In a money-tight economy, what do you do as the small businessperson, consultant, coach, or entrepreneur when that client, who you worked so hard to get and worked even harder to take care of, stops paying his or her bill?
Many times, as a sole practitioner, small businessman or business woman, or self-employed consultant, you are the guy or gal at the end of the line. You may well be the smallest debt a client owes, but surprisingly, sometimes the last one to get paid.
So what do you do to resolve the situation if it does happen? What do you do when a client stops paying?
First, and most importantly, stay in contact with your client. When someone owes you money, he or she will feel uncomfortable around you and will probably begin to pull away, shutting down the channels of communication. Don’t let this happen. As long as you are talking, you stand a chance of getting paid. Once the communication stops, the sense of obligation to pay you lessens. Why do you think bill collectors are so persistent?
But don’t follow the other tactics that bill collectors use. Do not harass, threaten, or nag. If this person has been a good client in the past then he or she is not failing to paying you now because he’s suddenly turned into a deadbeat; it’s because he lacks the funds. Perhaps his own business has dropped off. Maybe he is facing the same thing you are in terms of slow pay accounts or possibly his or her spouse has lost a job, reducing the family’s income.
Instead of pushing your client to pay, once you are sure that he or she clearly knows the debt is due and understands that your business is small and you really need the money, then stop talking about the debt. Instead, go back to talking about the weather, the Stanley Cup, the price of gas, or whatever you usually discussed in casual conversation. The goal to keep the lines of communication open is far more important at this moment than the goal of getting paid.
Instead of becoming the enemy your client or customer tries to dodge, show him as much grace as your own cash flow permits. Drop off tomatoes out of your garden because you know he likes them. Give him your extra tickets to a baseball game. Do any of the things you would have done, if he or she was paying you promptly. Your acts of kindness will burn in his mind. You will keep communication going, and you will go from being last on the list to pay to being first on the list because you treat him with the same respect you would show if he was paying his bills promptly.
Secondly, when an account turns into a slow pay/no-pay situation, do exactly what credit card companies do in this situation. Offer a compromise. Is there a service this customer can provide that your consulting practice or small business really needs? Of course you can’t survive by bartering, but these are unusual times. Look for workable solutions. Can you work out a payment plan? Can you take less money in order to get some money? Did you provide that client with goods that you could accept on return? Try to think of how you would like to be treated if the shoe was on the other foot; if you were the one struggling to pay your vendors, suppliers, consultants, and coaches.
In a good economy or a lousy one, clients are hard to get and even harder to keep. If your business customer or client has a history with you of paying bills on time, the factor that in, offering as much benevolence as you can afford.
Larry’s Story of the Pill that Was Nearly Too Big and Too Bitter to Swallow
A number of years ago Larry, a writer and creative director, left the ad firm where he worked and started his own adverting agency. As a one-man operation, Larry was the sales team, copywriter, graphic designer, ad buyer, and chief cook and bottle washer of his company. When he needed extra help, he outsourced projects or parts of projects to other self-employed entrepreneurs and business people.
As his business grew, Larry was able to service bigger accounts, finally landing a small car rental company that was a true bread and butter account for Larry’s tiny ad agency. After a couple of successful ad campaigns for Dave and Horace, owners of the car rental company, they were ready to go big time and with Larry’s help, planned a national advertising campaign.
Larry’s creative skills were in high gear. He added a part-time admin to handle the tasks he no longer had time to do himself. He designed the advertising campaign of a lifetime, placed ad buys in major publications, and bought airtime on radio and television.
But when the bills started to arrive, the always-prompt paying client suddenly wasn’t paying so promptly.
… fast forward 3 months …
Larry’s bread and butter client tanked, taking Larry’s business down the drain with it; after all, those big-dollar advertising expenditures were all billed to Larry’s ad agency, not to Dave and Horace’s company.
… now fast forward 3 years …
After a couple of grinding years working for his old employer, Larry pulled his personal finances back together and went back in business for himself. New company, new clients, new income stream. And then one day, Dave and Horace showed up at his office.
As it turned out, Larry wasn’t the only one who had been hard at work. The two entrepreneurs were into a new business venture and needed the help of a skilled advertising mind. They turned to Larry and Larry had the vision to look beyond what had happened in the past and take them on as a client. “It was only business,” he said. “And I thought it over and decided I wouldn’t let my personal emotions about the past prevent me from making money on these guys now.”
Over the next ten years, Larry’s agency represented David and Horace in their new business, and the second business they added, and later in the franchises in which they expanded. Larry was their go-to ad man right up until the day that he had made so much money off of their work he was able to sell his company and retire quite comfortably at the age of 42.
Today Larry works as an advertising consultant, taking projects that interest him, because as he points out: he can’t pay golf and sail around on his boat all the time.
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