One of the scariest things about being a solopreneur is wondering if you will get paid by your client. Some people can get 100% of their fee up front, but most of us don’t, so we are always taking a risk that our client will decide not to pay us once the project is done.
I was “fortunate” to have gotten two deadbeat clients within the first few years of my business, and I consider myself lucky. They were both small projects, I learned something important from each one, and — surprise! — both clients eventually paid me. First I’ll tell you a little bit about each situation, then I’ll tell you what I learned from each one and how I now avoid repeating my mistakes.
Client A was someone I had worked with in my last employee job. He was a nice guy, and he launched his business as a competitive intelligence consultant about the same time I started my research business. My policy for new clients was (and still is) that I either get a credit card number or prepayment of a certain portion of the anticipated budget, usually 25% or 30%. Client A refused to give me his credit card information and didn’t want to prepay a portion of the job. “I’m astonished that you would ask me for a deposit! How insulting!” Against my better judgement, I agreed to waive the usual prepayment — hey, I knew him from my last job, so of course he’ll pay me. Well, he didn’t; he just ignored all my invoices, phone calls, and letters. I eventually wrote off the invoice and sent him a letter saying that I didn’t want the debt staying on my books and that I forgave the debt. Twelve months later, he sent a check with full payment.
Client B was someone who found me on the web. In retrospect, he sounded like trouble… He started the conversation by asking me for a discount, he constantly criticized his clients, and he complained to me about hard it was to make a profit. While he did pay a deposit for the work, he just never get around to paying the final invoice. He kept putting me off, saying the check was in the mail, saying that he was waiting to be paid by his client, and several other excuses. Again, I sent him a letter forgiving the debt and a year later, he paid up.
But since then, I have always been promptly paid in full by my clients. I realized that it’s my responsibility to manage my client’s expectations, to listen to my gut, and to be very clear about payment terms. Here are the things I do differently now that ensure I get paid every time:
I require prepayment at the start of every project for a new client. I accept credit cards and PayPal, I handle bank wire transfers, and I have never lost a client because they couldn’t find a way to pay a deposit. I’m taking a risk by working on a job without a guarantee that I will get paid (because pursuing a deadbeat client through the court system is not worth the expense), and it is reasonable that my client share the risk.
I make sure my clients understand what the payment terms are. I spell out when payments are due and I check with the client’s Accounts Payable department to find out what information they need in order to set me up as a new vendor. If I am working as a subcontractor, I make sure the prime contractor understands that he is my client and that I will get paid within 30 days regardless of whether he has been paid by his client. personal.
I listen to my intuition more. If something just doesn’t sound right, I keep the conversation going until I am sure that the client understands and agrees to the payment terms. If a prospective client asks me “Do I still have to pay if I’m not happy with your deliverable?”, everything comes to a screeching halt. I spell out the scope (and limits) of the project, assure her that I am committed to providing the deliverable agreed upon, and make it clear that payment is not optional. And if I still feel uneasy, I gently tell her that I am not the best person for their specific needs and, if possible, refer her to a colleague who might have better rapport with her.
I never invest more in a prospect than I can walk away from. When a prospect keeps asking me for more information, an additional proposal, an interview, and maybe another modification of the proposal, I step back and reassess the likelihood of this project ever coming to fruition. I want to make sure I am never in a situation where I feel like I have spent so much time trying to land this sale that I have to take whatever terms are offered, even if that means a very low hourly rate.
And finally, I let go when it’s clear that my client does not intend to pay me. If I open my accounting software and see an invoice six months or more past due despite my best collection efforts, I could get aggravated about the client and my inability to manage the situation. Instead, letting go of the unpaid balance means that I can free up that time and energy to get better clients who value me and are happy to pay.