Who's on first?
So I have two decent projects working right now as well as my ongoing contract managing a DS network. Client A is a longstanding client who gave me my first contract when I started my business. While pleasant to work with, they come to the table with vague ideas, poorly written scripts if any, lots of change requests, complain about the invoice, drag their feet on approvals, and worst of all pay 60 net. Client B is new, high energy, high profile project with more to come if I do a good job on the first one(no bull, the guy is legit), and best of all, gave me a CC number and said, "just make sure to let me know when you bill it and send me an invoice, now go create". He has no issue with any of my rates, we gel personally and professionally and is reasonable in his requests.
I have one project for Client A that was finished and billed 30 days ago, at the time my cash flow wasn't great and requested that they pay early this time to help a brother out seeing as I had just gotten ripped off for a great deal of money from another client who went belly up. Client says, I'll see what I can do. Haven't seen it yet. Meanwhile, we start another project, I get a rough to them, they drag their feet with the changes once again. Client B meanwhile who has been paying as he goes, needs his project ASAP. So who gets the priority? Client A's project was in the pipeline first BTW. My inclination is to give Client A the same priority that they give me and work on Client B's project first.
Higher Ground Media
You already know the answer, Mick.
You just want validation to feel good about it.
Ask yourself: is this a business or a hobby? Are you in it to make a living, or to make friends? Suer you can *sometimes do both, but what's the priority here? If you don't make billable COLLECTABLE time, will you still be around to help the others that are slow to pay?
Since the older client is slow and disorganized, I say go serve the quick-turnaround guy that pays promptly first, then come back to finish client A when you can. WHen client A figures out that lack of prompt payment equals lack of prompt results, you may convert their behavior.
As you are operating now, you're only enabling their continuation of bad client behavior, aren't you?
[Mark Suszko] "You just want validation to feel good about it."
Thanks for the input Mark. Yes I come here for validation as I value the opinions of other professionals on this forum. However, feeling good about it isn't my goal. Just looking for opinions not psychotherapy, my wife's a therapist so I get plenty of that at home.
Higher Ground Media
Your wife's going to be an excellent sounding board for you on this then. She can put a therapists' context on the business relationship you've fallen into with client "A".
I'm going to guess she tells you to put "A" on the back-burner and conentrate on building a good relationship with "B". By the time you are done with "B" and ready to resume with "A", "A" may have their act together. In the meanwhile, you put that time to productive and financially rewarding use with "B".
And like I said, if you don't like the slow pay or no-pay relationship with "A", that is never going to change unless and until you hold back delivery in expectation of payment. It may be too late with "A" to change them much if this has gone on so long it has become "baked into" the business relationship. If that's the case your only real option is an ultimatum. In this economy, that's not a choice made lightly, I understand. One way to test the flexibility of "A" would be to make them sign a new contract on the next job, with better terms for you in it.
Like I said before, I think you've probably already made the right decision on your own and in the end it's only you that can. What others here can do, based on their experiences, is confirm your logic or counter it with an alternative view/opinion. That's what I meant by "validation".
[Mark Suszko] "Your wife's going to be an excellent sounding board for you on this then"
Not really, her specialty is marriage and family, not douchebag clients!!! (while tempted, Mick refused to put an LOL after his statement, no matter how appropriate it seemed at the time)
Higher Ground Media
Perhaps you should talk to your banker. See if you can get AR financing for Client A's projects, go to Client A and explain that you have to do that because of their payment slowness, and that you need to get POs from them for your banker, and will need to charge them the interest on the money you are borrowing based on their tardy pay schedule. You can't be expected to float their business payment schedule, because you have payroll to pay too, supplies to buy.
This problem is endemic in the world of advertising agencies, and by working with a business banker, you will gain valuable cred, especially to help you grow your business. However, in this economy, it may be hard to find a business banker to help you, though it seems to me, given my experience that US Bank and Bank of America (a bank I would not personally use) are two that specialize in business banking, which often includes AR financing. How tight the market for this kind of thing is, is anyone's guess.
I personally ask for money up front (1/3rd in front and more depending on the trust of the client). Also, you might talk to your client about a retainer. If they are a monthly regular, tell them you need $x on a regular basis, you will credit them with so many hours, and account for the hours used every month. One of my clients is done that way, and they don't even ask for an accounting anymore for hours used. I track them anyway. Maybe explore an escrow account, where they would deposit a large chunk of the costs in advance, they would control it, and you draw down what you need, when you need it. If the job is ongoing for $10k a month, for example, they deposit the whole amount in the escrow account and draw as needed. On delivery, use get the final, remaining amount. Talk to their bookkeeper about methods that person would be willing to back with management, then talk to management about it.
I'd say you would be crazy to put your relationship with
client A in any Jeopardy. This is a longstanding client that has paid you net 60, on time, since the beginning of your relationship,
You have agreed to this in the past and changing now would be a mistake. Your problem was not caused by client A but by the client that
went out of business (not a happy day for them or you) So what do you do? Look for an additional source of temporary capital.
Bank line of credit, Credit card advances, Friends & Relatives.
It sounds like your business is sound and you have a temporary
cash shortage caused by a failure of a client. This is not a reason
to put any other relationship in jeopardy. I know of many many
houses in this industry that would jump for joy and count their
lucky stars if all their clients paid them in 60 days. I doubt very much that those advising you to change the way you do business
get paid in exactly 30 days or by the terms of their billing.
In this industry 60 is the new 30, You should feel good
that you have clients that give you a steady flow of work and
pay in 60 days. You will simply have to find a way to plug the whole
caused by the client that went out of business, But to do this by
squeezing other clients is just bad advice.
I think I agree with Neil. If you have a long term client (A) that pays their bills (albeit a bit slow) there's no reason to alienate them. Focus your immediate attention on Client B and develop that relationship.
There's a good chance that Client A (given their pace of getting you information and feedback) will not even notice that they've been put on the back burner.
If you get into a log jam with multiple deadlines/deliverable and your business/service model lends itself, you may be able to get some freelance help to do some functions in background (image prep, capturing, assistant editor type of work) while you remain the face to your client.
If that's not possible and/or it becomes as issue for Client A and you're forced to make a choice - do what you have to do. But I would try to accommodate both clients for as long as you can.
It may not feel like it, but you are in a very enviable position. You're just experiencing growing pains - and that's quite a feat in today's economy!
Good luck to you!
Production is fun - but lets not forget: Nobody ever died on the video table!
Thanks everyone for the input, most valuable. I think Steve really hit the nail on the head, very well thought out and balanced feedback. One thing I forgot to mention is the 60 net thing with client A has not been from the beginning of the relationship. I used to work directly with the sales agents who had control over their advertising and had accounts to pay for it upon delivery, that changed with the new Marketing Director getting rid of almost the entire sales team and taking control of every project. Now everything has to be run through accounting directly AND the company is hurting financially like everyone else. Thanks again everyone.
Higher Ground Media