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There are good customers and there are bad customers. Every business has some of each. Identifying the really bad ones (before it's too late) can make or break you as a business owner.
You know the good customers. They tell you exactly what they want, and when you provide it to them, they pay on time without complaint. The bad customers are a bit different. They come in all shapes and sizes and, if you're lucky, will have left a wide wake of destruction for the wise to witness. Ah, if it were all so blessedly easy.
Knowing when to say "no" has many facets. Getting at the whole truth can be tricky. If it were only a matter of charging a fair price for a given product or service, there would far fewer problems in the service business. But as we all know, expectations vary. Being able to identify potential nightmare customers takes experience and often comes after years of tears and boatloads of painfully expensive mistakes. If you know potential clients are particular, yet you're certain you can please them, all that's left is sizing up the time and the materials required, then finding a mutually agreeable yet "profitable" price. However, if you let your ego (or greed) lead you, you could find yourself in that indefinable bottomless pit.
What To Do
Our contracting company has done a lot of fancy floor work on luxury yachts over the years. Once, while waiting my turn to bid a job for a Hollywood producer's wife as she ground down potential subcontractors for their new $250-million boat, I witnessed all the dire signals. One by one she hammered away at the various subs offering her quotes for their work. By the time she got around to me (over two hours later), I practically blew her over with my handsomely inflated estimate. Unbeknownst to her, as I heard her berating the other subs, my price had been going up $1,000 a minute. When I overheard her request a quote for the walls in her master suite to be covered in unborn baby rabbits' fur, I had pushed my bid up another $25,000. Several years later, I spoke to the foreman of the boatyard that built the yacht. He told me I was lucky to not get that job—the boatyard and all the subs suffered severe financial and emotional strains working on the project.
What Not to Do
A gazillionaire was referred to us by a perfectionist friend of his (who was even wealthier) to do the hardwood floors in his latest "statement." The gazillionaire's builder had his own hardwood sub and didn't exactly welcome us with open arms. I thought long and hard about turning down the work, as I had scored abundant, less-than-blissful case histories working with builders who would have rather worked with their own sub than with me, their client's personal pick. Still, I thought, this was a very, very big and lucrative project. We can make it work. The long and the short of it was the builder forced us to sand and finish the job during a time when we had several other extremely large projects underway. My entire crew was backlogged with work. I was forced to hire an ex-employee who had started his own wood flooring business. The exemployee had done excellent work when he was with me, and I had used him and his company to sand and finish jobs for other clients with great results. So, I was lulled into serene incompetence. A week before the sand and finish work was to start on the gazillionaire's job, the ex-employee fell in love. He departed on the Love Boat, leaving one of his "key" employees to perform the work without his direct supervision. The key employee used a sanding machine that was badly in need of repair. The floor, along with my reputation, was trashed in the process. Yes, we fixed all the problems with the floor. Yes, we spent the next 18 months doing it on our own dollar. Yes, even though the floor was fixed, the gazillionaire was left with a foul taste in his mouth.
What I Have Learned
Everyone who's been in business has developed their own criteria for evaluating prospective clients and their expectations. I've found it helpful to identify some of the signals potential clients give off during the courting stage. Of course, if you never actually meet the prospective client, that can be a bigger challenge. Working directly for the owners while they are living or conducting business in the same structure can be especially challenging.
Regardless, all clients and prospective jobs give off signals— some good, some bad. I look for these signals and give them green, yellow and red flags. Green flags usually mean go. Yellow flags mean raise your bid and watch out. Red flags generally mean use extreme caution or cut and run. Here are just a few examples of signals as I see them:
• You visit a prospective project where your company has done work in the past. The client tells you how happy they have been with your company's work: green flag.
• The prospective client tells you that your company has come highly recommended: green flag.
• You ask the prospective client who recommended your company and they say the name of a client you remember as having been especially picky or difficult: yellow flag.
• The prospective clients adds that the person who recommended you is known as being extremely picky. He tells you that if your company could please those people, he's certain your company can please him: red flag.
• The wife is pregnant and the work must be done before the baby arrives: yellow flag.
• ... and this is their first child and first home: red flag.
• A special party, wedding or other major event is planned to take place where you are doing the floors. You need to be done and out of there in time for the event: yellow flag.
• ... and the project involves several other subcontractors whose work must be done before and after you and your crew: red flag.
• The prospective client tells you that she has had problems with wood flooring contractors in the past: yellow flag.
• The client tells you that she has been unfairly treated by numerous contractors in the past, or on the project for which you are bidding: red flag.
• As you look at the previous wood floor work, it looks nearly perfect and the prospective client is still complaining: red flag.
• On visiting the prospective site you are asked to take off your shoes before entering the house: yellow flag.
• On visiting the prospective site, you are amazed at how tidy and clean everything is, including the floors: yellow flag.
• ... and the client apologizes for the mess: red flag.
Now I try to use the KISS (Keep It Simple, Stupid) method for deciding "Go" or "No-Go" client relationships—assuming the dollars figure out. I hate to sound trite, but usually, your first impressions are the most correct. Don't let the gold mask the real, untarnished truth. Obviously, when the hair goes up on the back of your neck, you should know to cut and run. It's the subtle ones, though, that can get your dander up longterm. If you wonder, "Is this a good match?", listen to your intuition. When a client asks us to sharpen our pencil, we generally do one of two things: 1) Break the lead. 2) Raise our quote 10 to 15 percent and thank our client profusely for asking us to review our bid and bringing our attention to a previously missed and potentially costly oversight.
It's almost always better to have a cool drink in the shade than sweat it out in the hot sun for somebody else's gold.