SUMMARY
Our panel discusses signs that client isn’t worth taking on and how you can guard against bad fit clients, saving yourself time and headaches in the process.
SHOW NOTES
Episode Summary
Our panel discusses signs that client isn’t worth taking on and how you can guard against bad fit clients, saving yourself time and headaches in the process.
Panelists
- Reuven Lerner
- Margaret Reffell
- Jeremy Green
- Erik Dietrich
PanelPicks
Each episode, the panel (and guest) share their picks: a book, app, service, resource, or something else that they’re enjoying and recommend you check out:
- The Pumpkin Plan by Mike Michalowicz (Erik Dietrich)
- Tales from the Loop (Jeremy Green)
- Headspace (Margaret Reffell)
- Screenflow (Reuven Lerner)
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On the Business of Freelancing, our panel of experienced freelancers discuss the issues that they have encountered while building up their business — and give you practical, actionable advice to take your career to the next level. We also invite expert guests to provide their opinions and perspectives on how you can better succeed in your freelance career.
Episode Transcript
Reuven: Hi, everyone, and welcome to the Business of Freelancing.
This week we’ll be talking about signs that a client isn’t worthwhile, and how you might be able to guard against them and save yourself in the process.
Hi, everyone, and welcome to the Business of Freelancing. This week on our panel, we have Jeremy Green.
Jeremy: Hi everybody.
Reuven: And Erik Dietrich.
Erik: Hi, everyone.
Reuven: And Marg Reffell.
Marg: Hey, guys.
Reuven: I’m Reuven Lerner. So we’ve previously spoken about horror stories when things go bad with clients. What we’re going to talk about this week is how can we maybe identify those bad clients in advance before things go wrong? What kind of signs can we look for to identify them, and warn ourselves before we get into hot water to stay away? So, who has some brilliant ideas for how to stay away from the bad guys?
Jeremy: So one thing to look out for, that’s not necessarily indicative of a bad client, but a potentially bad project is if it has to be started tomorrow and has to be delivered next week. Like if there’s not much time for you to do your normal due diligence on a potential client and figure out if they’re going to be a good fit, or if they are wanting to skip maybe an exploratory project and just go straight to “No, you’ve got to start this immediately.”
Anything that’s really on a short timeframe and under the gun often has the potential to go bad because it probably is, on a short timeline, because of previous mismanagement. So, it’s just a continuation of bad things that got it to the position to where it comes onto your radar, and you’re looking at it.
Marg: Yeah, definitely ones that have that sort of hard, hard timeline and hard cut off with absolutely no flexibility, those have probably been one of the biggest red flags going forward. For sure. Definitely for me.
Erik: I found that to generalize a little bit so like a client coming in and saying, I need you to get started like tomorrow, don’t mind the paperwork, etc. Just go. Is an instance of like, if I zoom out, if you have a call with a client and or a prospect, and the way that goes is that they’re kind of trying to dictate all the terms to you, as opposed to you saying, “This is how I work. This is what I typically do.”
If they’re flipping that around, either by force or maybe because you haven’t set up those terms. Yeah, they’re dictating a lot of how things are going to work, that can be a bad sign. It isn’t always necessarily especially with enterprise clients that’s how they have to work. But I’d say in general, that’s something to look out for, where you’re saying, “I’d be comfortable starting this next week.” And they’re like, “No, we need it tomorrow.”
Or maybe you prefer a certain project management methodology or a certain set of tooling. That’s how you work with your clients. This one comes in and said, “No, that’s not going to work. For me, that’s not going to work for me.” Because either, it might be like a cultural or a thing where, they’re going to be a problem or it might just be that it’s a poor fit, and you’re going to be miserable either way.
I found that a lot of what it may be bad clients, or there’s nothing wrong with them. It’s just not a fit. So, a lot of it is who is dictating what’s going to happen in the sales meeting, and if it’s not you, that’s the potential for some pain.
Reuven: Erik, you just hit on something there, which is in many points. But we’ve often made the distinction between coming in as an expert, as a consultant offering expertise and advice, and coming in and I forget what the term is, I always forget it, just sort of adding manpower adding hands and eyes and brains to an existing project.
What’s the term that’s been used? I can’t remembert that term.
Erik: Staff augmentation?
Reuven: Staff augmentation, there you go, there you go. So if they come to you and say, “This is the deadline, this is the project. This is the methodology, and by the way, this is the price.” Take it or leave it. They’re not really interested in you as a consultant. They’re interested in you in just being another cog in their machine and getting through it as quickly as possible and they will treat you accordingly.
Marg: Yeah, and I definitely think scenarios like that foreshadow a lot of micromanagement along the way too. That can happen which can lead to a whole other host of issues and more than anything, scope, creep, and timeline creep, and all of that kind of stuff that can come as a result of that. Then ultimately pushing the timeline further, so you can’t get it done by that amount of time as well.
