In my decade-long stretch, I’ve been lucky enough to have less than a handful of bad clients. As I write this I laugh because each one of them had serious red flags, all of which I ignored. Bad Sonja.
As entrepreneurs, we understand that clients are the lifeblood of our business. They generate revenue, offer growth opportunities, and can evolve into partners in your entrepreneurial journey. However, not every client adds value to your business. Some can become liabilities, draining resources, causing undue stress, and costing precious time and effort.
The main goal of this article is to arm you with the necessary knowledge to identify and avoid problematic clients from the get-go.
This applies to all clients, from smaller projects to six-figure deals. Understanding the red flags that indicate trouble can prove invaluable. These warning signs can vary widely, from a disregard for contracts to a history of problematic behavior, and recognizing them can be the difference between a productive partnership and a draining one.
It’s important to note that client screening shouldn’t be viewed as a sign of distrust or disrespect towards potential clients. Instead, it’s a necessary step to protect your business interests and ensure that you’re partnering with clients who share your values and goals.
Why Client Screening Matters
If client screening is such an important process, why do so many fail to do it? The common reasons are poor planning and lack of knowledge. For instance, some businesses may skip the screening process out of desperation for new clients, while others might be unaware of the risks of partnering with unjust clients.
Client screening matters because it can help you avoid a range of issues, such as late payments, disputes, legal problems, and reputational damage. By conducting thorough screenings, you can identify potential issues early on and take the necessary steps to mitigate them.
When done right, client screening can have numerous advantages over the long term. By focusing on higher-quality clients, businesses can develop strong partnerships that are more profitable, trustworthy, and less draining on time and resources. This, in turn, can lead to increased customer satisfaction, improved brand reputation, and higher revenue streams.
Spotting The Red Flags
Unwillingness to Sign Contracts or Agreements
In business, contracts play a critical role in safeguarding both parties involved in a deal. However, some potential clients may insist that a verbal agreement is enough to move forward. When this happens, it’s crucial for you to step back and tread carefully.
I cannot stress enough how important it is to have a contract before you do any type of work for a client.
Contracts aren’t just pieces of paper that formalize an agreement. They serve as legal safeguards that protect both you and the client should things take an unexpected turn (which I guarantee at some point they will). They clearly define what is expected from both parties, outline the scope of work, detail timelines, specify payment terms, and provide a clear protocol for resolving disputes, among other things.
If a client dismisses the importance of contracts, they are effectively disregarding these safeguards and protocols. They’re signaling that they are comfortable with ambiguity and informality, which can lead to misunderstanding and potential disputes down the line. This can be particularly problematic if the scope of work shifts over time, as is often the case in entrepreneurial ventures, or if payment disputes arise.
Therefore, when a client appears dismissive about the need for a contract, it should serve as a clear warning sign. In such a case, it’s advisable to either insist on a written contract before proceeding or consider moving on to a client who respects the importance of contractual agreements in business. Ignoring this red flag could lead to unanticipated issues and potential legal complications, consuming your time, energy, and resources that would be better invested elsewhere.
Having Unrealistic Expectations
In any successful business relationship, there lies a delicate balance of expectations and deliverables. Clients naturally seek expediency and efficiency, envisioning their projects to unfurl seamlessly. However, an underlying hazard emerges when clients harbor unrealistic expectations that defy timelines, capabilities, or compensation norms.
Take, for instance, a client who requests the completion of a mammoth-sized project within an implausibly short timeframe. This demand not only underestimates the complexity of the task but also overestimates the potential to deliver without compromising quality. Or they tell you it’s just a ‘quick’ job and have no idea how much work actually goes into it.
Need Guaranteed Results
This approach becomes even more crucial in specific industries where clients may require guarantees of growth. While every business strives for growth, predicting exact growth figures is an inherently uncertain endeavor, subject to numerous fluctuating variables, and can be an impossible number to give. If anyone asks you for exact numbers consider yourself warned.
Poor Communication And/Or Overcommunication
Poor communication can lead to misunderstandings, missed deadlines, and lost sales. If a client takes a long time to respond to your emails or phone calls, provides incomplete information, or is unclear about their needs, it may be a sign that they will be difficult to work with in the future.
Make sure to set expectations for response times and establish a clear process for communication. While you all are in negotiations be on the lookout for over communication. If a client is messaging you on every platform available and at all hours, not only is this a red flag, but it is overstepping boundaries and micromanaging. Also take note, if they text you (this is a bit odd if you don’t have a contract yet) and you don’t text back right away for any reason and they get Angry, or demand a ‘1-hour response window’ well, you have been warned again. This is a sure sign they are controlling and will suck up your energy.
You’ll Have To Use Their Tools
When you are screening a client of course you need to ask them what type of technology and tools they use. For example, if you use Mac and they only use a PC – trust me, even if you know how to use a PC you need to understand how different these machines are and the thought process behind them. This holds true for apps, software etc… if they insist you use theirs not only is it a learning curve but they are also micromanaging you.
