Which Clients You Shouldn’t Deal With In the Tech Industry

Bad Client

Bad clients are dangerous for your business, beware of them.

A bad client is who doesn’t pay you for your service or product, and/or gives you a lot of headache.

So beware of them.

Also note that a business is a money making activity. Don’t do it like a charity work. Keep your business and charity work completely separate.

Also, keep your emotions, relations, religion, beliefs, personal issues and thing like that aside when doing business. However you should also know that statistics show that most of the businesses fail, and while failing, also ruin life long relationships. So it is better to not do business with people with whom your relationships are dear to you.

Almost all businesses, small, big, or medium size, face bad clients, one time or another. However newer and smaller businesses face them more often because of their lack of experience in identifying them. So here I’ll try to explain how to identity bad clients based on my many years of my personal experience and experience of many of my successful and unsuccessful friends and relatives in terms of their business related activities. Read carefully and save yourself time, headache, and most importantly money and human resources.

My focus here is on technology development related businesses, primarily software development.

So here we go…

When a new business starts, it is desperate to find clients. This is very natural.  Without clients, a business cannot run. So in the beginning all clients look good.

However, don’t expect to get good clients so easily and so soon, since there are very few of them.

How a Software Development Business Works

First you should know how a software development business works. You do a few sittings with a potential client who explains you what he/she wants get developed. You give your technical input about what is possible and what is not, how you would do it, how long will it take for delivery and for testing, and then the most important thing how much will it cost. The client negotiates with you on the cost. You might remove some features from the final product or modify certain things. Once you both agree on a product, till its minutest details, you write an agreement with milestones and final delivery date, and payment schedule. Then you get at least 33% paid in advance to be able to start the work. Rest you get paid as you deliver your milestones. And then you get the final payment at the time of final delivery.

However, it is tough to get good clients with whom things would work like mentioned above. In real life, most of the clients you get are bogus clients.

Here I have categorized types of clients to make it easier for you to identify them and decide how to deal with them:

Types of Clients Simplified

CLIENT MATRIX
CLIENT HAS MONEY CLIENT HAS BUSINESS PLAN TYPE
NO NO Very Bad
NO YES Bad
YES NO Bad and Dangerous
YES YES Good

 

1. Clients with no money, no business plan

This is the most common type of clients you will deal with, doesn’t matter where on the globe you are located. These are the worst type of clients. They want something but don’t know what they want. They usually have a vague idea what they want as their business product, but they have neither money nor a business plan. They waste your time, explain their vague idea and expect you to fill in the blanks, and based on it make a product for them. Since they don’t have money, they can’t pay you for your work and want you to agree on one of the following terms:

  1. Money will be paid when the work is finished.
  2. Money will be paid when they’ll start making money of the product you will develop.
  3. You do a partnership with them, and you make money and give it to them, and then they’ll give you your share.
For point 1, they will never pay you because they don’t have the money and will never have.
For point 2, will angels descent on them with money once they have product in hand? No, they won’t. Since their is no business plan, so there will come no money.
For point 3, its basically asking you to do business for them and feed them.
Don’t waste time with such clients. Say them good bye and hang up. If they keep buggin you, give them a really high quote and ask for 33% advance, and they’ll will never bug you again. Your time is too valuable to waste on these clients.

2. Clients with no money, but a business plan

Then there is the second type of clients who have done some homework on the business aspect of their dream, but still, they don’t have money to pay you. So they are equally useless and will act the same way as clients mentioned above.

3. Clients with some money, no business plan

These clients are very dangerous. A small or new business will find them attractive because they can pay some money, which is better than nothing, but they don’t realize that they’ll end up doing client’s business and administrative work too. And client will keep bugging them because he would think that by paying a little money, he/she now owns you. He/she would expect you to sell the product, add extra features in it, do its marketing and advertisement, provide on going service and so on.

Stay away from such clients as well.

4. Clients with some money, some business plan

These clients can be just ok clients if you deal with them really carefully. Make sure they write down their business plan properly, and stay realistic on how detailed their product will be. Since they are paying only some money, so the product will also be pretty basic and simple.

5. Clients with money, no business plan

These clients are also not good. You should always be cautious of any client who has no business plan since such a client will have unrealistic expectations from the product you would develop for them. They might seem attractive because they can pay you money which you desperately need, but it’ll come with a lot of headache as well which will not worth it. As mentioned earlier, such a client will expect you to do his business work too.

6. Clients with money and a business plan

Now these are the right clients which you are really looking for. Do anything to keep them happy, even if you have to do some extra work for them. They know what they want, they’ll provide you with the details to the best of their ability, probably by a team of technical people. Then you’ll be able to guide them on how to make their idea a reality. They’ll pay you advance as any genuine client would do, and things will go smoothly from there as long as you do your work right too. In this scenario both the client is serious and hopefully you are also serious.

7. Clients with a lot of money, no business plan

These clients again have no business plan and can put you in real trouble because the product you developed for them will obviously make no money. They’ll blame you for that. So if you want to deal with them anyways due to monetary benefit, get a well thought out agreement signed by them with proper disclaimer.

8. Clients with a lot of money and a business plan

Now these are the best clients which you get only once or twice. You really don’t need to get them very often. When you get one such client, leave all other work and just focus on their work, and do it to the best of your ability, deliver them the best possible product even if you have to hire people from outside and/or get into partnership with another technology development companies.

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