1). Work with better clients. You can have invoice collection problems at $50k, too, but they're much less likely than at $500 and you have much better options for... escalation methods at that point.
2). If you're not a bank, stop taking on so much credit risk. Businesses can deal with substantially sterner payment terms than you'd think to offer. If your clients balk, see #1. (Thomas has some suggestions here, too, many of which reduce to "Work for Thomas' clients and charge enough that dealing with their purchasing processes is worth your headaches rather than chasing deadbeats for Snickers money.")
3). Showing up on iamachumpconsultant.com will not enhance your professional reputation, bill rate, or client pool.
Patrick, I completely agree with you, which is why I have never publicized my difficulties with problem customers.
But something in my reptilian brain really still likes this. Let me tell you why...
You say "Work with better clients." Working with better clients means avoiding the bad ones. Avoiding the bad ones means being able to identify them. Being able to identify them means being warned.
It's almost like seeing an obstacle in the highway and wanting to warn others going in the opposite direction. But how do you do that? I once had the idea of putting a giant tattoo "Avoid me." on my bad clients' foreheads.
The biggest problem with bad clients isn't that they took you, it's that they never go away; they just keep popping up over and over, only to take advantage of others.
One former client of mine is the perfect example. He never paid his bills, he was extremely abusive, he was often very unethical, and would do anything to make an extra buck. He would pop up all over the country with a different name, starting the cycle all over again. I recently noticed he just got out of jail with a brand new name and web site. If only I could find a righteous way to warn others, "Run the other way!"
If you want to perform (for lack of a better word) a mitzvah for the community, rather than picking out a single abusive customer, use your experience and teach people how to pattern match.
Memo to young Rails developers: "I have an idea for a website. If you build v1.0 I'll pay you a whole thousand dollars and you might get equity if it works very well." has never had a happy ending. (Slight overstatement there, but it won't weigh on my conscience.)
"I have an idea for a website. If you build v1.0 I'll pay you a whole thousand dollars and you might get equity if it works very well."
If only all the assholes were so easily self-identifying.
The real problems are the charming, smooth talking, dream clients offering cool projects, top dollar, and paying on time...until they don't and decide to start making your life hell because you're in so deep already. They're no dummies.
Agreed. I had a project a couple years ago, just like this. Everything started off fine -- solid contract, good communication, etc. Payment was solid for the first few months, then it stopped. I was accused of putting together templates with no functionality behind them, and they demanded their money back. When I informed them where they could put their demands, so to speak, they threatened litigation. I had done the work and knew the contract was solid, but I couldn't have afforded a lawyer. Thankfully, they soon disappeared... But not before stealing their customers' funds. Ugh.
In retrospect, there were a few warning signs fairly early on, but it's hard to see that when you need the money to eat.
How much are we talking here? Many states have to be above $5 to 7.5 thousand to get lawyers involved out of small claims court. Also, many lawyers will do brief consultations on your case without charging you.
For future reference, don't back down when threatened with litigation. If it's actually a bullshit claim, they'll either settle out of court (on their own lawyer's recommendation) or they'll end up paying your lawyer for you when you win your case.
Hindsight is 20/20, but typically any sign that they're weird and irrational (trail of angry developers/no business model), or that they'll try and screw you out of a fair payment (won't do commencement payments) are a red flag.
Even if you can't afford a lawyer, I would have something along the lines of terms and conditions, what happens on non-payment (usually work stops), etc. The "Fuck you, pay me" is a pretty good introduction to the field.
For web design you'll have milestone payments on commencement, initial design (with a couple of rounds of changes), conversion to HTML (with no changes) and installation on the site. Payment terms are 7 days, or as short as you can get away with. If they need more changes than agreed, or they change their mind, then they pay the balance and you requote for the new work. If they decide not to use your work, then they pay the balance. If they delay on any part of the work (eg. won't provide content for six months) then they pay the balance and you do the work later on. You get the idea, I'm sure.
If they balk at any of your conditions without a good reason, that's usually a sign that they'll be trouble and that you'll need to keep them on a tight leash and/or handle them with kid gloves.
On the flip side, if they're a good client, good payer and you're happy to work for them, then give them a lot of leeway. But the deadbeats get held to the letter of the agreement.
Hehe. Reminds me of a former client (sorta) who would always wind up working for assholes. Everyone he had worked with turned out to be an asshole would couldn't do what he wanted. Turns out he was the asshole.
It's almost impossible for everyone else to be an asshole. It's like the old poker tip. If you look around the table and can't find the sucker, it's you. If you think everyone is an asshole, you're probably an asshole.
We invoice weekly. Depending on our terms with the client, if they aren't paying on time we stop work. This results in at-most 2 weeks of unpaid work, and typically they have a lot invested in seeing it through to completion because already have (largeish-n)% of their money. We also send emails EVERY TIME a work unit is created in xrono (our open source app-to-run-a-software-consultancy) showing both the current work and their current uninvoiced total.
