“If the career you have chosen has some unexpected inconvenience, console yourself by reflecting that no career is without them.”
~ Jane Fonda
“I have a business question for you Mrs. Roddy. It’s actually a people issue.”
Another young entrepreneur had lunch with me today. I’m proud that these young men and women feel they can share anything with me—business and personal. He looked up from the menu. I could feel his urgency to understand and resolve a dilemma.
“I connected with a network group that has brought me lots of business clients. I’m struggling with one thing, though. I give the client the contract, they read it, sign it, and then still expect me to provide additional not-agreed-upon services once I’m on the site.
“It’s puts me in a difficult bind, Mrs. Roddy. I bring a crew, we have a certain amount of time to finish the job, and I have to pay the crew. The client seems to think it’s no big deal for us to spend another hour or more on details. I don’t get why people don’t understand a contract. If they want that additional service, I’m happy to provide…just not for free. Am I wrong?”
“That is one thing we’ve all had to deal with in the beginning of our businesses,” I responded. “I know exactly the frustration you feel. You are right.”
“I’m starting to wonder about this particular group of clients. Those clients asking for free services make complaints to the networking group that referred me as though I’m cheating them or something.”
“Everything is itemized in the contract?”
“Everything. I’ve already lost some income. Since I’m on the site, I’ve gone ahead and provided the extra service with the client’s promise that they would pay me. Most didn’t pay for that extra, Mrs. Roddy.”
“You know what? Rather than just give you my thoughts, let me put out a FB request to some truly savvy business strategists I know. Let’s see what they have to say!”
So glad to offer a few insights…
Sunds like thre are really TWO problems.
1. SCOPE definition.
2. Payment
Let’s tackle the toughest one first. SCOPE.
Most new business owners have a tendency early on to undrestimate what it will really take to produce the results they were expecting. As a result, they define deliverables without realizing there are 5-6 more steps than they’d thought about, or, worse, not realizing that they need to include time for client communication. They may not have a policy of change orders (my preferred approach is one that allows the client to decide— if we want to add x, will we need to subtract z, as opposed to simpoly paying more. When you are pricing, give yourself a fudge factor of 10-15%. There will always be work you didn’t expect, and so you need to be prepared for that.
PAYMENT. Lots of challenges here. If you’re just starting your business, you need to accept the reality that are responaible for figuring out not just scope and pricing, buy payment terms. I’d ecommend considering: 1/3 up front, 1/3 at the mid-point and 1/3 upon completion. By doing this, yo’ve already demonstrated your business sense, and, you’re treating them fairly.
One last comment: BY having a “clear terms and conditions” docucment (think of it as a “letter of agreement”, you can spell out scope, adjustments in scope, erms and conditions.
Consider asking members of your networking group what resources they have/use. I bet they’d be fr more willingto help if you just asked. People will only be critical if you seem syubborn and all knowing— genuine vulnerabiity opens the flood gates to authentic help. Just ask!
Thank you Ms. Buckley! Wonderful insight. I will make sure our young entrepreneur reads this and then I will discuss it with him! Thank you, thank you!!!
As a new entrepreneur, I faced the same problem. Partially it was because I was very naive about how much time & effort actually went into a project. And, I wanted to keep my prices “reasonable” so people wouldn’t have a reason to say no.
Then, when I was faced with the “scope creep” that invariable happened with all the last minute changes, I was left with two options:
1. Eat the costs myself — which pleased my client, but hurt me financially.
2. Keep adding costs on to their bill, which really ticked them off. They felt like I was “nickel-and-diming” them. Or, they felt like I was coming in with a low ball price and then tacking on additional costs for every little thing.
Neither option is good for business. Over time, I learned how to handle these situations better. Here are some things I did:
- Built in an additional 20% or more for additional costs. The truth is, no one noticed this that it cost more, especially since I really focused on the business value my work would provide.
- I got better at explaining what was covered and not-covered. I didn’t assume they would figure it out. I was more explicit at the front end.
- Created packages offering various levels of services. The top priced one was always fully loaded. The bottom price was minimal. The middle range one was usually what they selected. I would throw in some of the extras there and make some good profit on it.
By now you should be aware of common issues that keep popping up. Plan for them from the onset.
Make sure you give yourself some leeway in pricing so that you’re on the edge financially if they ask you for a little “extra” too. It’s nice to be able to have that extra time to give away freely — and it makes your customers happy too.
Thanks so much, Jill! He will love this sound advice!