A warning

3 Dec 2009

In the life of every small studio, or every small business for that matter, there will undoubtedly be troubles with Clients not paying, or at least not paying within the decade that you sent the invoice. This is to be expected, and the minor cash flow problems that ensue, plus the annoyance of constantly finding clever new ways of politely reminding Clients that they haven't actually paid are all part and parcel in the life of the small business owner.

We've learnt a lot in the past 2 years, and would like to take this opportunity to share a few nuggets of wisdom with any one who cares to read them:

  • Always take 50% upfront. That way the Client is invested in the project just as much as you are. Why should you be the only one taking a risk?

  • Don't trust anyone who is not willing to give that 50%.

  • Many people will offer you a percentage of future profits in return for work that you do. Listen to these offers, but think carefully before accepting anything. What guarantees do you have that you'll make any money? Are they offering you a percentage of the gross or the net profit? Why are they willing to give up a percentage of their business?

  • Don't trust anyone who tells you their business will make a million in the first year.

  • ALWAYS get signed Terms and Agreements for every project. Even if the Client is your best friend.

  • Be upfront and honest with your project deadlines. Tell the Client about anything that may affect the delivery date as soon as possible.

  • Clients may expect you to work for cheap because of their 'great contacts' or their promises to recommend you on. If you do good work, it will speak for itself.

  • Don't try to be the cheapest. Try to be the best.

These things are all written in just about every business manual every written, but it's taken us 2 years to fully understand and take on board the importance of each. We went in to business thinking that we could and should be friends with all of our Clients, and that if we treated people well then they would do the same for us in return. Alas we've been proven wrong in a fairly painful way.

We started making a website for a woman we met once a week and were on friendly terms with. It was to help customers reclaim unfair credit card payments. As we knew the woman we didn't get T&Cs signed and we didn't get her to pay upfront. We saw her every week, where was she going to go?

Nine months or so later, and after every excuse in the book about why she hadn't paid (including cancer, a miscarriage, a car accident and an operation) we stopped work and sent a letter to her partner in business. We haven't seen her since this point.

That was when her partner started to realise there was something funny going on (her partner had paid her for the website and was shocked to hear that we'd never received anything for it). She did some digging and found things about this woman that you wouldn't believe. Not only was the name that we knew her by not her real name at all but also she had a fairly impressive 12 other names! She was quite possibly using the credit card website as a way of defrauding her customers, and she had already taken several thousand pounds off the partner. I asked around other mutual acquaintances and found that she had taken about £30,000 from people I know. In short, a con woman.

Hard to imagine that there really are people like this in the world. Needless to say, we contacted the police and they're investigating (very slowly), but we doubt we'll ever see proper payment for the huge amount of work that we put in on the site (not to mention a ridiculous amount of time chasing payment etc). A lesson learnt hopefully, but not one that I'd care to repeat.

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