Small-business clients: the good, the bad and the ugly

- November 22, 2013 2 MIN READ

If your clients are small businesses, you’ll know they’re not all ideal – some are far from it. Here’s how to tell the good from the bad.

The good

One of the best indicators of a good small-business client is their love for their businesses, which is inspiring and infectious. Their energy, drive and enthusiasm are all turned up high. They make you feel genuinely appreciated, even for the smallest things. You aren’t just a number, and they let you know when you’ve made a positive impact and helped their dreams come true. Since you work so closely with them, you might get to know them as friends as well as clients. Most importantly – they pay on time.

The bad

In small business there is never enough time or money, which has a big influence on their behaviour as clients.

With small (or no) budgets and cash flow usually stretched, purchases often come with a degree of angst. Expectations can be high, especially for professional services. If you are selling something that is not a necessity, it is more difficult to translate value and make a sale. Often you will be asked for a lower price. If you experience this from a new client and still want to do business with them, take the time to build a relationship; explain your value clearly and have the client crunch their own numbers to see the benefit of your service.

Unfortunately, the autonomous decision-making of small businesses also means you can be dumped much more quickly and suddenly. There’s not usually much in place for legal protections and formalised agreements either.

Time shortages and a constant juggling of priorities mean that getting information or attention from your small-business clients requires persistence. As soon as your client gets busy, you will slip to the bottom of the list.

‘Bad’ small-business clients present such a mixed bag of challenges that identifying them early can be difficult. Some clients demand too much and others are too busy to communicate, so you need to watch for the signs and take action early: either set boundaries to slow it down or create a schedule to keep it alive.

Early warning signs include unreturned communications, and dissatisfaction with or discussion about cash flow. Combat this with clear communication up front about how you work and how that benefits your client. Set up defined time frames and minimum terms/orders from the start and (if you can) set up automatic payments.

The ugly

The ugly side of small-businesses clients is the difficulty in getting paid. Most providers have been burnt along their journey by not getting paid or being paid so slowly it’s like extracting teeth to get it (myself personally for thousands). Malicious intent is rarely behind it; more likely it’s because of low cash reserves that evaporate quickly when financial stress strikes. Particular types of businesses have a reputation for being late payers (like restaurants), but there are also times of year to be wary of when client cash is at its limit, such as the weeks just after BAS payments.

The ugly side can be hard to see and you can find yourself in trouble quite easily; bad payers can often look the same as good payers. Keeping yourself safe is the best approach, so do some due diligence beforehand. Good credit terms and references are essential. Be firm with your payment terms, chase your payments before they get too old and (as hard as it can be) stop supply if you feel things are going sour. It doesn’t get any easier for them to pay you with more time or bigger outstanding amounts.

How do you tell good small-business clients from the bad?