I’m not a great business person. True, I did celebrate the 10th anniversary of my business this summer, so I have found a way to stick around for a good long time. But I’m not a great business person; sometimes I’m not even sure I’m a good business person. Let me tell you why.
Two weeks ago I had to go to small claims court to get money that someone owed me for work I completed. The thing is I made one of those crucial mistakes that probably hits all business people at some point in their life. I did the work before I had the person signed the contract, and then he decided that there was something about the work he didn’t like and he didn’t pay me all he owed me. I did the work because this is someone I’d known for a while and thought I could trust; Judge Judy would have chewed me out for this mistake.
This isn’t the first time it’s happened to me since I’ve been in business. It is the first time I was owed enough money to sue for. Luckily I won; yay! Or did I? What I agreed to is half that day and half the following Friday, and to also help finish the project, which this guy hadn’t finished even though in court he tried to tell the judge that he’d gone to somebody else to help him with it. Of course I knew better because there are very few people that do this particular thing I do. I did my part, and today if he does his part I should have a check in the mail. The thing is it’s five days later than I should have had this money. That’s being a bad business person.
On another front, I’ve been waiting to be paid by a company I did work for back in April. In this case I did sign a contract which said that I would get paid when they got paid. This was with another guy I have known for some years who told me that their clients usually pay them within 30 days so that I should have my money relatively soon. This could have turned out to be a very big contract so I went with it.
Instead, new players got into the game, the contract got cut short, and I have been waiting for my payment ever since. I had actually been told that I would have this payment a month ago and I’ve been looking for it for a while. Then last Monday the same guy contacted me and tells me there had been an error in the office that was finally corrected and I should have my check this week. Of course nothing has shown up yet.
If you’ve read this blog or my business blog for a while, you know that I basically have three tenets that I base my perception of every person I meet on. Those tenets are honesty, loyalty, and trustworthiness. Sometimes in business we tend to make allowances for things that we wouldn’t make allowances for in our personal lives. This sometimes impacts us negatively when it comes to business, whether we work for ourselves or for someone else. After 10 years I’m supposed to know better; I need to start proving it.
Here are five rules I’ve got to put into effect for myself if I’m going to stay in business. These wouldn’t hurt anyone else to follow if they needed business tips, whether your business is online or off-line, and in some cases whether you work for someone else or not. So here we go:
1. I will no longer do any business with anyone without at least getting a deposit up front. The amount of the deposit will vary based on how big the contract is, but it will be anywhere from 25% to 50%. Truth be told, on the first story I told you if I hadn’t got the amount of money I got up front I wouldn’t have been able to get the entire amount in small claims court, and I would have had to make a decision whether to take him to full court or not. That would’ve been really expensive based on the amount of money he owed me, and I could’ve lost out totally. So maybe I wasn’t such a bad business person at all.
2. I will stop lowering my price for most services I provide for someone else. I mainly do this for people I know, but that turns out to be a bad thing when I’m doing something that’s very technical. One of those things you start to learn is that people don’t respect you as a professional, even if they know you, if your price is too low. I was trying to do the first guy a favor which I thought could result in a lot of business on the back end, and he used it to his advantage by delaying the payment I deserved. Sometimes we need to realize when we do specialized services that we need to stick to our guns and our price and dare people to find someone else who can do the work for them. And if they go searching and can’t find someone, if they come back to you raise the price for their wasting your time.
3. I will better define certain terms of my contract so that there is a definitive as to when a project is completed. In this case I did the work in the time I said I would do it, but I never really indicated when I expected to be paid. I did write that I expected to be paid within two weeks of the end of the project, but that left him to interpret that the project ended when he thought it was over. That left me without being paid for seven months. That’s a mistake that won’t happen again.
4. I will better define what will be delivered and what the client can expect. When it comes to SEO work, clients need to understand that the only guarantee they can really get is that their presence on search engines will improve, probably a lot if they have no ranking, but if they have a presence already results might not be as drastic.
When it comes to the specific healthcare work I do, realizing that everyone can’t do it and those other people that do this type of work, which are mainly the very large consulting companies that charge upwards of three times what I normally charge, are someone that I can beat with a better price and better customer service attention.
