Mixing Friendship and Business is a Bad for Business

March 24, 2011 by +Marj Wyatt
Filed under Business Basics, Featured

For the past two years, I’ve been in a business relationship with a client whom I felt had also become my friend. After extracting more than twice the amount of labor than was allocated under the terms of our monthly retainer agreement for WordPress Website Development services over several months, these local clients have reminded me that mixing friendship with business is a bad idea.

In an effort to overcome my disappointment about their denial about what is owed for my services … or even discuss a compromise, I decided to write a post to advise and educate small business owners on better ways to structure contracts with clients who expect to receive benefits prior to payment.

Qualifying Business Prospects

As a former Realtor, one of the refrains that they drilled into my head during training was that Buyers were Liars. We were taught to qualify people for mortgages prior to investing time and energy in setting up showings or writing contracts. This is easy to do when you can “spin” your request for qualification as a service that will benefit the Buyer but it is not so easy to do in other service businesses.

The difficulty may lie in the fact that most small business owners cannot afford to use expensive credit checking services. Thus, the qualification process involves interpersonal communication that almost seems intrusive while qualifying a prospect for their ability to pay.

In a perfect world, you would take 100% of the payment up-front but that is a hard sell. In lieu of that, insist on a retainer of no less than 50% of the total contract price and establish milestones that pay the remaining 50% for each deliverable at the time of acceptance. You may want to consider using an escrow service to ensure that you will be paid as tasks are completed. If you are in the middle of their project and they begin to tell you they are having trouble paying their bills, stop working on their project. Retainers are non-refundable. You cannot recover the time you’ve spent once it is gone.

Get it in Writing!

If there is no written contract to enforce a business agreement, things can easily go wrong. At the very least, put the request into an email message after you’ve agreed to deliverables and pricing. Don’t begin work on the project until you have an email reply that acknowledges the agreement.

Stick to Business

Since time is the commodity that service providers trade, don’t allow yourself to get engaged in personal discussions with your clients during the project. Clients will act friendly and they will say anything to get what they want. Inevitably, they will try to gain your sympathy and convince you that they will pay you later when they want more than they can afford. In my experience, this never happens when the bill comes due and the friendship that you felt was merely the tool they used to get what they wanted.

Negotiate Before You Do the Work

If a services client requests work that you know will take more time than the payment arrangement allows for, take notes about their request and tell them that you’ll have to get back to them with a price. Regardless of their insistence, don’t lift a finger to get the work done until you have reached an agreement about compensation and received an additional retainer payment. This is business and you are delivering value.

I repeat: Don’t budge if they say they will pay you later. They won’t.

Don’t be Afraid to Walk Away

As the saying goes, when one door closes another is opened. If you feel that your client is difficult to work with and they are exhibiting signs of ambivalence about your requests for payment, this is a sign that you need to move on to another client who understands that this is your business. You are not their employee and you owe them nothing. You are an independent business owner and it isn’t your job to save them at your expense, no matter how nice they seem.

Don’t Get Distracted by the Noise

When a client knows they are wrong, they will endeavor to assign blame to you for their irresponsibility. If you get caught up in their accusations, you’ll get distracted from the goal of being compensated for the work that you’ve done. Acknowledge that you have heard what they are saying but do not engage in a debate about why you are demanding to be paid and do not involve yourself with explanations about your actions as you pursue payment. You did the work. In a business relationship, you deserve to be paid.