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Don’t Ignore Red Flags

By Sherry Holub

Dont Ignore Red Flags image 5727507

It’s not often that a successful company will pen a blog such as this explaining this type of scenario, but if it will benefit another small design firm and help them avoid situations like this, I’m all in. I also like transparency and honesty in business, and I’m proud to say that in the 17 years I’ve been running my design company, I’ve only had to deal with two “problem clients”. Not a bad track record if I do say so myself. But I have to admit, this last one is purely my fault and I’m going to explain why.

The first error …
Turn back the clock about 12 years. Our company was small (in other words, it was just me and one other person) and doing a lot of business with other small companies. We first took on this client way back then. As a fellow small business owner I gave her the best rate possible and we did a number of small jobs together. Some time passed and we didn’t hear from her for a number of years, then one day she contacted us and told us she was starting a new business and that she pretty much needed everything. We thought, great, more work! Since she was just a start up, I gave her the same budget rates she’d previously enjoyed. This was my first error. Even though some years had passed since we had done any work with this client, I still offered her the same low rate as when we first met.

My advice now would be that no matter whether you had worked with a client previously, your rates must go up over time. You must value your services, expertise and experience properly. You must sell on value and not price.

Being a push over …
I then completely ignored what would become my most fatal error in this scenario, and it was something that started happening almost right away on projects with this client. I became a push over. If the client asked for, “just a couple other things”, I blindly did them, without charging for them (“Five more rounds of revisions? Sure, no problem! We want you to be happy!”). When I wised up and started to try to put a stop to it, the wheels had already been set in motion. The client expected to get more than what she was paying for because that’s the foot we started out on. When I first started to challenge it, naturally this was met with resistance from the client. I learned that if I mentioned something would cost extra, a confrontation would follow. So more often than not, I let it go. I also made the error of thinking that because this was a long-term client, I could still benefit in the long run.

My advice now would be to handle the very first occurrence of scope creep properly. Alert the client to it, discuss the additional costs, and only move forward if the client approves. If it really is something small, you must still alert the client to it, making sure they understand this is a single exception you are making and tell them what the normal cost would be.

It’s okay to fire a client.
My third transgression was allowing this client to pay late for pretty much every project. I would notice 45 or more days would often lapse on even the smallest of invoices. Of course when I mentioned that we would not do any more work until balances due were paid, there was often another confrontation or a complaint about our work. Honestly, it kind of confused me. I hadn’t really dealt with anything like that up until that point. I guess I just wasn’t used to doing business with someone, who, when confronted with the facts, would spin them in such a way to make herself “right” each time.

On two occasions I attempted to part ways with this client, but in hindsight not only did I not approach that correctly, I didn’t stick to my guns and allowed her to keep coming back with more work. Since 99.999% of our clients are pretty awesome, I think for a long time I felt like I wasn’t going to let this one bad apple spoil the whole bunch and just ignored every red flag that had been happening for years.

My advice now would be that if you have a client that routinely pays late, makes excuses why they paid late, or tries to turn the blame on to you even when you know you’ve acted in a professional manner and delivered what they paid for, it’s time to let that client go. Fire them in the most professional and stern way you can and never look back. And by all means, do not feel guilty about it. You should also check out this video program on increasing your cash flow.

What happens when you ignore the red flags…
So this summer, we built a new website for this client. Originally, it was just supposed to be a simple redesign as they were already using our preferred CMS on the site we previously built. What it turned into was a nightmare. I’ll spare everyone the details, but because of not charging for every instance of scope creep, we probably lost about $5k on the job. To top it off, in the end we were accused of delivering a website with “errors”. Even after our error checking determined there were no errors in the code we delivered, this client badgered me via phone and email to “fix” the site – for free. This was where I drew my line in the sand, even though it was far too late because of my earlier transgressions of not sticking to my guns, it needed to happen. But this was it, the final straw. I explained how the glitch would need to be troubleshot at our hourly rate. I reiterated multiple times that this was not an error in our code (and showed the code working glitch-free on our test server). The client refused to acknowledge that, resorting to her tried and true tactics of, “the customer is always right”, that she wasn’t getting what she paid for, and generally slandering our work.

In what I call a “deal breaker” email, she resorted to calling me a nice colorful metaphor. It was the perfect opportunity to fire her. I calmly and politely responded that I wouldn’t tolerate that type of thing and informed her that her company was no longer a client of ours and that they would need to find someone else to do business with. End of story, right? Wrong. That was a month ago and recently I found out the client has attempted a charge back on their credit card from the bill 3 months ago claiming that we never delivered a working website. You know, that fully operational website that’s been live on the internet, that they’ve been promoting, using, and updating on their own for three months. Yeah, that one. I also continue to receive harassing emails informing me of additional “errors” and of course how unprofessional and shoddy our whole operation is. This is what ignoring the red flags gets you.

In closing …
This is not typical scenario for my business. We have a stellar track record and routinely receive kudos and glowing reviews from clients. Our very first client is still a client of ours. We’ve survived over the years because we do excellent work and offer excellent customer support. But in the scenario I’ve detailed above I failed big time by ignoring the red flags and failing to take appropriate action. What I did do brilliantly (beyond delivering all the work that was done, of course) was set up the perfect storm for a “client from hell” scenario. I undersold our services from the start. I did extra work for free. I allowed invoices to be paid late. And I continued to take work from a client that I knew was not a good fit for our business and that I knew I had trouble dealing with and standing up to.

Many clients may ask for work not realizing that it is out of scope of what you agreed to and that it would be an extra cost, but it is your job to educate and to explain things to them. Many of those clients will perfectly understand your explanation and have no problem at all with it. Then, you’ll come across those one or two that refuse to acknowledge that and it’s at that point where you must draw your line and not budge. When it’s clear that you cannot have a prosperous working relationship with someone, or if a client really does turn abusive on you, it is your job to fire that client. At the end of the day, you’re running a business, and you cannot ignore red flags and make exception after exception and profit from it.

Thanks again to Sherry for sharing this great advice. If you have a story that could benefit other agencies, let me know and I would be happy to publish on my site. Interested to Guest Blog