5. I will not only work to maintain my integrity and the standards and tenets I’ve set for myself and people in my personal life, but I will hold people in business, whether it’s their company or themselves, to the same standards if I’m the one who’s going to be working with them. This is a concept known as “finding the type of clients you want to work with”. I will not work with just anybody for the sake of getting money. I have found that to be mentally draining and not much fun. True, work isn’t always supposed to be fun, but if work is beating you down get away from it and go do something else.
And those are my five things. Is there anything you’d like to add?
Those are great rules you’ve set for yourself. Good luck.
As someone who is relatively new to building a business, these are some great tips! Thanks for sharing them!
Thanks Grady; good luck with your business.
In the last 10 years, I have been 4 times in the court. 3 times won, related to my SEO works, just customers tried to do a runner by my lawyer had prepared good docs, actually he is one of my best friends and former drummer of my black metal band. However the 4th one, it was with partner which didn’t arrange contracts properly, the financial status of customer was close to bankrupt and they won, what this company won was just not to pay to us. This is 4 from more than 400 contracts, in all cases money were absolutely nothing, probably expenses to sue them were more, I just wanted personal satisfaction for my work. Right now my SEO work is completely different than before, the whole process is monitored and visible to customer through user panel, by all I mean absolutely everything from number of links build, thought number of on-page amendments and even blog commenting. I agree with you, upfront payment is good and bad to some extends in online business, as many times, the upfront fee is the only payment. Paypal transactions can be pain sometimes if somebody open a dispute.
Carl, you’re right about that Paypal. One of my clients did that once because he didn’t recognize the name that showed up on Paypal. Eve though he immediately reversed it, took a month before Paypal got it right.
There is another thing, which probably you are not aware, but currency exchange rates are very unfair and below rates announced by national bank. For example if customer send money in GBP converting to USD or any other is killing.
Actually Carl I am aware of it because of my finance blog. The funny thing is that even with this economy I tend to come out ahead, which is strange but I’m not mad at anyone for it. lol
Mitch you ain’t never lied. Business is business, and I’ve found that anybody who balks at putting up that deposit is probably not someone you want to deal with anyway.
I got burned earlier this year. I would do these consulting calls with a guy who found me through my blog. I had no contract or anything of the sort. my fault.
Every call we’d go through his site and tweak this or that. At the end of the call we’d get the result he wanted and I got paid. It went smooth as silk this way for 3 calls.
On the 4th call, I noticed the call was a lot longer than usual, like he was trying to squeeze every last ounce of knowledge out of me. technically we went well over our allotted time but I had no plans to charge him extra. then at the end of the call he lets me know he can’t pay me right now.
Man, there was like 20 seconds of silence on the phone.
Finally I said Ok when can you get that to me?
He tells me he’s not sure, he has a vacation to Mexico coming up.
HUH?? You’re taking my money to MEXICO??
So I felt like I had to let him know that while there was really nothing I could do about it, it wasn’t ok with me.
He finally paid me like 3 months later after a few reminders. When he wanted some more work I told him we had to have a written contract and I needed to be paid up front.
Never heard back from him again. See ya.
It’s a shame you had to go to court. I hope I never have to deal with that situation.
To me your 5 rules nailed it. I hope things go smoother in the future!
Thanks John. Sometimes you just never know about people, but you need to listen to your Spidey senses. In this case they didn’t go off, knowing the guy for 25 years or so until after I’d done the work and had my first visit to his home. Tough when things go like that, but at least I got my money finally. And I did right by him as well.
Ok I have to tell you that those are some great tips. I’m also at Internet Marketing and I’m yet figure things out about this business, especially when it comes to clients and getting payed.
Cristian, all these things won’t specifically apply to internet marketing, but definitely applies to business in general. I hope they work for you.
I am a budding businessman you can say. Great tips you have here. The deposit thing makes me think really! But do you think people will agree to give a deposit? I guess trust becomes an important factor here!
Saksham, if people value the work you do, you’ll get your deposit. Almost no businesses these days go without a deposit, although the dollar amount might make you think twice here and there.
Hi Mitch,
This is a subject that is near and dear to me. (grin)
In my early days as a consultant, I trusted people to do what they said they would do. Usually they did, sometimes they didn’t. Each individual was relatively consistent.
Over the years, I learned my lessons.
Now, when (if) I take a project, I get paid up front. For relatively small projects under a couple of thousand dollars, I get 100% up front. For larger projects, I get a minimum 25% up front and then $1,000 paid into a retainer account, against which I bill. When the retainer gets under $200, it has to be refilled.
