Like many small business owners, Mike Freemire, 50, learned to handle difficult clients the hard way. When he started Results Integrated Marketing, a strategic marketing firm in Bettendorf, Iowa, he immediately came across a common type of problem customer: one who wanted a lot of work done—but didn’t want to pay the bill afterward.
Freemire was surprised. He’d spelled out how much he charged ahead of time and been clear about the services he would provide. “I was told: `Anyone can do this stuff,’” Freemire recalls. Wanting to preserve the relationship, Freemire renegotiated: A new contract spelled out a maximum budget for each project, and he would alert the client if the cost of a project was going over. They ended up continuing to work together, on good terms, although Freemire says of the incident, “It’s like the 800-pound gorilla in the room.”
Over the ensuing 16 years, few of Freemire’s clients caused him this kind of headache. Concentrating on relationships with 50 to 60 great customers, he built revenues to the “low seven figures” and recently sold to a national company, launching a new firm, Mission ROI, in Denver, where he and his wife, Lori, wanted to live.
Freemire, meanwhile, has learned to avoid troublesome clients, so he has the time he needs for those who value his advice and treat him with respect. “You’ve got to ask yourself, `Are you confident enough to walk away?’” he says. “How can you best spend your capacity? And how can you ultimately enjoy your evenings, so you’re not worried about someone being a good-willed person?”
It’s not always easy to predict which clients will be troublesome. In a survey of small business owners in August 2012, Rocket Lawyer, a web-based legal services provider in San Francisco, found that a full 65 percent of businesses faced a legal problem such as a contract dispute or collection problem in the past year.
Your best defense? Spot potentially toxic clients fast. Some are best avoided at all costs, while others can be reformed. Here are some common types—and advice from seasoned pros on how to handle them.
The Commitment Phobe
This potential client seems interested in hiring you—but won’t pull the trigger.
Warning signs: Repeated demands on your time, such as asking for a written proposal, a four-hour introductory meeting, long conference calls, or “emergency” calls on weekends. In between, there’s radio silence.
What to do: Weigh the benefits versus the risks. If you’re competing against other firms for a project from a giant corporation, a long courtship is par for the course—and potentially very worthwhile. Big companies move slowly, and they often vet new vendors carefully. A smaller client who is considering putting you on a monthly retainer may also need to build a comfort level.
But you may also be dealing with a tire-kicker who wants to use you as a negotiating tool with another vendor—or simply milk your free advice. If you’ve reached the point where you would normally negotiate a contract, speak up. If a client postpones that discussion—or fails to respond to a contract you’ve negotiated and sent in a reasonable amount of time, it’s a bad sign, advises Nat Wasserstein, who runs crisis management firm Lindenwood Associates in New York. “You don’t want to work with them. The chances of sending an invoice and getting paid are miserable.”
See also: Be The Boss You Always Wanted
The Expert Junkie
This client is in a big hurry to hire you—because she just fired another advisor and needs some work done in a hurry.
Warning signs: Say you’re an accountant. The expert junkie will tell you he has worked with three other accountants in the past year and “none of them knew what they were doing.” “The client who complains about previous providers will soon add you to the list,” says Freemire.
What to do: Ask to see the work previous advisors have done before you come on board, and head for the exit if they won’t share it. It could be that your predecessors recommended the same ideas you would, but the client is not open to advice. “If the engagement doesn’t lead to some success, it’s a waste of time,” says Wasserstein.
Also, watch for signs the client is in financial trouble. A business may be churning through advisors because it never pays them, notes Wasserstein. If you know anyone who has worked with the company, ask for a confidential reference. And consider doing a check with a credit reporting agency like Dun & Bradstreet, which issues a widely used credit score for businesses. At the very least, get an up-front retainer to give you some protection, says Wasserstein.
Everything seems to be right on track with this client—until the night before your first big deadline. Then the client wants to tear things up and start the project over from scratch
Warning signs: Fuzzy directions, rescheduling of important conference calls to discuss details, or a main point of a contact who is junior and doesn’t have the final say.
What to do: Outline every project in writing as soon as you sign a contract—including any deadlines the client needs to meet for you to accomplish the goal—and get sign-off from the big boss before proceeding. Clients may not realize how much lead time you need to complete a particular job or that you need to order supplies ahead of time. “We’ll try to educate them,” says Scott Cullather, 49, who runs inVNT, a 36-employee agency that plans conferences and other live events from offices in Washington, D.C., and four other cities. If you’ve already done that, and the last-minute drama continues, it’s probably best to move on.
The Client You Just Don’t Like
This client came with a referral from a contact you respect or has a great reputation in his field—but rubs you the wrong way.
Warning sign: You find yourself mentally reviewing a rude comment he made to you or your staff—at 3 a.m. — and wishing you’d responded to it better.
What to do: It’s easy to ignore your gut when you’re hurting for work or feel you need to add a marquee name to your roster. Butwhy do business with someone you don’t like or respect? The relationship is bound to go south, and that may harm your reputation in the long run. “In a professional services business, a client can pick holes in someone’s work at any time, and you can dwell on that and never move forward,” Freemire says.
The Corner Cutter
This customer pushes the envelope on business ethics or uses business practices that leave you uneasy or exposed.
Warning signs: Big red flags include backdating legal documents to conceal a mistake, or keeping certain information under wraps that would normally be shared with advisors, says Wasserstein. Other clues may be more subtle: for instance, they may want to forgo a written contract, even though that’s customary in your industry.
What to do: Do your homework on any client who gives you a queasy feeling. Do lawsuits come up when you Google their company name? Is there any negative buzz about them in your industry? If there are subtle signs that their business practices are shady or they like to play rough, don’t risk your reputation—and peace of mind—by associating with them. “If they’ve worked with other people and been combative, chances are it’s not going to be a good fit,” says Freemire.
Elaine Pofeldt is co-editor of the $200KFreelancer, a site focused on helping independent professionals make a good living.