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Tuesday, 23 August 2016

Four lessons that lousy clients can teach us.

We all have them: Lousy clients.

The guys who want to ask for a reduction in your quotation, and then they want another quotation. And then your quotation is still too expensive for them.

The guys who compare your quotation with the quotation of a similar professional from their country and complain that you've overcharged them. In fact, you've given them a fair rate.

The guys who want you to start work immediately, keep asking you for updates, and expect their work to be completed ASAP. All before they even pay you a single sen.

The guys that promise to pay, but never pay. Maybe they pay a deposit, and ask you to start the work. But they fail to pay the balance.

The guys who complain that you've taken too much time, so they'll change service provider. And they want their money back.

You must know some of them. Don't you? I thought that this must be a problem that even non-lawyers face, so it would make for a relevant piece. For you.

But this post is based on my own experience. The observations might be true for me. But your mileage might vary.

The guys who want reduced quotations to be reduced further.

They are trying their luck. They probably know that you've given them a "fair rate", i.e. similar to what other people in the industry are charging. But they have been programmed to say "too expensive" at any price level. 

This service: This price. That service? That price. That's how you work. But they don't care about you.

Sometimes the scope of the work isn't clear. It could be cringeworthy if you go ahead to give a quotation. But they'll insist on a quotation anyway. After you start with the quotation they'll start whittling it away.

I was referred a lady who wanted my services. I said yes. Then the lady asked for my estimate of my charges. I wasn't sure about the scope, so I could not reply. It would have been unfair to one of us if I did.

If I overestimated my charges and she said yes, she would have overpaid me. I would have been happy. She would have gotten a grilling from her boss. If I underestimated my charges and she said yes, she would have underpaid me. I would have been disgruntled. She would have gotten a year end bonus.

We e-mailed. We phoned. But we didn't meet.

There are some people who follow this modus operandi called project cost management:

1) Identify the service providers who are competent enough.
2) Seek the lowest cost among them.
3) Lock in the service provider's charges.
4) Load up the work.
5) Sit back and relax. Hold back some part of payment.
6) When the work is completed, look for rectification work. 
7) If there are problems that need fixing, set it off against the retained payment. (And there is always something a problem. Or two.)

They might be making two mistakes in doing so:

1) They assume that the services are homogeneous. They think that all service providers provide the same level of service. More experienced service providers will usually want to charge a commensurate fee. The junior service providers are learning at the client's expense.

2) They are forcing the service provider to provide services below what the service provider thinks is fair. The service provider may refuse to provide services next time. They might even get a bad name for themselves. It won't be surprising for service providers to share information on "bad clients". In many industries, suppliers will want to share information on "bad clients". They don't normally share information on their "star clients" for fear of client poaching. But sharing information on "bad clients" is a way of venting frustration.

The first lesson is: Treat service providers with fairness.

The guy who compares your prices with someone else from his country.

He is not being realistic. The prices for products and services are different in different countries.

These guys need a reality check. But who is going to give it to them?

It's like a girl who has her first boyfriend. She wants him to be handsome, play the guitar, and be athletic. Then she finds one, and she discovers that he cheats on her. Maybe he's insensitive. That's what a jock is. For her second one, she wants someone who is caring, who has dreams. Then she finds one, and she discovers that he has no money, and he's so broke that the beggars by the roadside want to donate lunch to him. For her third one, she wants someone who is financially stable and has no vices, and loves her. And she finds one, but he's not such a good looking guy. And she accepts him, because she's come to terms with reality.

Clients are like that girl. They need to come to a reality check. I had an Indonesian guy complain that my charges were more expensive than his regular industrial design agent. He was a manufacturer who got his products OEM'd in China. The designs were his own. I had gone ahead to get an engineer friend to produce exploded 3D drawings of five items. 

He was unhappy. He never paid me anything. I asked him, "What if you don't register these and I register them?" He shrugged his shoulders. He couldn't be bothered. For the record, I didn't register them.

He should have surveyed the market prices. Then he would have known that my charges were reasonable. Then I wouldn't be writing about him here.

