When A Client Refuses To Pay: Influence Is The New Control

Well, it happened again. Twice in the last three months. If you are a small business owner or independent contractor, it has probably happened to you.

There are many ways to describe the problem. Getting stiffed. Getting ripped off. Getting swindled. You delivered the services promised — you have data that proves you achieved or exceeded all performance milestones and expectations — yet the client refuses to pay.

The impact of getting “ripped off” by a single client or customer can be disastrous or even fatal to a new startup or independent contractor because nonpayment can create cash-flow problems, impact productivity, and damage relationships with your team and vendors. It is also a frustrating time and energy drain.

If there was ever a situation when “the best defense is a great offense," making sure you get paid for services rendered would be it. Having a proactive versus passive approach gives you a huge tactical advantage. Invoicing and collection processes alone do little to nothing to mitigate the risks of not getting paid.

So how can you be proactive and protect yourself against this problem? Here are a few of my own “lessons learned” that may help shape your strategy:

Lesson 1: If you aren’t learning, you’re losing.

Adding a new product or service means you need to plan for the changes that the “new” will bring. You need to understand how the new product or service will impact your business to ensure the feasibility of the change and the value-add it will bring to your profitability.

Working in crisis management was not a part of my original plan. I found myself getting referrals from sources who believed my negotiation skills would enable me to excel in this line of business. What I learned quickly, however, was the processes that were working great for technical consulting and business development and executive coaching clients didn’t translate well to the world of crisis management. I created the problem by assuming my existing client selection, payment policies and legal documents were adequate before accepting my first crisis management client.

Take the time for research and discovery, as neglecting to do so could open the door to a potential loss of revenue.

Lesson 2: Control is illusory. Influence is everything.

I learned one of life’s realities in my early teens: The only thing you might exert some remote semblance of control over in life is you.

The definition of control is not “the capacity or power to be a compelling force on or produce effects on the actions, behavior, opinions of others." It's influence. Influence is getting someone to do something because they want or agree to do it, even if grudgingly or reluctantly.

Influence can be leveraged in every aspect of the client life cycle by focusing on the fundamentals. Do you have clearly developed and documented performance goals, completion milestones, performance measures, or support agreements signed and in place before beginning the work? Are your contracts, billing, and payment documents simple to understand, explicit in detail, and aligned with the legal requirements of the business you are in and the locations you serve? Do you solicit and document customer feedback frequently throughout the project?

These are preemptive things you can do to deter someone from “stiffing" you. They, too, must consider the costs of going to court. And if it makes their case tougher to prove, they might do the right thing, either partially or fully.

Lesson 3: When in doubt, say no.

It seems counterintuitive to anyone starting a business to say no to potential clients and the revenue they bring. However, you might have had an experience with a toxic client whose behaviors cost you more in time and revenue than what you were being paid. If you have, I suspect that you learned to look for the “red flag” behaviors these customers displayed when selecting future clients.

Most small business founders or operators share the truth that time, revenue and your brand’s reputation are precious resources that must be protected to grow and sustain your business. Saying no is a proactive approach to avoiding toxicity and its related cost.

The biggest red flag I encountered was companies or individuals that tried to reduce the cost based on the “value” of their brand or the promised referral income they would generate for us.

The best way to deal with a potentially toxic client and the costs encountered with time, revenue and your brand’s reputation is to politely say no and not have to deal with the costs and consequences of saying yes.

Lesson 4: Have a 'sit-down.'

The "sit-down" is a negotiating tactic I learned from a mentor who was an avid aficionado of all things La Cosa Nostra. It is a negotiating session designed to find a solution to a problem between two or more parties. The difference between a meeting and a sit-down is that the sit-down is governed by a strict code of personal conduct based on respect and self-control. This eliminates a lot of the finger-pointing, name-calling, anger and other sources of negativity that make these types of negotiations far less productive.

Key factors include:

Preparation: Simply know what your desired outcome will be, and have the facts and evidence to support and defend your position. It is also helpful to know as much as possible about the company or individuals you're meeting with to resolve the problem.

Self-Control: Acting with respect and self-control simply means you don’t engage in any of the tactics or behaviors the person on the other side of the table might be using to influence your actions or decisions. Speak only when necessary. The more the other side talks, the more you can learn by listening to what they have to say. You might be raging on the inside, but you're channeling Marlon Brando in The Godfather on the outside. After all, it's a negotiation, and their words will shape what you say and do to resolve the dispute.

Compromise: Always enter the meeting with your desired outcome in mind. As the conversation unfolds, the details and circumstances will dictate if a compromise is needed. The reason they refuse or can’t pay what is owed is one thing; knowing what they are willing to pay is the key piece of information you need to figure out your next steps. This is where the sit-down mindset is extremely value-adding.

Non-payment is a very common occurrence. But there are many tools and tactics you can use to be preemptive and proactive, and to minimize the chances of getting stiffed by a client. It’s all about influence. Replacing the anger and emotions in these situations with a solid approach is a great offensive strategy and goes a long way toward eliminating the likelihood you will ever find yourself getting stiffed.