Our clients never, ever, ever tell us that they were unaware of how much money they'd agreed for us to spend without us laughing a lot. It typically ends well.
I refer to this as a "cash leash", and it's a very good idea, particularly in the early days before you can hire lawyers to create contracts and write letters to non-payers.
"The real problems are the charming, smooth talking, dream clients offering cool projects, top dollar, and paying on time...until they don't and decide to start making your life hell because you're in so deep already. They're no dummies."
I can completely relate. If only there were a place to keep track of clients and their payment history. Glassdoor meets credit reporting. Clients with no history get charged more and require a higher deposit.
Agree 100%. The follow-on problem is that once you are owed a not-insignificant amount of money by one of these clowns, the temptation is to keep them happy and avoid conflict in the hopes you'll get paid out without having to resort to litigation.
I once worked for a few months with someone before I watched him not pay one of our contractors for no reason. When I raised the issue, he asked me if I'd be willing to take a 50% pay cut - on the work I'd already done for him.
Yes, I've seen this happen at a couple of small businesses that I've been involved with. The trick is to have regular milestone payments, and if they miss them, work stops. (It'll annoy idiots like this to the point where they won't hire you, but that's kind of the point...)
Doesn't match my experience: I have several small clients who pay within a couple of hours of receiving a bill. However they are profitable small clients (and very nice people).
I stopped making websites for friends or 2-person companies for this reason. Besides the pain on their faces when I estimate them how much its going to cost, these are the same people who get an idea in the middle of the project and want to add a dancing and singing cat to the home page.
- I agree, I've had bad experience with both. Be wary of individual/companies who work for clients and outsource their technology to you. Often the specifications will be very vague, and even if you manage to communicate a better level of understanding what THEIR CLIENT actually wants (which takes time and effort..) - you might end up not getting paid, because their client doesn't accept the solution, and doesn't want to pay the guy who hired you.
- Always have signed agreements, ALWAYS, can't stress that enough. Unless you have very good reasons of trust. Chat logs, e-mail conversations, all cool, all legal, but you will always get a yes-no story. Signed agreements are often very clear cut.
= Never agree on doing a revenue share with individuals or smaller companies. They probably won't have a clue what they're doing.
- If you don't believe in the product when you get your first impression on it, you never will. Don't let 'em fool you and convince you otherwise.
This is a good rule of thumb, but the best client I ever had was in the general area of legal services. No more than 6 employees, or at least that's how many email accounts I set up, but paid well, without complaint, and always immediately.
I think it comes down to, looking out for clients that focus on cost instead of value.
It took me a while to make the jump. I started by earning my dues working too hard for two little pay with some small-time clients early on. I built up a decent portfolio that I could show off and started using that to market myself. I sent it as a link to adds I saw on craigslist. I did a couple projects on spec that I worked really really hard on and sent links to the company offering it for free. You'd think that would be a huge risk, and frankly, it is. But in fact, both of the times I did it, I got major clients. Kept building myself from there.
Yes I did. It was very hard work. I combed through hundreds of adds, sent custom replies to several dozen of the most promising and made it clear that I was offering high quality, with the unstated caveat that I was not offering the lowest price. I replied only to adds local to Boston (where I live) and said that I would be happy to come to their location at their convenience. When I did in person interview I dressed very well, and read up extensively on their companies beforehand. I did not even entertain anyone that seemed like a cheapskate or wanted to offer equity.
Advice sometimes isn't worth the (web) paper it's printed on.
But take a long, hard look at the clients you are most successful with. Identify the larger market that fits that criteria. Then, how are you going to compete with the people already in that space?
I think of it the same whether doing a startup, consulting, or pivoting a business.
Heh, I'm sure it depends on your market. Here I'd say it's 50% obvious jokers, 49.5% who could be all right (but could just be less obvious jokers) and 0.5% who really sound like good clients.
Pattern matching is a general term for what you do every time you see a letter and recognize the pattern of light, or hear a word and match it to a concept. Don't give it a bad name just because human pattern-matching is flawed and unreliable in the (relatively rare) edge cases.
Maybe you can drop the "for smart people" -- the same kind of magazines that blather about horoscopes tend to run lots of stories along the lines of "How to recognize a narcissist".
I think you're dancing around the word "discrimination" which is actually a fundamental aspect of thought and language, and is how humans can tell, for instance, the difference between good and bad. Are you saying that people shouldn't have standards?
poTAYto, poTAHto. The fundamental engine of consciousness is fuzzy pattern matching; when done poorly, it's called "guessing", and when done well, it's called "intuition".