Erik: A very specific and granular one, for me historically that I’ve learned the hard way at times, if you are talking with someone, and you have a set price range, or I don’t know if you have an hourly rate, whatever the case may be. If you quote, fixed bid things or productized service, and you’re talking to somebody, and you’re at the very upper end of their price range, and they’re at the bottom end of yours.
So if it’s your cheapest offering or the cheapest, and you do, and they’re trying to negotiate you down from that, whether you let that happen or not. I personally would not recommend giving them a price. But whether you give a little to get the business or whether they come up to your price point, that in my experience has been a recipe for misery, because they come into it feeling like you’re overpriced and that you should be giving them the Cadillac treatment, and you go into it feeling like they’re your least valuable client, because they’re at the bottom end of your range, and they’re demanding the world and it’s not even worth your time.
It’s a super poor fit to go into a project where they think you owe them way more than you do, and vice versa, on the other side that you think you really should pay them minimal attention. That’s not going to be a lot of fun, most likely.
Reuven: I actually have a big client, a Fortune 100 company, where once every year or two, they ask me if they are paying the most, the least, or the average. Where they fall in terms of what they’re paying. I used to think it was because they didn’t want to think that they were being ripped off that they were paying more than everyone else, that’s still part of it.
But, they also want to know that they’re not paying much less than anyone else for exactly that reason because they realized that if they’re paying less than everyone else, they’re going to be a very low priority for me, and I’m going to treat them accordingly. They’d rather pay a bit more and get good service and good treatment. Clients should realize this, right? Like you’re the people who pay more are going to get better service. That’s just the way it is.
Erik: That’s fascinating. It makes me think like that’s a tactic I should employ for our vendors where they’re variably priced. I would actually like to know that myself, that’s a really savvy thing to do.
Reuven: I found it also interesting because people can lie, right? But is your incentive than to lie and say it’s higher, it’s lower. I always say, oh, you’re paying exactly what my average rate is. I don’t know what everyone else’s strategy would be. By the way, similarly, when I want to raise rates on clients, I tell them I raised them on all my new clients, then I go back to my old clients and say, “Oh, you’re now paying less than anyone else.” That definitely gives them incentive to feel like “Oh, my gosh, I guess I should be paying more because I don’t want him to drop me.”
Erik: I’ve mentioned that comparing that in raising rates as well, like, we grandfathered you in, but you’re now paying less than everybody else, and I can’t make a business case to do this indefinitely. So usually, it’s a heads up that a time is coming when I’m going to raise the rate. I found that to explain that you’re paying the least, and it’s untenable, I found that to be a good piece of messaging for what is inherently a pretty hard conversation.
Reuven: What about rates? You’ve now talked a little bit about them wanting to pay less or than you would normally get, but what do you think about people negotiating with you on rates and negotiating them in a very hard-nosed way?
Jeremy: It can definitely be a signal that it’s somebody you may not want to work with, and that they may be more concerned with feeling like they get a great deal than in seeing the project succeed.
Erik: I found because my business, Hit Subscribe, has clients kind of all over the world, it seems, and maybe others have experienced this too. But it seems that negotiation can vary culturally. For me, personally, I don’t like to negotiate. But I’ve learned that even though clients, whether it’s in some countries, cultures, whatever, that they may negotiate, that I just expect that more from certain cultures than others.
Sometimes after that negotiation phase, they can be great clients, even though it’s not how I would prefer to enter a deal. We don’t budge on price, but we might throw in some kind of extra or go back and forth that way. I consider it personally to be maybe a sign that I’m not going to enjoy the negotiation process because I’d rather just name prices and have that be it. But I don’t know if I would always consider it to be a flag. We’ve had fine experiences with negotiation, heavy prospects and all. Have others experienced this that negotiation itself can vary by culture or place?
Marg: Even if you’re not really willing to negotiate on price, there’s still some room in there to be able to negotiate on what you offer for that price. So to be able to scale back your services accordingly so you’re not taking less money for the same services, but you’re scaling both back accordingly.
How I’ve approached it with some clients, who actually end up being some of my almost long term clients, we can phase it out. So say they go into something not thinking that it’s going to be a hugely costly project, and the quote comes back to be significantly more than they anticipated, we’ll go back, and we’ll scale back something into what’s like an MVP of phase one. Then we plan for phase two.
So in some ways, it’s a negotiation of what work for what costs can be done now, versus what can be held off for the future as well, too. More than anything, they’ve really appreciated that because it’s like, “Okay, let’s work with what you can do, and also get you some money coming in so that you can pay for the next phase when that comes up as well.”
Reuven: That’s really smart.
Jeremy: One of the big red flags about negotiation is if the price that they’re trying to get to, is just totally in a different ballpark than the gains that they hope to see. Like, I had one client come to me once, a prospect with a project that they wanted to do that after getting into why questions, and “What’s this going to do for your business?”
They expected it to increase their bottom line by millions of dollars in the first year and tons of millions of dollars every year after that, but they wanted to pay like $2,000 for this project. That was a sign that they just fundamentally did not understand what was involved in the project, and how to, invest in a business that would be sustainable and long term. It was just a very big red flag that, “Okay, these people either are fundamentally not serious, or just don’t get it, and I am going to run away. I don’t want any part of that.”
Reuven: Erik mentioned before that it’s a cultural thing with negotiations. I can tell you in Israel, every time, literally every time I start working with a new client, I get a call from the purchasing department. I finally learned that purchasing department is the negotiation department. Basically, their job, and what they have to show their bosses is they have reduced your price somewhat.
It’s such a cultural thing that I’ve recently started saying to people, “No, I won’t negotiate on price.” There’s a stunned silence at the other end of the phone like, “Wait, we’ve never got it.” I even remember someone saying, “Wait, you mean, you’ll go without the work?” I said, “Yeah, I’ll have enough work, I’ll go without it without the price.”
They don’t know what to do with it. One company… I’ve told the story before, one company, the woman basically said, “Listen, I have to show something, something, please tell me, give me any discount.” I said, “How about $10 a day.” She said, done. So with that company, I charge the exact same as I do for training with everyone else, minus $10. By the way, they pay for lunch at a local restaurant, and you can be sure I get a very big lunch that day and feel great about it.
[laughter]
Erik: It makes me think that like a general property of what we’re seeing here. When it comes to negotiation is if you can define the reason for the negotiation. So, if it’s a cultural mandate to negotiate, that’s a much different thing, then I want to get this work for a fraction of the price. Or, sometimes maybe it’s that they’re blasting out some RFP request to tons of people, and they’re saying, “Well, this person over here will do it for half the rate you will.”
One of those things is a red flag, the other one isn’t. If they’re comparing you to labor or somebody who is almost not doing the same thing as you, or if they seem to just be completely misaligned with you in budget. Like that latter one is a red flag, it was like what I was talking about earlier negotiating the bottom end of your price range.
If you sell a service for 5K, and the client says, “Look, my top budget here is 2500.” There’s nothing wrong with them. But due to their budget constraint, they’re just not your client, and if you try to make it their way, it’ll be miserable. So, if there’s negotiation going on, and you can figure out what’s driving it, that will probably tell you a lot.
Marg: So, maybe people listening are wondering, was there a moment in time that you guys that you had that realization, or if something client-wise happened, that was able to give you that spidey sense and allow you to differentiate and call those clients out a little bit earlier? Because as you guys how you’ve gotten it’s gone through it can be line between people that have the best of intentions and maybe just not an awareness of how it can be rolled out and what the options are, versus somebody who is literally just looking for the best bargain that they can get.
Erik: I have personally learned about my rule about negotiating at the bottom of a price range, just the hard way, by doing that a bunch of times and having it always being miserable, and done, like putting it together in retrospect. So now when I see that happening, and I’ve got my service for 5K, and they say, there this other guy, he will give it to me for 3,000. I just say like, you want to do that, then that sounds like a good deal for you, God bless.
So, yeah, for me, what became a pretty easy rule through battle scars. I’m trying to think of other things that have come about through experience. A big one, some of what we let off the call with, if a client is culturally, hair on fire. So if right from the get go, they’re saying, “We needed to get started yesterday, and this is super important.” I’m leery of that because I like to be what are the work quadrants like, important and urgent, important but not urgent. It’s like Eisenhower quadrants or something anyway, I like to be in the important but not urgent range.
Dealing with a client who operates constantly behind the eight ball is miserable. So, I’ve also developed that sense through some battle scars. If they’re already behind the eight ball on a sales call, like, whoa, we should probably consider that to be a flag.
Marg: It’s interesting, too, because I also have found it’s helped having conversations with clients saying, going back to what you’re saying of people wanting stuff done yesterday, basically. Going back to them saying, especially if they have something complex, not only can we not take it on right away, but I’m always leery if they want something complicated. If they find someone who can drop everything and take it right away, that’s probably not the best sign that it is because at least most developers I know, have a queue.
So they have some sort of waiting time generally, to be able to get to work with them. There’s always Fluke, say, like a project falls through and all of a sudden, you have the time and the timing works out perfectly to take on something else. But typically, I also try my best to educate clients and say, like, “Look, we can’t start this until next week, or the week after, and we’ve seen conversations around money too. So try to be mindful of that. This is my price range. If you find somebody for 1000 bucks, cheaper, great. But if you find somebody for a quarter of the price, I really need to be honest, that that will not get done properly. There does need to be a minimum threshold for the work to be done well.”
I do try to educate people to the best of my ability, but ultimately, there’s going to be those people who are like, “I don’t care, and then they leave.” That’s fine. They were never your client to begin with. But yeah, I found that that helps a lot trying to try to educate them, at least then they think that it’s coming from a good place. Even though if you can help them, if they’re out of your price range, try to give them some advice to be able to get a product that they want to get at the end of the day, but also something that’s going to serve them and not cost them three times as much down the road as well.
