Winning that new client can be an absolute buzz but occasionally it can be a nightmare scenario waiting to happen. We all look to expand our businesses with the right kind of business acquisition, one that is going to be enjoyable, profitable and ultimately provide a positive impact inline with our growth plans. However, it is very important to make sure that new piece of business is going to be a profitable one and, if it isn’t, should we ditch that client to find one that is profitable?
Most business owners, if asked the question, will be able to name the clients they wished they hadn’t won, the type of client who became a drain on resources, morale and ultimately the bank balance. They will also mention how losing that client demonstrated a positive impact on their business.
Having too many delinquent clients can be fatal, seemingly suggesting there are inefficiencies in your business and its abilities to cope and, in some circumstances, this can be the case. Our systems and processes should be able to cater for the most demanding of clients and there is nothing wrong with being demanding in relation to the agreed service and level that is being communicated. It is wrong, however, to expect more than is detailed on the Service Level Agreement. This is just one reason to assess the validity of that client in relation to the health and wellbeing of your business. Therefore, Service Level Agreements are extremely important, they set the parameters and expectations clearly for the new business relationship.
So, what are the key indicators of a delinquent client?
The Late Payers
Those who don’t pay their bills on time can be a drain on time and resources. If you are in the service industry and provide typical 30-day terms, a late payer could see you waiting more than three times longer than the terms set out. Imagine the impact that has on your business when you have already paid out costs and wages against that work. It is better to look for clients who pay you on time or within an agreed period that meets with your cash flow requirements. It is not only the time it takes to do the work for that client but also the time to chase for payment.
Many business owners have noted a period within their business careers where they are demonstrating a strong degree of business solvency but, due to a few late paying clients, cash flow certainly doesn’t represent this. Asking for payment in advance or staged payments is commonly used to manage cash-flow but also demonstrate the commitment from your client to pay for and value your hard work.
I think it is reasonable for every business owner to be treated respectfully during the process of conducting business. Yes, many of us will have certain gripes in any long-term business relationship, but shouting at the supplier’s member of staff, or indeed in one instance where I heard of an account manager who was basically bullied by the client and regularly reduced to tears, is really not on. Unfortunately, in business there are people who believe shouting will get them results when, in fact, calmly outlining their concerns and demanding those concerns to be dealt with and reversed is much more productive in getting the desired outcome. People will relate and respond accordingly and if they don’t then it is perfectly reasonable for the client to move on.
Abusers can be hugely detrimental to any business and have a negative impact on morale and the wellbeing of your people - the very people you want to lead your business and feel a strong part of the business and its future success. Maintaining a positive culture and ensuring the welfare of your team is a major contributory factor to your bottom line.
The Hogs is a rather detrimental term, but it relates to those that hog your time, they demand much more than the service level agreement allows, but it’s important, once again, to differentiate between the standard of your communications and helping the client to understand and appreciate the level of time and work you put into their account. The real hogs are the ones that fully understand but still demand more. If you are in a service based industry this can be hugely detrimental to profitability where you are over servicing a client just to keep them happy. They constantly take because you are giving and not setting the parameters or a benchmark for the service being provided. If they want to pay you more for additional time, well then, they are the perfect client.
Differentiating the value of that client is analyzing your time effectively and, if they are for good reason hogging your time, then there is no reason why your fees cannot be increased for the work you do.
How many business owners have experienced the client who has requested and ordered a piece of work and then stated they ‘don’t need it now’, so don’t want to pay for it? Service based businesses make their money by filling a capacity at a certain rate so, if their client is demanding time and not willing to pay for it, it certainly doesn’t take a genius to work out how detrimental this is on the business - it could potentially wipe out the accumulated profits of a great deal more work that is being paid for.
In my opinion, if a client shows these signs early on in a relationship, look to replace that business as soon as possible.
Making the right decisions for the health and future of your business
The most successful business relationships are quantified by respect and partnership. It is a two-way street for a common goal and, undoubtedly, there are many frustrations to overcome throughout a business relationship and absolutely no relationship is going to be 100% perfect at all times.
To recognise the key differentiator between a good and a delinquent client is to understand the traits, how each client contributes to your business and the impact they have on business health and the bottom line.
Severing ties too rashly risks damaging your reputation and your reputation is absolutely key to future success, especially in the digital world of endless reviews. Show empathy with your delinquent client but also help them, where possible, to find an alternative solution.
The welfare and future success of your business depends on how you conduct yourself in the most difficult situations and how you accumulate a client base that is going to respect what you can do for them and pay a fair rate for that work.