Any advice for a new consulting shop to collect on satisfied, though non-paying customers?
Ray Garcia replied:
Several ways to address the problem you stated:
- avoid those clients once it is known that they avoid paying for services even when they agreed to receive the benefits.
- test the client early, with a small amount, tiny engagement to assess the risk
- have a solid contract that has a penalty for non-payment, with interest, and pursue reporting the company to the credit agencies when they do not pay.
- Get paid some portion up-front, then make sure that the deliverable is recoverable so that they do not get the full benefits until the
final payment is received.
- reduce the terms of the payment to immediate on delivery if prepayment is not possible
- get a good lawyer with a named firm, when these big companies see a contact from a known law firm they behave differently
- convert some portion of the consulting online where they have to pay with a credit card for the time if the consulting is verbal. Consultants can use http://brainsy.com/ it is exactly for expert consulting and it solves most of the problems related to non-paying clients, the clients have to pay for the time of a call.
- stay away from the procurement offices, they are the worst at doing this
- stay away from the client legal departments, they are the second worst
- make sure that whomever the consultant is dealing with has a budget and the signing authority to release the payment.
- do not deal with any low-level people in the companies, they do a lot of this free gathering of advice, they get other people to do work for them but they have no authority to pay for it or have it approved.
- separate the free advice from the paid advice
- avoid certain cultural behaviors that have an insular view of exceptionalism where they treat anyone who is not like them as
enemies or people to exploit, thus they work with win-lose attitude. This is a hard one since it is not good to make these kinds of generalizations but in NYC this largely holds true for some interactions but this is something that each consultant will have to learn for themselves, I do not want to disparage any group with generalizations. Doing business internationally or with people from many other backgrounds has many nuances when it comes to negotiations and they can cause a lot of misunderstandings.
- test the relationship by assessing the negotiation style and whether it is win win and fair
- spend enough time with the person to have some assessment of the character and the culture of the organization.
- focus on repeat "good" customers over trying to find new customers
- do the kind of consulting that is time dependent where the value is not lasting and the clients have a recurring need.
- try to get out of the freelance consulting business, find a tangible product that can be sold via e-commerce instead so that it has some way of scaling.
- build a reputation that is so respected that a company would not want that person to never recommend dealing with them for bad behavior
- start a website where people can post anonymously their bad experiences with companies with regard to unfair payment practices.
I have done consulting work for many years and only once did I have a delayed payment situation where the CEO was a toxic client but eventually paid.
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