Reuven: One of the reasons I’ve been so happy, doing training over the last number of years, is that I basically largely got out of that whole conversation. Because it’s basically a product and I say this is the price, and you can take or you can leave and maybe there’ll be some small negotiation like I described earlier. But it’s not like I have to start saying, well, this will take 3 days, 5 days, 10 weeks, 20 weeks, whatever, and then we start negotiate over scope and time.
It’s a course it’s four days, it costs you this, take it or leave it. It has reduced my stress on that front a lot. Because before that it was never-ending. Marg, you asked how did we evaluate it before? In my case, it was always poorly, and I didn’t have a lot of bad clients, but I had a fair number. I would come home and tell my wife “Oh, I met with so and so.” I would say about half the time that I’d say so there was this quirk and this weird thing and this other strange thing, but , it’ll be okay to work with those cheapy one.
“No, no, what you’re describing is just not going to work at all.” When I listened to her, I was very grateful and I did not listen to her. She was generally quite right. She picked up even from my conversation describing like, my description of my conversation with the client was enough to set off all sorts of red flags for her and say this not a reliable person to work with.
So having someone else to bounce it off of… My wife is available if someone wants to talk to her. But basically that’s very, very useful. Also just get a sanity check on these things.
Erik: Yeah. I just wanted to echo that real quick, because like, as you were saying that I realized the exact same thing is true about me that if I would have… Now what we’re doing with Hit Subscribe is also pretty productized service. So it’s just “Are you going to work with us or not, this is how we work.”
But from a lot of years of, doing solo consulting, management consulting, and some of the things in my background. My wife was better at telling from how I talked about a sales conversation than I was, from thinking about it. She was better at knowing whether it would be a good fit or not, by the way, I talked about it. That’s fascinating that I’m not the only one that’s true. So I feel, yeah, having somebody who probably knows you pretty well, and is listening, because you want to close the sale, right?
Reuven: Right.
Erik: You want it to work out, the client wants to work out, so you both make some concessions. But like somebody else can really hear and say, “Oh, no, not this again. I remember how you talked before about this other client.” So that’s a great thing to point out, Reuven.
Jeremy: Mastermind groups can be great for this as well, which we’ve talked about previously. It’s somebody that knows you well but isn’t as invested in whatever the financial situation is, as you are and can have a little bit of detachment to say, “You know what? That looks a little bit shady. And even if you need the money, it might not be a great deal for you.”
Reuven: One thing I wrote down here, my list of notes as being a red flag is free advice. I don’t know about you, but I’ve definitely had a few potential clients over the years. I had one just two summers ago where they really wanted to do something with me and started the summer with a phone call. About four or five months later, after lots of exchanging emails, I finally realized, Oh, my God, this is going nowhere and sucking up lots of time.
I emailed him and said, “Listen, I’d love to help you, but we’re going to have to actually talk about paying, because this is what I do.” I did not hear anything from them after that. I was thinking, boy, once again, I was snookered into giving free advice, that was really worth that much in the end to them, I don’t think. Any sense along those lines as well from you guys?
Erik: Well, that’s a tough one for me, because my tendency is so much to give away tons of free advice. I can’t really think of ever being burned with it. But that’s happened to me that that people have initiated these email conversations. I do like a reader question column on my blog, so a lot of people write into me asking for advice.
What happens is I just naturally let that peter out after a while. If it just keeps going on and on, I might get less responsive, or just be upfront and say, like, “Listen, I just don’t have a lot of time to do this. I’m sorry.” I can’t think of it ever having led to a bad client, it just maybe is a time suck in the pre-sales phase, if you will, at least for me personally.
Reuven: That’s a fair point. That’s true.
Erik: I mean, I could see where it could lead to a bad client, like if what they get used to is being able to consistently violate the scope of your agreement for more stuff. I could see it being a red flag in somebody else’s life that it had happened to it, just not me personally.
Marg: I’ve had that happen sometimes at the end of projects. So we do have a very clear ending time, and there’s either two weeks or four weeks, depending on the size of the project of support afterwards. The turnaround times are very clear on the support and the dates are lined out and everything like that in the contract.
But I definitely find afterwards if it’s technical support or something in the training, they don’t understand, absolutely. I’ll hop on that. But I do find that say it’s one or two or three months down the road, and I’m totally fine to hop on and have these conversations with clients. They really love talking about this stuff. Like how can, how can they grow where they want to introduce this new product, and how can they make it work on the site, which is great?
But I have had a couple instances where now they just want to hop on a brainstorming call every week. It’s like, “Oh, now we’re getting into a bit of a gray area.” So I’ve had that happen a couple times. That’s good. That’s a brings up something good, like how would you end something like that? Ultimately, the two times that it became pervasive. I did have to say to them, “Well, if you want to continue, I have these packages.” That kind of stuff. Like Reuven was saying, the communication stopped pretty quickly after that.
