3 ways to smell a bad client from a mile away

3 ways to smell a bad client from a mile away

Some clients are good for your business, others aren’t. The latter may cost you more time and money than they are worth. They may stress you out and suck up so much energy that you miss other great opportunities. After taking on my fair share of bad clients over the years, I’ve learned a few things about how to identify up front whether I should work with a prospect or not. I’m still learning how to get better at that, but I can say that turning away clients I would have taken on in the past has become a key to helping my business grow significantly.

I’d like to share one of my hard lessons as well as the three principles I follow when deciding to take on a new client.

How I closed a big contract – and how I wish I hadn’t

Recently, a potential client approached me who looked like an absolute slam-dunk. At my firm (which helps people sell their profitable websites) we look for websites just like his. I was eager to land the deal – so eager that I ignored the red flags I noticed early on.

But instead of being a slam-dunk, this client turned into a headache. I eventually sold his website, but it was way more difficult and far less profitable than I originally anticipated.  Not only would he scare off potential buyers by being overly-aggressive, he would often forget small, but really important details about his business which made the deal far more complex and forced me to try to explain to buyers why key details kept changing.

After I sold his website, I reflected on whether his contract was worth it. There were certainly several things I could have done to make things better, but I couldn’t ignore the glaring reality that the deal would have been a huge headache no matter what I did.

I ignored the red flags, and I ignored the principles I normally use to help weed out problem clients. Here’s what I should have been paying attention to:

1. Never work with someone you’re not comfortable with

One of the problems with applying this principle is that in the rush of trying to sell a client on your service, it can be difficult to take the time to get a real sense for who they are. I certainly didn’t do this with Mr. Slam Dunk.

To help me get a better sense of a prospect, I encourage them to tell me their business stories and their past deals. If I see something that isn’t in line with integrity and honesty, my guard goes up.

As an example, I received a call from a client I worked with in the past. He was interested in having me help him sell a new business he started. It represented another good opportunity for me, but when I dug into things a little deeper I discovered that the business was being run through his girlfriend’s name. He explained that this was necessary in order to avoid a non-compete agreement he had signed earlier. When I pressed him on this point, he had trouble seeing why this would be wrong since ‘technically’ he wasn’t doing anything wrong.

But I saw things differently. I worried that if he wasn’t being straight with the party he signed a non-compete with, he might not be straight with me throughout our relationship. I also had the legitimate concern that his attempt to protect his venture through a technicality might not hold, which could hurt my reputation if I got involved. While I might have stood a good chance of making money on the deal, I didn’t feel comfortable with him. So, sticking to my principles, I politely told him that I couldn’t help him.

2. Have your terms, and don’t be shy about them

The second principle I follow concerns my terms. I’ve learned that if you are willing to be extremely flexible, accommodating, and if you make everything negotiable, you will probably win a few more clients, but you’ll also find that your client base isn’t happy or profitable. Moreover, you won’t be happy and your profitability will suffer.

When I take on a new client these days, I clearly identify my working rate and the length of commitment a client has to agree to. I also identify what sort of information a client must hand over to me before I can work on their contract. These terms are now non-negotiable.

When I stick to my terms, I do lose some business, but the business I gain is positive and the work I am able to perform is solid. It is when I bend on my non-negotiable terms that my work suffers and the business I gain becomes less profitable.

Clients appreciate honesty, and they understand that you are in business to make money. Don’t be afraid to be honest with a potential client and tell them exactly what you need in order to be successful for them. I’ve found that when I approach potential clients in this manner they are appreciative, and I win more business than I lose.

3. Don’t act desperate

When I first talked to Mr. Slam-dunk, there were little red flags that told me he might be a problem client. For example, he wouldn’t show up for scheduled meetings, or when I requested information, he would send me something other than what I asked for. He showed from the beginning that he didn’t trust my professional opinion or experience.

But I really wanted his business. I wanted it so much that I ignored those red flags and I ignored my three principles. I acted desperate.

The truth is, there’s a fine line between being accommodating and acting desperate. And the problem with desperation is that a client can smell it on you. When they do, there are two possible outcomes: desirable clients end up being repulsed by your desperation while headache clients, like Mr. Slam-dunk, may sense an opportunity or may never learn to trust you and your professional opinion. Once a headache client senses an opportunity, that’s when they start asking for concessions and changes to key terms.

There is no remedy for that sense of really wanting someone’s business, but just because you may actually be desperate for their business doesn’t mean you need to act in that way. If you properly define your terms and conditions (principle #2), the results will be better for both you and your clients. Compromising on that rule can quickly turn a highly desirable client into a headache that is difficult to separate from.

Last word

When I follow these three principles, my business thrives and I enjoy my work more. When I fail to follow these principles, my business stagnates, I become stressed, and profitability suffers.

I’ve also found that following these principles makes my business more appealing to potential clients. They appreciate that I take the time to get to know them so we become mutually comfortable with each other. They appreciate that I value honesty. They appreciate that I tell them upfront what my terms are. And they appreciate that I am established enough to not have to beg for business.

How about you? Have you ever taken on a bad client? What impact did it make on your business? How can you tell in advance if a client is going to be a headache?

About the author: Mark Daoust is the founder of Quiet Light Brokerage, Inc., one of the first brokerage firms to help Internet business owners sell their websites. Since its founding in 2007, the company has facilitated the sale of hundreds and hundreds of web based businesses, with 80% of listings sold within 90 days.

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  • diane

    I wish I had this very valuable information a few months ago when I had the worst of all clients…the ones that take your work and disappear without paying. And I ignored those red flags and did the work anyway….on a rush basis to boot! I hope your information saves others from this as I know it will help me in the future.

    • Mark Daoust

      Ugh…so sorry to hear that! Fortunately we haven’t had issues with non-payment, but the nature of our business is that we don’t get paid unless we are successful. There is nothing worse than pouring countless hours into a client only to not get paid!

  • Barbara van Rijsewijk

    Aye! Those red flags, why do we blatantly ignore them sometimes :( Thanks, an excellent article.

    • Mark Daoust

      Thanks Barbara – writing it served as a great reminder to stick to my guns as well!

  • http://www.junesjournal.com/ June Wilson

    Great article! Thanks for sharing. It is a great reminder. I think all of us in business have done it one too many times. We talk ourself into an exception and then hades breaks loose and we’re left with deep regret until we terminate the contract or that client’s project is done!

    • Mark Daoust

      It seems to be a yearly reminder for me. :) Most of us are in business to help people or provide some good or service – it is anti-intuitive to turn people away!

  • Andres

    I would recommend to have a look at the”target Account Sales” (TAS) business development method, this technique allows you to evaluate cultural and financial angles that can profile a bad client quite clearly and fast.

    • Mark Daoust

      Great tip – I’ll be sure to look into this!

  • Idayan

    Great advise. Should thank google for showing me thsi when I searched on payment system for our new business

  • Jason

    I stumbled on this article through LinkedIn. Some good basics are discussed above. Thanks to the author for bringing them up. For freelancers and small businesses we perform a no recovery=no fee collection process. We are professional and diplomatic, yet resourceful and persistent.
    I’ve seen (as a middle man) every possible scenario thousands of times, and have a much higher than average recovery rate. If I can’t help you I can share some of my experience with you and point you in the right direction.
    When the non payers pop up, don’t waste time and headache. If they haven’t paid you in 90 +/- days, call us. We specialize in getting you paid anywhere it’s humanly possible. We’re Cambridge Receivable Solutions by the way. You can click my name for the website.

  • http://growthforce.com/ GrowthForce

    Job costing is one way to see if a client is really worth your time. If say “Client A” takes up twice the man-hours and is constantly causing issues for your company compared to “Client B” and they both are paying the same rate for the same service, then it may be time to give Client A the boot. Yes, it can be hard to let go of business, but sometimes a bad client will end up costing your more in the long run.

  • http://torontocomputerhelp.com TorontoComputerHelp

    In my experience a huge red flash is when a client acts aloof and keeps changing the expected deliverables. Also when they request a quote for a huge project that’s unlikely to materialize.