Several small tech companies just like us (teams of less than 15, service-based, and working hard to build their businesses) have shared some of their problems with me recently. One company is trying to collect $15k that a client owes them. Another firm’s client keeps moving scope on them and delaying the project, which prevents the startup from getting project sign-off and final payment. These are serious problems for companies whose founders and employees depend on this cashflow to keep the lights on and put food on the table.
We have learned some lessons here at Elias by reading prolifically about project management and unfortunately by dealing with a couple of difficult client situations. While we are by no means experts, I think there are a few basic principles that could save service-based firms a lot of pain:
1. Be picky about who you do business with.
I read somewhere that “people, when given the option, do business with people they like” (paraphrased). Early on, we took clients out of desperation because we needed to generate cashflow. This led to unhealthy business relationships that we later regretted. Now we only work with clients that we like. If a member of our team gets a bad feeling after speaking with a prospective client then we turn down the deal. Period. We may miss out on some cash in the short term, but I think we save ourselves a lot of pain in the long run.
2. Frame the relationship.
I made up this phrase to communicate part of my objective to deliver fantastic client interactions that create raving fans. Conflict arises in any relationship when expectations go unmet (that goes for you and your client). So you can either a) attempt to meet all of the client’s voiced and hidden expectations or b) frame the expectations upfront yourself so that they know what they will get and, equally important, not get. Seth addressed this concept in a recent post on customer service. We are working to implement packages of services to make it easier on online retailers and their agencies who are trying to navigate a confusing market of Magento development firms. Learn more about how to handle hard customers with these tips https://www.salesforce.com/blog/2014/02/funny-sales-quotes.html
3. Understand the root problem.
Businesses are made up of people; and people are not perfect. That includes you. Service-based companies have to approach situations objectively and at times be a little introspective. Avoid passing blame to the client while at the same time being careful not to completely blame yourself. Conflict is a 2-way street.
4. Think “Proactive”.
50% of being proactive requires simple communication. If you are asking yourself, “I wonder if I should tell the client (insert issue),” then the answer is “yes” 99% of the time. We had a server go down a couple of weeks ago which affected a handful of clients. A few clients didn’t even seem to notice, but we sent them an email anyway to let me know what happened and that everything was fine now. Simple transparent communication. My only regret is that we didn’t take a minute to send the note earlier to everyone (we were so focused on resolving the problem that we didn’t think to make a blanket announcement until after our team resolved the problem). This mentality also applies to budget on the frontend and warranty on the backend of a customer relationship. If you don’t set expectations then you must work with the client’s expectations.
Remember that businesses are comprised of people. If you are a small company then be human and leave the cold, impersonal approach to the big dogs. Communicate and work with people you like. Avoid doing business with people you don’t trust. Simple wisdom like this can help you prevent a lot of the pain that no amount of project management ability could avoid. Now get out there and serve some customers so that you create loyal fans!
Fantastic post guys! All of those points ring true loud and clear, particularly number 1, which as you know, I’ve dealt with a lot of myself recently. The service industry is certainly a tough one, and if you think you know it all, then you’ve still got a lot left to learn!
I think the 80/20 rule is also very prominent, 80% of your income comes from 20% of your clients. My biggest lesson for 2009 is to find people who I really like working with, and work with them as much as possible.
@John I’ll toss you a softball: Any tips on how you plan to go about finding that 20% crowd?
Great post! One small, but useful thing we learned is not to be afraid to ask questions even though they sound silly.
We, as a small outsourcing company, learned this the hard way (loosing time and money), we were afraid to be taken as amateurs or not skilled enough to carry out a given job if we asked so many questions.
Now we ask whatever we think is not clear enough, regardless if it sounds silly, and it pays back.
True. There is also the maintenance part. Most of my experience with projects and clients is that they all come back for more. This is the critical juncture where you must define your work and their compensation. This is where you build your business.
Totally 🙂
They’re in your existing clients – the ones who you really enjoy working with and never give you any headaches. Typically they’re polite, understanding, and pay promptly, but one of our biggest mistakes is not giving them enough attention! If you want more work from the 20% clients then you need to ask them for it, conversly if you want MORE 20% clients then an easy way to get them is to ask your existing 20% clients for referrals.
Apologies for not going into more depth, this iPhone keyboard gets a litte tiresome after a while!
Good read… thnx.
Thanks, Branko. Do you think it is good enough to be ripped off by someone else like your post was?