes to getting paid.
There are lots of places you can negotiate. This is one that you have to stay steadfast and true to.
Also! Make sure you watch the video for a little color commentary on my glasses and migraines.
And, if there is a topic you’d like us to cover, industry trends you’ve heard about but don’t understand, or a question you are embarrassed to ask but know we will be happy to answer let us know!
You can also stop by my house with a bottle of wine, but we can’t sit out on the porch and drink. It’s too cold. You’ll have to wait for that part until spring.