[laughter]
Erik: Yeah, I do something similar and say “Listen, we can put together a retainer consulting package if you want to keep this going.” Personally, I found that people, if you point that out and say, “Listen, this is a lot of my time, and I’ve got a lot of other things I could do running my business, and they need my attention. I can’t keep going like this. But we can structure something.” Most people are understanding of that.
If they realize that, maybe it’s because they’re like, “Oh, I can’t keep going on this gravy train.” Or maybe they feel kind of bad. They’re like, “Oh, I didn’t realize how much I was violating your boundaries. I’ll stop.” I found most people seem to be pretty understanding about that. It’s hard for me to imagine too many conversations where somebody was like, how dare you keep giving me free advice?
Marg: Yeah, I did have one of those when it all went wrong situations, which is why I’m a little scared of those sometimes. This was a few years ago, it was in 2017. Talking about spidey senses. I had this amazing client who I had for a few years before, we still work together to this day. It’s a really incredible company to work with. Part of them is a nonprofit, they’re doing really great stuff.
One day, they gave me a referral to someone else, 90% of my business is through referral. So this is totally, it’s a common behavior. So I had a referral, we had one discovery call with the referral. Immediately, I had that like sinking feeling that you get, doesn’t happen a ton. But it’s like a sinking feeling you get right after you talk to someone that you’re like, “Ah, this is not just not a good match.”
So I went back to my initial client, and I was like, “Hey, I just don’t think it’s a good fit. I really appreciate the reference, though, because I want to follow up with them.” Then I made the cardinal mistake of telling the person that I couldn’t work with that it was because I didn’t have the time in my schedule. So, lo and behold, they said they would wait, and the problem is, there’s no way out of that.
[laughter]
Marg: Don’t ever use that, just suck it up and say that it’s not a good fit or some form of the honest answer. But saying that you don’t have time right now as a lot of people’s go-to, please don’t do that I was burned so hard [laughs]. This person, as soon as I started working with them, every day without us booking calls would just call me two or three times a day on my cell phone. Now I also just don’t get my cell phone number out too to clients. A couple clients have it but it takes a long time to get that trust. Yeah, it was a few cell phone calls a day, most of them lasting 60 to 90 minutes.
Reuven: Oh my God.
Marg: It was insane. It was brainstorming about her business. So at that point in time, it was a few years ago. So it’s like, “I can’t afford to give the money back. I just have to work through this. Also, she has eaten so much of my time. They don’t have any much other client work at the moment.” So I plowed through, we finally made it to the end of the projects, four months later. We launched the site, everything was in writing. Then she came back a month later with legal notices because she was suing me.
Reuven: Oh my goodness.
Marg: I was just like, I don’t, I don’t even know. It ultimately got dropped because everything was unfounded. It was just one of those things where you knew from the moment you meet them that it’s not, it’s just not a good fit. I don’t know many people that would be a good fit, maybe someone who’s very new and also, I wouldn’t want to traumatize them like that. But if anything, the biggest lesson learned from that was, if you don’t want to work with somebody don’t tell them it’s because you don’t have time right now because they might offer to wait.
Erik: What did she do on the call that triggered your unease? Do you remember?
Marg: I’m trying so hard to pinpoint. Truthfully, it was all not necessarily the things she said, saying anything specifically triggering but the way she said it, it seemed very, very frantic, very unorganized. So there was those mannerisms that I’ve definitely… If anything, I am grateful for it because it’s made me acutely aware of those. It’s interesting because I do find that there’s sometimes those instances of Okay, the universe, or whatever it is as there is going like throw you this issue and see how you deal with it.
Ultimately, I dealt with it not great because I still followed through with it and ignored my intuition. But a few months after that, I had a very, very similar call. This person was actually pretty high profile. So it was really hard to say no because it would have that internal conflict of like, Oh, I mean, they’re paying well, and then also the exposure because they have a lot of clout behind them.
But after I took the deposit for them after the second call, I was like, “Nope, I’m not going through this again.” I refunded all her money. I’ve never had a client issue like that since. So I learned my lesson, I don’t need any more lessons for that [laughs].
But yeah, the biggest takeaway for sure, be as honest as you can with people, if they’re not meant to work with you, they’re not meant to work with you. There’s no harm in saying that you’re not a good fit, because you’re doing them a favor too, they will find someone else that’s a better fit for them.
Reuven: Wow. Wow.
Erik: I found… I don’t know how else to put this. But speaking of the spidey sense, I’ve had this go both ways where… I don’t want to put it in such crude terms. But it’s almost like I had an initial call with somebody, and I’m like, “I just don’t think I like this person.”