They Don’t Have What You Need For You To Do Your Job Successfully
For example, I’m a marketer and brand builder, therefore, I need images to work with. Or, I need them to be ready to have a series of professional photo shoots done. If they don’t have or are unwilling to provide, the tools I need to make something work, well then, I can’t do my job.
Disrespectful, Inappropriate, or Abusive Behavior
If a client shows a hostile or condescending attitude from the very beginning, it’s likely that they won’t improve their behavior going forward. Hostile clients can exhaust you, your staff and potentially ruin your company’s reputation. It is important to set clear boundaries and expectations for respectful behavior from the outset of the relationship if you choose to continue. If such behavior is displayed, quickly cut ties before things get out of control.
If you’re finalizing a large contract over a meal, as is often the case when signing higher-end clients, observe how they treat the staff. Poor treatment of service personnel often indicates a lack of respect that may extend to your professional relationship.
Any client who makes inappropriate comments or unwarranted physical contact should be avoided. This behavior crosses professional boundaries and is unacceptable.
Questioning Your Expertise
A good client trusts their service providers and depends on them for their expertise and advice. However, if a client constantly doubts your judgment and experience and insists on his or her own ideas regardless of their viability, it can be frustrating for both you and the client. It is usually best to select clients who trust your professional judgment and appreciate your input.
It’s important to communicate clearly with clients about your experience and qualifications. This can help build trust and establish you as an expert in your field. If a client continues to question your expertise, it may be necessary to have a frank conversation about their expectations and whether or not you are the right fit for their needs.
Asking For A Discount
Asking for a discount and negotiating is not the same thing. In the realm of business transactions, negotiation is a common, often expected, part of the process. Potential clients might haggle over prices, seek better terms, or try to extract more value from a deal. As an entrepreneur, you would understand this, appreciating the importance of finding mutually beneficial grounds. However, persistent requests for discounts can edge from negotiation into the territory of undervaluation, indicating a lack of respect for your work and its inherent value.
Negotiation is a strategic dance, grounded in respect, where both parties aim to strike a balance between what one is offering and what the other is willing to give in return. This process involves consideration of various factors, including market conditions, the quality and exclusivity of the service or product offered, and the perceived value to the client.
On the other hand, undervaluing is a one-sided affair where the client, instead of recognizing the value of your offering and the cost of your resources (time, effort, and money), consistently pressures you into reducing your prices. This behavior not only undermines the worth of your work but also sets a dangerous precedent, potentially trapping you in a cycle of continual discounting and devaluation.
Such clients may argue that they can get the same service cheaper elsewhere or that their circumstances warrant a price cut. While it’s important to empathize with your clients and show flexibility when warranted, it’s equally crucial not to compromise your worth. Discounting your services excessively can lead to resentment, reduce your profit margins, and make it harder to charge fairly in the future.
Moreover, clients who consistently undervalue your work may also prove challenging in other ways. They may demand more of your time, push for quicker deliveries, and be more likely to quibble over minor issues. These additional stresses can distract you from providing your best service, impairing your reputation and performance.
Remember, as an entrepreneur, your services are your product, and their value should be upheld. It’s essential to identify the difference between negotiating, a normal part of the business process, and undervaluing, a sign of disrespect for your work and its worth. Recognizing this distinction will help you cultivate business relationships that respect and appreciate your services, leading to greater success and satisfaction in your entrepreneurial journey.
Family Run Businesses
As an entrepreneur, you’ll encounter businesses of various structures and management styles. One unique and potentially challenging scenario involves businesses that are family-owned or dominated by nepotism. In these situations, familial ties can influence the decision-making process, potentially leading to questionable business choices and an unstable work environment. Therefore, extra vigilance is needed when dealing with ‘shareholder’ family businesses.
Nepotism, the practice of favoring relatives or friends, especially by giving them jobs, is a common occurrence in family-run businesses. While familiarity and loyalty in such businesses can sometimes lead to success, there are also significant potential downsides.
First, businesses influenced by nepotism can often make poor business decisions. Relatives or friends may be granted positions or responsibilities not because of their skills, experience, or qualifications, but merely due to their familial ties. This can lead to inefficiencies, incompetence, and a lack of accountability, all detrimental to a company’s success.
Moreover, nepotism can create an environment where non-family members feel marginalized or overlooked. This can result in low morale and high employee turnover, leading to instability and unhealthy work culture. These negative outcomes are especially damaging for entrepreneurs providing services to such businesses, as they can impede project progress, hinder communication, and complicate the execution of contracts.
Dealing with ‘shareholder’ family businesses adds another layer of complexity. These are businesses where family members control a significant or majority share of the company’s stock. Decision-making in such enterprises can be heavily influenced or monopolized by the family, possibly leading to biased decisions that don’t consider the overall health or best interests of the company.
For entrepreneurs, these dynamics can present unique challenges. Decisions may be made that prioritize family interests over good business practices or decisions may be delayed due to familial disagreements. Navigating the intersection of family and business within these organizations can be an arduous task.
