Deal with problem clients responsibly
Jacksonville Business Journal - January 9, 2004
By Ben Leichtling
Every company has them: clients that aren't worth the problems they create. They eat up your profits and are so nasty, deceitful and frustrating that your good employees quit. If you think your company doesn't have any, you're too far away from the firing lines.
Successful training or timely firing is in order before they ruin your business. The trick is to do it in a way that costs less, preserves your reputation and helps your company grow with better clients.
Don't hesitate because of fear and inexperience. A typical fear is thinking that if you stop working or push for timely payment, they'll get insulted and won't pay or will bad mouth you. Problem clients are less likely to pay after you finish the job.
Here are some suggestions for dealing with problem clients:
* List your top three "problem children" and your timeline for their professional development or firing. What keeps you from taking action right now? Is that fear exaggerated?
One surveying company owner had a client who refused to pay during a project, no matter how much the entrepreneur compromised. The client claimed they'd never received invoices, and stalled and lied many times about mailing checks. In order to receive the finished drawings, the client finally cut a check but then canceled payment as the owner was driving to the bank.
* Know your clients and employees. Who pays on time, who avoids paying and who nickel-and-dimes you? Which employees are afraid to pursue clients, which skillfully handle different types of clients and which escalate problems instead of clearing the air?
* Plan ahead. Do your contracts give you enough leverage to stand firm?
* Owner-to-owner honesty can distinguish problem clients who have been blaming difficulties on poor systems or employees from good clients who have problem employees. Some clients and managers treat your staff like dirt but will listen to you. Develop a timetable with staff: clients must deliver by a certain time or get bumped up to you.
* Educate inexperienced or fearful managers on when and how to stand firm. Many managers, afraid of the repercussions if a client complains or leaves, jump inappropriately to please clients. Meet regularly with staff to determine when to get firm with which clients. Tell them that clients who take advantage will get no more slack while good clients will get some. Managers must know that you'll stand behind decisions and plans.
For example, when clients call with urgent change orders, fearful managers can create future payment problems by sending crews before the new work is described, priced and signed for. Get signatures when the client is anxious to get the work done.
* Some clients can be educated if your service is good enough. For example, a civil engineering firm had a client that withheld payment. Cash flow suffered while the firm carried the account. The client valued the firm's accuracy, attention to details and timely adherence to budget, and wanted to hire it again. I asked the engineer, "What would that client have to do in order for you to be willing to work with them again?" The answer was to agree to pay a retainer that would be replenished at each milestone or the work would stop. The client agreed and cash now flows.
* Be clear, persistent and matter-of-fact when educating or firing a problem client. Most entrepreneurs want parting to be amicable so they do it indirectly. They'll eat the present contract, and never again bid or bid high for that client. Explain that you're probably not the right fit for the next job and send problem clients to your competitors.
Don't react emotionally to their emotions. Learn to say calmly, "We can go on to the next step when you've signed off on this step or paid the outstanding bill."
* Some problem clients are so abusive that good employees burn out. Rotate staff to see if a different personality or style solves the problem. Make sure employees know when you've fired a difficult client. Be aboveboard if you ask employees to put up with a client for a finite time. Consider offering them a bonus or some perk for their "hazardous duty."
If you're desperate, you'll take any client just to survive. However, a different strategy is necessary in order to thrive. Stand up to your fears and stop wasting time, energy and good employees on problem clients. Focus on your best clients and grow with other good ones.