Trust your gut with that because if that’s your first impression of somebody, that rarely gets better, it will probably just get worse. There’s something your subconscious is probably telling you, and maybe there’s nothing wrong with the person, maybe you’re just not a personal fit or something. But I’ve ignored those impulses to my detriment and wound up giving a refund.
It’s been a long time since I was billing in arrears in such a place where I’m like, “I can’t get this money back.” So I’ve been fortunate enough to even when I go against my impulse, say, like, never mind, here’s a refund a few weeks later. But that is a powerful thing, even if you can’t exactly articulate.
For those of you listening out there, if you don’t have a great system, but you do have this sense of like, ooh, I have a bad feeling about this. I don’t think that that the way that goes too often is you have an initial call, where you get a really bad feeling, then you have a second call, and everything’s great, and you have a great project. That’s a pretty rare situation.
Jeremy: One other thing that I think is a red flag that you should look out for is if the client is reluctant to put in writing what the contingency plans are if a project does go south. Some projects are just big and hard to predict what’s going to happen, and you as an expert may be able to see potential pitfalls that could come up, that could dramatically increase the scope or the timeline or something, that’s going to mean, you end up having to put more time in it.
If you can spot those things, you want to be able to have that in the contracts, something that says, “If this third party system that we’re trying to integrate with, doesn’t actually match the docs that they have, that’s going to make the whole thing take longer. I’m going to have to charge you more.” If the client says, “Oh, let’s not put that in this contract. Let’s just address that when and if we get to it.”
That’s not going to work out in your favor, what’s going to happen is they’re going to say, “Hey, you agreed to this contract that says you’re going to have this thing done by this date for this price.” That’s the end of the story. There’s not going to be a second round of negotiation for this thing that we predicted and said, “Let’s put off trying to figure out what happens if the circumstance arises.” That’s going to be bad.
Reuven: I’m also curious. I now mostly work with big companies, but I still work with some startups and smaller ones. But I definitely worked with some very, very small, or one or two-person startups even before they were funded. Sometimes I worry, or I used to worry about this, like, “Do they have money to pay me? How’s that going to work out?” I’ve seen different approaches that to deal with it. So one of them is Jonathan Starks, which is you just get payment upfront, end of story.
The other that I’ve heard of is Brendan Dan who talk about going in with a mutual NDA. The mutual NDA would be like, “I’m not going to spill the beans about your company. I’m not going to spill the beans about the project. You’re not going to say anything about me.” Basically mutual.
Then he would interrogate them about their company’s finances in a nice way. It would be mostly so that he could know how much you could charge them. But also to make sure yeah, these people are stable enough to be able to pay. I’m wondering, how do you guys check, make sure that your clients are actually stable enough to pay you? Or do they? Sometimes not?
Marg: I’ve never had someone not pay. So knock on wood.
Erik: Same here.
Jeremy: Yeah, I have and I’m now on the Jonathan Stark plan of you pay me up front or I don’t start your project.
Marg: Wow. Did they keep saying that they were going to pay and then they just fell off the map or at some point where they just like, “No?” Did you end up delivering the final product and then pulling it?
Jeremy: It was that they kept saying that they were going to pay and that they needed to have project done. They were receiving revenue from having the project live. Once the project was live that then they’d be able to pay but turns out, they were just crappy at running a business. Not only did they not have the money to pay, to get the project done, they didn’t know how to do marketing and actually get people to start using the project, to get revenue, and to be able to pay me. Then finally, the company just went under and you can’t get payment from a company that doesn’t exist.
Marg: Oh, man.
Jeremy: It was not fun.
Marg: Oh, for sure.
Reuven: Yeah,
Marg: One of the ways I do ensure is in our contract it’s usually 50/50. So it’s usually 50 upfront, but then it’s 50 before delivery. So ultimately, if they don’t pay me the final payment, they don’t get the product at the end of the day. So, that’s mitigated. Though there have been exceptions if I work really well, with someone I know they have consistent income through their online courses and stuff like that, too. Maybe this is like a Shopify store or something else, that they’re building on top of the regular business that I know they can generate income through.
Sometimes they need the payments divided up into two, three, or four, just to match cash flow a bit better, I’ll definitely do that. I’m willing to accommodate people, the more I know about them, but yeah, if I don’t know anything about a company, it’s usually 50, upfront 50, just before delivery.
Erik: I’ve been doing 100% upfront for years. I also tend not to with new clients, let myself, and now, the business that I own. It’s a bigger operation, we’re not doing enough business with anyone that would be in any way catastrophic to write it off. So like our initial engagement, the client, a few thousand a month, or something, we’re not going to be sending invoices, because we’re doing recurring services, like running companies, blogs, and stuff.
So if we send them an invoice on the first, we don’t refuse to write blog posts for them until they pay. But we’re never letting the outstanding balance get into any territory that would be catastrophic. So that even if we have to write it off, it would be a bummer, but it wouldn’t be a big deal. It’s really in proportion to how much we trust the business and how long history we’ve had with them, to what extent we even let that credit ride. So that’s been my and now our management strategy of that kind of risk.