I have never had to give a refund. I finished every project I agreed to do and the client was satisfied with the results — except for one of my very first projects. If I ever have a client who is not satisfied with the result, I’ll refund all their money and eat the lost time.
I hope my memory and knowledge is accurate. I hope I didn’t disappoint anyone who hired me for a project, with that one exception.
(I still have a bad taste in my mouth when I remember that project. At one point, I realized I would not be able to complete it to either of our satisfaction, so we sat down and honestly discussed the problem. Their expectations were too high, my abilities were inadequate, and microcomputers were too limited for the task at the time — the late 1970s. I helped them find someone else who finished the project, and I worked for free during the hand-off period while we transitioned to the new guy. With the scaled back scope and a more experienced person working with them, the project was successfully completed, even though it wasn’t what we originally set out to do. None of us were happy with the outcome, but we were all satisfied that it worked out as well as it could, under the circumstances. It was a project for a group of lawyers. We could have done it on a decent minicomputer, but we were ahead of our time with micros. I offered a refund on what they paid me, but they declined the offer.)
With larger projects, we establish milestones, etc., but, still, it works best for me to work on a retainer arrangement rather than establishing pay points and billing subsequent to reaching them.
I agree with your “honesty, loyalty, and trustworthiness” criteria. For myself, I’d add respect, friendliness, and reputation. I only work with people I like. If a client starts treating me badly, I’ll fire them and never work with them, again.
I do what I agree to, and expect the same from my clients. I’m friendly, respectful, and honest, and I expect — and receive — the same in return.
I don’t work with contracts. I draw up a simple, one-page memorandum of understanding that shows the scope of the work, tasks to be completed, projected timeframe, milestones, etc. Each of us initials that and seal it with a handshake.
I never work with governments. I got caught twice (different towns) in the middle of political fights subsequent to an election, and ended up finishing a project while working with a very different group of people from the one that I started with. Never again.
In the last 30 years, I’ve taken only two large projects where I didn’t follow my own rules. In both cases, I billed for work I did and was paid promptly. In both cases, they were projects I really wanted to do and they were with people I knew, liked, respected, and trusted. They were also projects that stretched my limits and on which I learned valuable new skills. In those cases, it was more about the achievement than the money. Each of those two projects lasted over a year and required intense effort (including learning a new programming language specialized for that project). If I had charged what it was worth, they could not have afforded it and I would have missed out on a challenging experience. It worked out well for both of us, because I suspended my own rules. In this case the Spidey Sense was screaming, “Yes! Do this!”
In one of those cases, I was hired full-time to manage the results of the project after it had been implemented. I enjoyed working there for a couple more years, even if I am not a good employee. I’m a much better consultant than employee. I don’t think they ever got used to me working all hours of the day and night, as inspiration struck. I do not do 9-5, weekdays only, very well.
I’ve done a few small projects (<$500) for people I know, for which I billed later, but that was an exception based on their honesty and reputation. Also, in those cases, getting the money was not crucial for paying the bills. If I hadn't been paid, I would have moved on and forgotten about it. (They would have lost my trust and respect and I would never have worked for them in the future, but it never came to that.)
It's been over 30 years since I had a problem with being paid for work completed. If my Spidey Sense starts tingling at the first interviews, I decline the project. If there is any hesitation on the price I quote or getting the deposit, I decline and move on. I don't haggle. On multiple occasions, I have stood up, politely thanked the prospective client(s) for their time, told them I was not the right person for the job, and moved on.
(That's not strictly true for small projects. I have a couple of people I know and I want to work with them. They are in a tight spot and can't afford me right now, so I'm going to find a way to work out a trade or do the work for free. They are good people and I know I can help them. Usually, however, I market to the people who can readily afford what I offer.)
Over the years, I made a point of firing the bottom 10% of my clients every January (defined in terms of being hard to get along with or projects that I didn't enjoy). I then spent the rest of the year trying to find new clients like the top 10% — and frequently they would introduce me to people like them. Over time, my clientele improved dramatically, and so did my income.
Whenever I got to the point where I was working too much and not enjoying it as much as I previously did, I raised my fees. Sometimes, it's possible to double profits with a relatively small increase. I remember the first time I doubled my fees. The next year, I did less work, but the profit was more than 400% of the previous year.
