Here are four ways to avoid the headaches they can create
Don't fear the clientzilla
If you have been in business for any length of time, you will likely have served clients of all stripes. Some will be fantastic to work with: those who never complain, pay on time and bring in new clients just like them. Then there are the clientzillas: taking up the majority of your time with negativity, only wanting the free advice and allowing their bills to become overdue. While not every client can be ideal, filling your client list with difficult ones can sap your time and energy, and it takes time away from finding better clients.
Develop acceptance criteria for new clients
The best way to avoid taking on bad clients in the first place is to know the signals that manifest in the first meeting. Start by analyzing your good clients. What makes them good and what common qualities do they have? It may be that they listen carefully to what you say and ask for clarification when they don't understand something. It may be that they have a certain income level or that they own their own homes.
The commonalities of great clients will be different for every business and every industry, but it comes down to the fact that, with some experience, you will be able to spot good clients - and conversely, bad ones - quickly. Formalize your criteria for taking on clients and ensure that you only accept those who meet your standards.
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Have clear billing and payment terms
Collecting accounts receivable can be one of the most time-consuming and aggravating tasks for any small business owner. You may never be able to get every client to pay on time, but you can increase the odds by formalizing your billing and payment policies. For example, you may decide to bill at the time the service is provided on a net 30 basis, meaning that interest is tacked on after 30 days. You may send a statement every 30 days, including the original invoice amount and the interest that has been added. At 90 days, you may choose to turn bills over to a collection agency to collect.
Whatever you decide your policies to be, give a written copy to every new client and have it posted on your website so that every client is clear on what will be expected from him or her.
For all but the tiniest pieces of work you do for a client, having a detailed contract signed by both you and the client can clarify expectations and lessen conflict. A contract outlines the responsibilities of each party, as well as the deliverables and time frames. It becomes the guiding document if your client complains about the work or the deadlines. It also protects you if your client decides to take legal action. The best part of having clear contracts, however, is that they can help avoid the conflict altogether in many cases.
Show them the door
No matter how careful you are in taking on clients, you will likely still have a few problem ones. Before they get to the point of affecting your bottom line and your employees' morale, fire them. Yes, you can do that. It can be as simple as explaining to them that you feel they may be a better fit with a different company. If you're just starting up, you may be hesitant to pass on any business, but getting the time back to seek out better clients is worth it.
The bottom line
Every entrepreneur has to deal with clientzillas at one point or another. Building processes into your business to both deal with them and to avoid them altogether will make your business life easier.