In light of these potential pitfalls, when working with family-run or nepotism-prone businesses, it’s crucial to remain vigilant. Conduct thorough due diligence, clearly define expectations, and insist on professionalism at all times. Being aware of these dynamics and taking steps to mitigate their potential negative impacts can help you maintain a successful professional relationship with such businesses while safeguarding your own entrepreneurial interests.
Known Questionable Reputations
The reputations of a potential client play a significant role in decision-making. A client’s history can provide valuable insight into what you can expect from your professional relationship with them. If a potential client has a questionable reputation, negative reviews, or lacks endorsements, it should immediately raise a red flag.
This might seem like a ‘no brainer’ but trust me, if you are desperate or lured in and work with them it’s a disaster. And no, you won’t be the one that changes them.
A client with a questionable reputation often signifies past missteps, unsatisfactory business practices, or possibly even ethical issues. It may indicate a history of not meeting commitments, treating service providers poorly, or having unrealistic expectations. Engaging with such clients could expose your business to risks, such as delayed or non-payment, scope creep, or reputational damage.
Bad reviews and a lack of endorsements further amplify these concerns. Client reviews and testimonials are modern-day word-of-mouth, influencing a business’s reputation significantly. Negative reviews from past service providers could indicate systemic issues with the client, such as poor communication, late payments, or a lack of respect for professional boundaries. In the absence of endorsements or positive testimonials, one might question the client’s ability to maintain successful professional relationships.
Moreover, feedback from industry peers can be invaluable. Those within your industry often have a nuanced understanding of the challenges associated with particular clients and can offer insightful advice. If industry peers caution you against involvement with a potential client, it is prudent to take their advice seriously. Their warnings could help you avoid troublesome professional relationships and preserve your time, resources, and business reputation.
In the face of these warning signs, the most effective strategy is to conduct thorough due diligence. Research the potential client thoroughly, ask for references, and consider feedback from industry peers. It is also worthwhile to discuss your concerns directly with the potential client. Their response could provide additional insights into their business practices and commitment to rectifying past mistakes.
Previous ‘Bad Luck’
Occasionally, you might come across potential clients who claim to have had ‘bad luck’ with services similar to yours in the past. While it’s possible they genuinely encountered unsatisfactory services, it’s also crucial to consider another perspective – that these clients may be shifting blame for their own lack of accountability.
Accountability in a client relationship means taking responsibility for one’s decisions, communicating effectively, and fulfilling obligations in a timely manner. However, clients who consistently have ‘bad luck’ with services may be showcasing a pattern where they blame external factors or service providers for failures, rather than acknowledging their own role in the outcome. This could point to a pattern of denying responsibility and a lack of accountability on their part.
For instance, a client might claim that their past service providers failed to deliver the expected results. But upon closer inspection, you might find that they provided insufficient information, failed to communicate their needs clearly, or were unresponsive to queries and requests for feedback. In such cases, it’s not so much bad luck as it is a lack of proactive participation and ownership from the client.
Repeated instances of ‘bad luck’ with similar services could also indicate that the client has unrealistic expectations. They are already waiting for you to fail because that is what they expect.
All Talk, No Start
Be cautious of clients who continually schedule meetings without ever signing a contract. They may be unsure of what they want, or worse, they could be attempting to poach your ideas.
Demanding A Non-Compete
These are known as having ‘Golden Handcuffs’ – especially being a contract worker.
While a non-disclosure agreement (NDA) protects proprietary information, a non-compete clause restricts you from working with competing businesses. The former is a standard business practice, while the latter can limit your future opportunities.
You Are Friends
I don’t like to work for friends or family for example. That’s a hard rule. If I do something for a friend or family it is always free because you will never charge them enough and you end up losing money if you do. So if you agree to them, it’s free.
Offering Equity Over Cash
A client offering equity in their company instead of your regular fee can be appealing but consider it carefully. Particularly in startups, these clients can prove difficult to work with due to uncertain future profits and potential company instability.
‘Dangerously’ Knowledgeable Clients
You know the ones. They say ‘It’s not my job, but I know just enough to be dangerous’ in the service you are offering. Be wary of clients who know just enough to think they’re experts. These individuals can obstruct progress with their partial understanding, making them difficult to work with.
By keeping an eye out for these warning signs during your client screening process, you can avoid problematic clients and focus on building strong, profitable partnerships that benefit both parties.
High-Risk Industries
Certain industries, such as gaming, medical cannabis, cryptocurrency, and adult entertainment, are considered risky because of the nature of their products or services. These industries require a certain level of management that may not be suitable for all service providers. The people might be ‘nice’ enough, but you could get caught up in legal battles if you start working with them due to their nature.
Conclusion
In summary, the warning signs of a bad client should be heeded, and selecting clients should be done with utmost scrutiny. Identifying the early warning signs, monitoring behavior, and being aware of problem industries can all be useful in helping to avoid issues before they occur in the first place. By carefully selecting clients, businesses can build strong relationships, improve their value and steer clear of losing valuable time, money, and resources. Ultimately, the smartest business move you can make is finding clients who suit your business positioning and ensuring that the relationships remain mutually beneficial and long-lasting.