Let's give credit to whom it is due: I will always be grateful for the grizzled old businessman who sat down with me in a restaurant and explained what I was doing wrong with my business. In a three-hour meal, for which he paid, I learned more about running my business than I had learned in the previous five years. I knew the technical side of my business, but he knew about running businesses — he owned more than a dozen at the time.
He said I was a smart and ambitious young buck and I knew computers better than he ever would, but that I didn't know squat about running a consulting business. He asked the waiter for a sheet of paper, and while he talked over the course of the meal, he scribbled out a very good business plan. I've adapted it over the years, but I still remember that conversation — and him — with great gratitude. If I still had that sheet of paper, I'd hang it on the wall.
He was also my best client and he was the one who advised me to double my fees and not to take on the small projects that weren't really profitable. He told me to work only with people I respected and to demand the same from my clients. He told me to get paid up front. He told me a lot of things that changed my approach and gave me a better career. I followed his advice and he was right. He only grinned when I told him I'd need a larger deposit for the next project. And, when the next project came around, he never flinched at the higher fees and handed me a larger check with a grin and an "Attaboy."
Every single time I've raised my prices, it has resulted in less work, more profit, and a better group of clients.
In the past, I made the mistake of discounting my rates for friends and relatives. Now, I either charge full price, or do it for free, depending upon what it is and who they are. In most cases, however, I decline.
Contrast this with affiliate marketing.
Affiliate marketing was perfect for me when I was caring for Mom and could not leave the house for over a couple of hours at a time. The upside was that I could work whenever I had some spare moments and I earned commissions with no customer support, having to find new clients, stocking and delivering products, etc. I built the sites and they provided a comfortable living. I also learned a lot in the process. It was also less pressure and less of a commitment and responsibility.
The problem is that I did a lot of affiliate marketing work and much of it never earned anything. I don't like working for free. It also meant that I never knew when and how much I would be paid. I didn't particularly like that, either, but as long as it paid the bills and I had the freedom to stay home and care for her, it was good enough.
When consulting, I could earn more by raising my rates and/or doing more projects. With affiliate marketing, I could not raise my rates, so the only recourse was to work more — and it didn't always translate into higher earnings. Sometimes yes, sometimes no.
Now, I'm doing a mixture of both. I'm doing more work in the real world, for which I'm paid in advance, and less — but more targeted — affiliate marketing, for which I may, or may not, be paid. It's a nice mixture. I love the residual income from the affiliate marketing and I love the upfront payments and working with real people in my marketing consulting.
Sorry about rambling, Mitch. It's one of those kind of days. Thanks for indulging an old geezer. (grin)
Act on your dream!
JD
John, I actually got through the whole thing; whew! lol Actually, if I had recurring clients, I would raise my rate and be done with those at the bottom. With just the few there’s no real need to do anything just yet I figure. However, the next projects I get I’m definitely making sure I price myself higher as I go for it. No more giving the kind of breaks I’ve been giving; those days are done except in special instances; always have a special interest.
Wow! Of course, I’m NOWHERE near John’s experience or experteese, but the idea about firing the lowest 10% of clients and finding the ones that are like the top 10% is just amazing. It’s so simple but I bet I wouldn’t thought about it myself. One day, I hope to be able to do that as well.
But first thing’s first – I really have to learn to get properly paid for my work. I’m the kind of person who tends to get underpaid.
Ana, it’s a recommendation many top people make, but John’s other idea, the one about raising prices so it seems those folks aren’t as irritating, it pretty smooth as well. But yes, you do have to figure out how to get paid properly for the work you do; I’m sure it won’t take you long to do that.
Yes, I need to buckle up and do so! Especially because every time I had to raise my price for my regular clients, I got positive responses. That means something.
Ah yes, it reminds me of a few deals I am waiting to be paid for. Sometimes honesty bites us in the butt, at least financially- but the benefits outweigh the cash.
Jack, I can’t overly disagree with that one. But when I had to sue for my money, I was starting to question things just a bit.
Hey Mitch, great rules… and I don’t know a single entrepreneur that hasn’t had similar problems from time-to-time… your rules will reduce that tremendously.
A
Thanks Anne. You’re right, no one ever wants to share this information with us up front, but hopefully someone else just starting out will learn from this.