The second lesson is: Be realistic in your expectations. It's OK to survey the market.

Ever had a client who said, "Go ahead, I approve"?

There are guys like that. They always want you to go ahead. Do the work.

If you complain about no deposit, they'll send you a deposit. Maybe about 30% of the quotation.

I have a friend who wanted my services. When I sent him my quotation, he said, "Go ahead. I'll pay you when it's done." When I asked for a deposit, he said, "I'm a Datuk. Do you think I will cheat you? But still, since you've mentioned it, let me pay you about a fifth of it. I'm a Datuk. I won't cheat you."

It was some complicated kind of agreement. He was going to license somebody's IP.

I sent them the draft. He told me that the deal was off. He wanted to pay me less. I agreed. I sent him a reduced bill.

Then he said, the other guy sent a cheque for about half of my reduced bill. Would I accept it? He declared that the deal broke down not because of his own faults, but because of the other guy. I shook my head. What could I do? I agreed again.

But he didn't know that the other guy had paid the full sum and had sent me a photocopy of the cheque. The other guy faxed the bank-in slip to me. The other guy didn't tell my friend, the Datuk. I also didn't tell my friend the Datuk. I wanted to see how far my friend would take this.

When I went to his office, he showed me a website he was building. It was a directory of professional services. Would I be one of his first clients? It wasn't expensive, only a few hundred ringgit a year. My heart felt betrayed. I was unhappy but I kept quiet because he was a friend. I had respected him. (He's now a Datuk Seri.) 

Maybe I should have spoken up. Ended the friendship because of his dishonesty to me. Maybe I didn't need his friendship.

I kept my distance. After a few years, he wanted my services again. I demanded payment upfront. 

The third lesson is: When someone says they are not going to cheat you, they are going to cheat you.

The guy who switches service providers halfway and demands all payment back.

He's probably not doing it for the first time. And he probably never intended to pay in the first place. 

A lady friend had rented out her house to a tenant. 

That tenant paid the deposit and the first month's rent. Then the tenant started giving her hell. The tenant refused to pay for the second month's rental. And the third month's rental was unpaid as well. The lady was frustrated. She had a few rental properties and all her tenants usually paid. This one was complaining about cockroaches in the house and the bad smell of the old air-conditioner. 

She asked my advice. We terminated the tenancy agreement. We asked her to move out. She didn't. We sued her. She stayed put. We got an order for double rental. She still didn't move out. Only when we wanted to seek vacant possession was she willing to talk terms. 

It appeared to me that the lady had gone through several landlords and she was well versed with the process of staying at expensive houses for very little rental.

A software programmer had signed a contract with a rather large company to produce a Uber-type of website. 

There was supposed to be a mobile app along with it. The software guy asked, why did they need him since they also had in-house software developers? They replied that they wanted an alternative. With mutual agreement, a deposit was paid and the work proceeded.

After the software was delivered, the client complained that his software wasn't up to the mark. They demanded all payment to be returned to them, saying that the system was unusable. It was not able to do this. It failed at that. And it couldn't go live. 

The software guy complained that in software production, it's an iterative process. That's how technology goes. You have your first iteration, then your second iteration, then your third iteration, then .... you know how it goes. It gets improved with each iteration. It goes from ugly duckling to beautiful swan. The client was purposely being unreasonable, because they had commissioned the job just to see if they could benchmark their internal team against an external team.

Sneaky guys. 

In both cases a bigger upfront payment might have helped to alleviate their woes. The landlord could have asked for three months' rental, by dangling a special discount for new rentals. If that didn't work, it should have raised her suspicions. The software guy could have asked for a bigger deposit, because he needed to hire a team of programmers to assist him. Software production in the waterfall cascading method requires a big team. There is also the critical path that must be followed strictly.

The fourth lesson is: Get a bigger upfront payment for your products and/or services. It sometimes does double duty as "consolation prize" if you meet a lousy client.

Thanks for Reading.

Here are some other pieces from me:
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