Marg: To reiterate what Jeremy was saying, get them to sign and approve, sign and approve everything in your policy, and especially including the payment plan and those terms and conditions for sure.
Reuven: Yeah, boy, since I started doing training, really, this hasn’t been an issue. Basically, mostly because I’m dealing with big companies. They might be slow to pay just because it’s like net plus 60 or something, but it’ll come like clockwork. If something doesn’t happen, I actually just much to my embarrassment. I got a call from a big client last week, saying “Hey, did you ever invoice us for two courses last year?” And oops, I never did. So they actually they’re going to.
Jeremy: Good client.
Reuven: They discovered it because it was on their books. The client called and told me that I’d forgotten to invoice them free, not small amount of money. Oops, and so now they’re going to pay me because it was on their books, and we agreed. So, big companies are very sorted by the book in that sense, and they’re not going to mess around, even if they are, as I said, slow and inflexible.
Erik: That actually, if it makes you feel any better, it happens more often than you might think we have somewhere in the neighborhood of 100 contractors that do work or have done work for us. You’d be surprised at how many of them like Angela, who does accounts payable will actually go and say, “You never invoiced us for stuff like eight months ago, and we’re trying to send out 1,099 I need an invoice from you.” So it’s something that happens in the freelancer world, more than I ever would have thought.
Marg: I’ve had a couple of developers who worked for me that I’m like, “Hey, just waiting on that invoice from two months ago because I’m holding on to your money here.”
Reuven: Yeah, I had to explain to them like he wasn’t even to the billing department, accounting department was to my liaison there in the training department. I said, “Look, I’m a one-person operation, and this happens about two-three times a year. It doesn’t happen all the time, but it have to happens like you guys have had it twice.” “Oh, well, we’ll figure it out.” And by figuring it out means they’re going pay me. So good deal.
Marg: The great thing that can also happen, which I’ve experienced a couple of times, even though big companies can be, like you said, 30 to 60 days sometimes to pay, because it’s go through payroll and all that. A lot of times at the end of the year, to be able to get budgets for their digital assets and things like that, they’ll have to max out the previous year’s budget.
So they’re like, “Hey, just reaching out, because we’ve got an extra six grams, sitting in the budget that we have to spend in the next three weeks.” So it’s like, “Here’s a chunk of money.” Then maybe they can bank hours or something like that, too. But yeah, so some of them have money that they have to spend. So there’s money out there, that’s for sure.
Reuven: So any other? I’m sorry.
Erik: The general subject of leering things out in an initial prospect call? One of the overarching piece of advice that I could offer to somebody who’s out there listening, the more you script the sales conversation, the more you give prospects an opportunity to disqualify themselves like the last you have to do it.
What I mean is, a guy who I talked to once there was a sales consultant was like, “Somebody is going to dictate your sales conversation, either you or them.” If it’s them, they’re going to dictate all of these terms to you. If you work with them and say, “This is how we work. We invoice upfront. This is how we provide updates. This is our standard contract. Here’s our auxiliary clauses and assumptions and all this.”
The more you walk them through that, if you give them those terms, they have all kinds of ways to push back. If they do that, they’re surfacing those red flags, where you’re saying, this is how I work and they’re arguing with you about it. Those are ways that you can disqualify them fairly immediately. It kind of gets that awkwardness out of the way, whether it’s your invoicing terms, or whatever it is you’re doing.
I’m a big believer in making that initial sales conversation, almost an attempt to disqualify them. So, here’s all these different ways that we work. Also, why are you calling me why don’t you do this for yourself? Why don’t you try it before, etc. So in general, I’m a huge believer in letting them disqualify themselves and raise their own red flags and show themselves the door, instead of relying on your own intuition to do it.
Jeremy: So one other thing to watch out for is to make sure that you don’t let a previous good experience with either an individual or a company, cloud your judgment and prevent you from seeing new red flags on a new project, or something. This can especially crop up like, if you have a contact that works at one company, and then leaves and goes to work at a different company.
It’s not unusual for that person to say, “Hey, I’ve worked with Jeremy, before, I know, he’s great. I know he can do some good stuff for us. Let’s bring him in.” But it’s important to realize that when that person has moved to a new company, that’s an entirely new client, you may have a new contact there, but it’s a different company, it’s a different culture, things will be very different.
I have had this happen, where a guy that I worked with was at one company, he went to a different one, brought me in for a job, things went great there, he went to a third company. I thought this is great because he’s going to get me into another new company. The third company things just… It wasn’t a good fit. I was really tempted to say, “I like working with this guy, he has been in great projects, I want to do another one.”