I think by, "Work with better clients", Patrick really means, "Stop doing work for cheap clients". I agree with him that payment from clients in the 5-digit range tends to go much smoother than from those at the bottom of the barrel.
I would also add that, when you charge a higher rate, you also can justify higher initial deposits and milestone payments along the way. This gives your client more "Skin in the game" which makes them more likely to honor the contract terms so that they can receive the final deliverable.
When I first started doing freelance development I made a practice of undercutting everyone else to get the gigs. This did earn me a fair supplemental income, but it was not a business model as clients at this level (<$1k) tend to have very little vendor loyalty and will just move on to the next cheap provider when you eventually try to raise your rates. Since restricting myself to projects of $5k or above things have gone much smoother and I'm alot happier.
Asking for something like 30% up front is a very good way to filter out problematic clients. I regularly don't even bother to collect the up front payment once they've accepted it, but if the client refuses then it's a red flag.
Often it's the client himself who chases me up to make the payment. That's a very good sign.
I recently noticed he just got out of jail with a brand new name and web site.
This is an amusing and dramatic example of why, while it's all good fun for one's reptilian brain, the tactic of trying to call out problem customers by name isn't going to help very much: People with negative reputations have nothing much to lose by starting over.
Whereas those with positive reputations do have something to lose. And the problem with throwing mud is that some of the mud inevitably gets on the thrower.
This is why the effective way to warn people about problem customers is in secret, generally over drinks.
while I agree that calling out unethical behaviour might be best for the industry as a whole, for an individual? calling out someone else is almost always self-destructive. There are two sides to any story, and just like how an insurance company will avoid a customer that gets in accidents even if it wasn't their fault, in business, people often avoid people that get in a lot of disputes, even if they were the wronged party.
Most of the customers that will pay you 20-40k for web work would never bother trying to stiff you; it would cost them more in process exceptions and legal review (which happens the first time the word "lawyer" occurs in an email message) than it does to simply pay you. But most of all, it's not their f'ing money. The company pays, not them.
So I might be substantially more wary about working for someone who's paying out-of-pocket than I would for a real customer.
I'm not sure how useful public shaming and griping are, but I do think it works on the iamayoungconsultantandnoonetalksaboutthis.com level. I'd have found the stories super useful as an insecure 25 year old "forced" into the freelance market.
"You can have invoice collection problems at $50k, too, but they're much less likely than at $500"
Where are you getting that from? From my extensive experience with both large and small transactions I don't find that to be the case. Assuming the profit potential is the same would you rather have the risk of 1 50,000 customer or 100 $500 customers? (Let's assume the $50,000 customer is reselling your product at the same margins).
"If you're not a bank, stop taking on so much credit risk. Businesses can deal with substantially sterner payment terms than you'd think to offer"
It's a risk that needs to be evaluated. Be to easy on credit you loose money. To strict you will loose business. Really no different than security policies or spam filters.
It also depends on your margin. If you have a large margin on your product you can afford to take a loss much easier then if you are selling Plasma TV's with very small markup.
Currently one of the products we sell is less than $50 and our cost is less than $10. If someone wants to mail a check, no problem. (Although of course we try and get payment by credit card.) We are making (say) $40 so if we don't get the payment no big deal. Not sure I would say the same if the numbers were 100 times larger though.
Fully agree with you Patrick, I've had some bad experiences with payments that turned out to be blessings in disguise.
As one of my mentors said about taking people to court "How much of your time / resources would it take to sue them? How much would you gain? How long would it take you to generate that much rev?" When I realized that it took less time to generate the rev than to sue I decided to drop the matter and focus on finding better clients.
Sounds like you're threatening to put me on iamachumpconsultant.com while discouraging me from putting you on iwasntpaid.com.
Just like corporations can ruin consumers' credit ratings almost without recourse, the concept here is to ruin these delinquent payer's reputation via a registry everyone can check.
This is one of the reasons I always ask for a percentage up-front (usually along the lines of 30-50%). A client that is willing to do this will more than likely pay you when the project is finished.
Before I did this, I had tons of clients that just wouldn't pay me or lie and tell me the "check is in the mail"..when it really wasn't.
When I was young and naive 6+ years ago, it put me out of business and I had to get a job.
1). Work with better clients. You can have invoice collection problems at $50k, too, but they're much less likely than at $500 and you have much better options for... escalation methods at that point.
2). If you're not a bank, stop taking on so much credit risk. Businesses can deal with substantially sterner payment terms than you'd think to offer. If your clients balk, see #1. (Thomas has some suggestions here, too, many of which reduce to "Work for Thomas' clients and charge enough that dealing with their purchasing processes is worth your headaches rather than chasing deadbeats for Snickers money.")
3). Showing up on iamachumpconsultant.com will not enhance your professional reputation, bill rate, or client pool.