I started this post in 2016 but decided to finish it now. In 2016, I was flabbergasted and embarrassed that a client would actually decide that it was OK not to pay me for work I delivered. This was despite the agreement we had in place. It was the first time it happened and I had no recourse to fix the problem other than to beg for my money. Now in 2019, I do. But that was a learning curve that I wish I hadn’t taken but should have anticipated.
Another reason it took me so long to finish this post is because when customers don’t pay it becomes personal. It’s personal because it sets a trickle down effect that not only effects me, but my family. It is hard to make plans and more importantly, I can’t pay my debts.
The truth is I felt powerless to recoup the debt and feeling powerless is not a great feeling for anyone, but especially a startup or small biz entrepreneur. We move with enthusiasm and idealism so a customer who doesn’t pay really lets us down. Especially if it’s not our fault.
Let The Lessons Begin
The number one reason customers didn’t pay was because they ran out of money before the results, translation money, came in. I would love to work on marketing projects with a product that everyone needs but most times I have to research and build an audience that wants the product or service and that takes time, creativity, and money.
So now I ask if they have a budget? That question alone let’s me know if the business has a plan and how much heavy lifting I will have to do at the beginning of the project. So as I build the marketing plan, I ask clients to build their company’s business plan. Or I will take care of that as part of the contract.
Now, I add a marketing plan to every proposal. One of the most important marketing tactics, when starting your company, you can do is identify your target market. This helps you identify who can afford to pay for your services. You also look at the market around you and how your competition is pricing their services or products.
Create a Pricing Strategy
The marketing plan also covers your pricing strategy. Me? I had an ad hoc pricing strategy or I’ll call it what it was. “The FRIEND Discount”. I was so happy to get the gig that I just didn’t think about my costs (experience x the hours worked to deliver) and whatever they could afford was how I charged. I also had hubris and thought I could work marketing magic as long as the client had a list.
One of the best meetings I ever had was with a SCORE mentor who told me to package my offerings. This made me take the time to understand the effort, vendors and subcontractors costs needed to deliver my services. This exercise also helped me understand and communicate my value to potential clients.
Communicate Not Assume
Talk money. This was extremely hard for me. I put my terms in writing. The client signed it. I sent the invoice. Sometimes, I sent a reminder. That isn’t enough. Today, during my weekly meetings when I cover the results of the marketing campaigns, I started mentioning that the next invoice was due. This is still a hard conversation for me but at least it opened up discussions about how my team was doing and if the client was happy.
I send monthly updates with any risks and issues that we, the client and I, have identified as a hindrance to success. I also send these findings immediately after a weekly meeting so we, the client and my team, are on the same page. This has helped me when one client tried to say that I didn’t deliver. I showed the proof and his sign off and got the check.
I Am Not My Client’s Banker, Parent or Financial Advisor
This means that their financial problems are not my responsibility except I need to collect the debt. Yes, I believe clients can be friends. Yes, I used to listen with sympathy about their issues. Yes, I made deals on payments. But now I remember, I Am Not My Client’s Banker, Parent or Financial Advisor. They have an obligation to pay me and at the very least they should figure out a way to make this happen. The burden should not be on me.
The End of Non-Paying Customers
I don’t think there is an end to this. As long as you’re in business you have to prepare or this as eventuality. But picking a customer is like getting a new friend. You want to make sure he’s there for you but doesn’t take advantage of you. You do this by building trust. Here are my steps to protect yourself and create a beneficial relationship between your company and customers:
- Get a signed agreement.
- If it’s an ecommerce sales, list and make sure your customers accept the agreement.
- Add a late fee and make sure you communicate this at the beginning of the agreement.
- Reminders in writing and verbal.
- Find a collection agency.
- This is where your lawyer comes in handy.
Here are other resources for you to read if this is happening to to you: