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.
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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