But I had to kind of override that previous goodwill and say, no, there are red flags with this company where my contacts said, “Hey, this is going to be a super important project. We normally have kind of the mid-level person that would be able to crank out this thing for us. But this is really important. We wanted somebody good. So you obviously came into my mind, and I want to get you working on this thing.”
Then it came back several weeks later as we’re going through negotiations, “Well, we kind of want to pay the same thing that we pay our mid-level guy. But this is more important.” He’s like, “No, I’m sorry, no matter how great these projects that we’ve done together in the past have been I just can’t make a good case for this one.” So it’s hard to not let that previous goodwill sort of cloud your judgment about new work that even look was interesting.
Reuven: Any final thoughts and advice before are headed to picks, folks?
Marg: You don’t have the time.
[laughter]
Erik: A little bit of wisdom I close with is trust your gut. If you have a bad feeling you probably do for a reason, and it can be hard. If you don’t have a ton of business lined up, or if you can’t really articulate what the problem is, but if your gut is telling you that this isn’t going to be a good fit, you need to have a really, really compelling reason I would say to go against that and try it anyway.
Reuven: Yeah, I’m going to echo that, and add to it, which is if you’re desperate, or if you don’t have a lot of work, and you say, “Well, better a bad client than no client.” No, I promise you better no client thand a bad client, it’ll cost you time and money and agitation, and, and so on and so forth. Better to wait for the good one to come along.
Marg: Yeah, that’s a fast road to burn out, too. If you’re constantly taking on clients that are not easy to deal with, but also not really fulfilling in any way.
Reuven: Okay, and with that, we’ll head into picks. Marg, what do you got for us this week?
Marg: This week, I would have to say the Headspace App, I use it every day. It’s 20 minutes, up to 20 minutes, you can choose anywhere from five to 20-minute meditation. The guy’s Australian accent is very soothing. There’s a free version, but I do have the paid version, which is fairly inexpensive. I think it’s like 50 bucks a year or something like that as well.
But for anyone who have a really hard time meditating they, and they do guided meditations. It’s such a nice voice to listen to. It’s over in a heartbeat. Super easy to digest. It reminds you every day, and it starts, you get going on a streak. Then once you’re on a streak, you don’t want to break it. So it’s good.
Reuven: Excellent. Jeremy what about you?
Jeremy: I’m going to pick Tales from the Loop, which is a series on Amazon Prime that we’ve been watching. We’re only a few episodes in so far. But it is Sci-fi based Twilight Zone type of thing. As far as I can tell so far. It’s interesting. Each episode is standalone. But each one is happening in this one particular town and you see some of the same casts or characters, from story to story. But so far, they don’t really seem to be leading into all tying together. I suspect that may change towards the end of the season, but we just don’t know yet. So, Tales from the Loop on Amazon Prime.
Reuven: Excellent. Erik, what about you?
Erik: I can go with something topical to the episode, it was an audiobook I listened to maybe a year ago. I don’t remember the name, but we’ll get it right in the show notes with the link, but it’s something like the Pumpkin Plan or Pumpkin Entrepreneur. It’s a guy who’s a serial entrepreneur that wrote this book, that heavily applies the so-called 80/20 principle. Pareto principle that you will have like 80% of your problems from 20% of your clients. Maybe the best 20% of your clients will account for 80% of your revenue.
So it’s about calling the worst, and then looking at the best and figuring out how you can turn the rest into the best. It’s kind of topical here, even though we’re talking about looking out for that prospects, where you have this idea, this feeling that it’s going to be hard to come by business, or you can’t afford to get rid of the bad clients and a pass on the bad prospects. It’s a really compelling to counter that idea.
It talks about how you can get so stuck in this cycle of being so busy dealing with bad clients that you can’t actually find good clients. So I feel like for anybody who’s listening to all this advice, and thinking, “Well, that doesn’t apply to me, I’m just getting started or I can’t do that I can’t afford it.” They’re like anybody out there, that’s a freelancer that’s running a business, you not only can you afford to not deal with bad clients, or you can’t afford not to.
I think this author did a really good job of walking through that and creating a framework for you to feel good about doing it. So that is my pick for the week.
Reuven: Very cool. I’ve lately been speaking at a lot of conferences. But of course, these are all online conferences, because people aren’t actually going anywhere, let alone large rooms full of many people. So I’ve been using ScreenFlow. I’ve been using it for a few years already for doing all my screencasts. But I’ve been using it really heavily over the last month or two.
I finally actually started using more and more of its functionality, and I am just blown away by all the things they thought of that you can do. Even someone without a lot of artistic video editing experience like me can actually pull it off pretty well.
So it’s a Mac-only app as far as I know, but it works really nicely, and everything I want to do, I’m able to do and then some. So a ScreenFlow, I think they’re up to version nine out, but I’ve been using it for a few years.
That’s it. Thanks, everyone for a great discussion. Thanks to listeners out there. If you have questions or suggestions, please get in touch with us. We would love to hear from you. We will see you next week on the Business of Freelancing.