Small business owners, especially those of us who are starting out, frequently live in fear that every client is going to be our last. Invariably, we are prone to hit the panic button and gladly accept any client that comes along in order to maintain a healthy cash flow.
However, as hard as it might seem, this habit has to stop. Not all clients are good clients and the wrong ones can often leave you frustrated, neglectful of high-value clients, and chasing unpaid invoices. But when should you turn away a new opportunity? Here are seven tips for identifying clients who aren’t the right fit for your business.
1. Clients Who Ask You to Work for Free
All of us do free work every now and again, but it’s usually in support of business development or relationship building with existing clients and it may only amount to sharing ideas over lunch or writing guest blogs to help gain exposure for what you do. These types of costs are typically recouped over time. But what about the client who actually wants you to work for free? Most of us have come across this particular species. They love your work, have a great business plan, and want to form a long-term relationship with you. But, they can’t afford your rates and propose a pro bono relationship where your reward is not in dollars but in the prestige and exposure you’ll get from taking on the work.
Another spin on this type of client is the one who connects with your social networks, views you as an expert or thought leader and reaches out seeking free advice.
At the end of the day, if a client is in business for profit, then they should have a concrete business plan and a budget to support their goals and labor costs. Would they get away with asking their employees to work for free?
2. Clients Who Complain About Your Fee
While you’ll often find that a client’s budget may not stretch to your rates, (the art of negotiation should get you through this one), you might want to avoid the client who questions whether the service is worth what you propose to charge. If they don’t see the value in what you do or perceive you as a rip off, what basis is there for a future relationship?
3. Clients Who Use Pressure Tactics
Dealing with tight deadlines is one thing, but the client who demands that you put all other work aside to handle their matter has “red flag” written all over them. These clients usually stand out by the fact that they have unjustified demands, are constantly on your case, and demand frequent updates. If work is light then taking on these clients might not be such a big deal, but if it means compromising other client relationships then consider turning them down. Remember, if they behave like this on your first project there’s a good chance they’ll expect quick turnarounds in the future (unless you can dig a little deeper and get to the reason behind the rush).
4. The Promise of Future Work
This is the business owners’ Achilles Heel, and the client knows it. These types of clients will often try to solicit services at a lower rate with the promise of more work to come. Each situation is different, but this is one instance where you’ll need to assess the client and the risk involved carefully, especially if you are being asked to agree to discount your services.
5. The Nature of the Project Itself
Let’s be honest you can’t be all things to all people. For example, if a project is too big you risk getting in over your head. On the flip side, the monetary benefit of a job that is too small may be outweighed by the effort involved. Or perhaps the project involves stepping outside your comfort zone and working on it would get in the way of any steps you are taking to establish your reputation or referral base in a particular niche.
6. Personal Conflicts
This is something your gut will inform. If you can’t see yourself getting along with a client or anticipate time-consuming hassles down the line, then it might be worth walking away.
7. Unresponsive Clients and the Project that Goes On and On
Ever worked on a project that you anticipated would take five weeks but ended up taking five months, thanks to an unresponsive client? While it’s hard to spot these projects before you agree to them, the warning signs soon creep in. The client might take forever to respond to email and phone calls or they take forever to review your work, delaying your ability to invoice them. Once you’re involved it’s hard to keep momentum going, but you can learn from the experience. The next time you find you are running around and chasing a client before you enter into a signed agreement, consider putting a project schedule in your statement of work or contract, with a cancellation clause should deadlines slip unrealistically.
The Art of Saying No! How to Let a Client Down
Turning down a client is a delicate affair. Getting it wrong could result in some nasty word-of-mouth negative marketing that your business can’t afford. Here are a few ways to turn down a client without risking your reputation or future projects:
- Saying No to New Clients – There’s more latitude to tell a little white lie about why you can’t take on a particular project from a new client. Lack of bandwidth, prior commitments, or statements such as “I/We are not the best fit for this project”, etc. are tried and tested ways to soften the blow of rejection. Delivered professionally and courteously such excuses leave the door open for future work (if you want it).
- Saying No to Existing Clients – Being honest with an existing client is your best strategy. If you have a good relationship and your work is valued, the rejection is something you’ll both get over. Reassure them that you’ll be there for them in the future, and put it down to bad timing or circumstances.
- Saying No During the Mid–Project Stage – If a client asks you to deviate from your scope of work in the middle of a project, and, whether for bandwidth or personal reasons, you don’t feel confident taking it on, try to be up-front about your reasons.
- Never Abandon a Client – When saying no, always recommend an alternate course of action or solution to the client’s needs. Perhaps you could point them towards someone else you know who would have less scruples about taking on the work.
- Don’t Rely on Email – Turning someone down over email is never a good idea. A tone might be inferred that wasn’t there or your use of words might offend. Always try and handle “no” over the phone or in person, this will ensure you can immediately correct any negative perceptions. It’s also the polite thing to do!
Building a stable of great clients isn’t easy. It requires a clear understanding of what you want and don’t want for your business – the type of people you want to deal with, the company size (smaller companies are often more flexible and collaborative than larger corporations), and the type of work you find rewarding. Knowing how to avoid unwelcome clients is a learning curve, but it’s one worth taking and perfecting.
About the Author:
Fundbox is a technology company disrupting the small business payments market. Fundbox is helping SMBs, freelancers and home offices grow by managing their cash flow better and by overcoming short term cash flow gaps.
This article was originally published on Funding Gates. Funding Gates is the world’s first CRM platform for receivables management. Serving as an online credit department for small businesses, Funding Gates is set on making managing receivables the easiest part of running a business.