If there’s one thing that aggravates me more than the customer that acts like a jerk, it’s the customer that takes forever to pay for services rendered.  These are usually the types that have never owned their own business, and are quite often also the type that expect you to bend over backwards to accommodate special requests or to perform extra services for free while on the job site.  Funny that they ask so much of you but think nothing of taking a month to pay.  In their world they’re just happy that that they needled you for every bit of free labor they could get and don’t give a damn about your cash flow.

As in life, one of the keys to running a successful business is to anticipate and head off problems before they arise.  I’ve gotten in the habit of explaining our payment expectations when homeowners call to schedule the work at their home, and it’s a ritual that has been pretty effective in avoiding payment problems down the road.  No matter if you’re trying to become a general contractor or a grout cleaner, tell them up front that payment is expected immediately upon completion of the job, and that they should make their check payable to “so and so contracting, LLC”.  If they want to pay with a credit card they should have it ready when the job is done.  Setting the stage in this manner will alert the customer to the fact that you take immediate payment seriously, and in most cases they will follow directions to the “t”.  There’s a way to do this without sounding like an a-hole, and if you can’t figure it out on your own then ask someone for help or get someone else to do the scheduling who has better phone etiquette.

No matter how well you prepare, however, there will inevitably be customers that “forgot their checkbook” or “can’t find their credit card” or some similar nonsense.  If it’s obvious that they absolutely will not or cannot pay on the spot, act a little shocked, then hand them a self-addressed stamped envelope (you should have several prepared in your work binder for this kind of situation) along with the invoice, and make sure to write “Your prompt payment is appreciated” on the bill.  These few simple steps will go a long way in demonstrating to them how serious you are about collecting the money ASAP.

If a week has gone by and you STILL haven’t received payment, skip the usual thank you letter and instead send out a demand for payment letter.  Make it friendly in tone, but be clear that your company relies heavily on weekly cash flow to keep up with your financial obligations and that their immediate payment would be very much appreciated.  End it with another expression of gratitude for the opportunity to perform your service at their home, and don’t forget to include another SASE just to help grease the skids a bit.

If two weeks have gone by without sign of payment, you need to make a phone call and politely ask what’s going on.  If that doesn’t work then, of course, other options come into play which aren’t very pleasant but which are occasionally necessary, and include lawyers, debt collectors, and liens.  The bottom line is that you don’t want things to digress to this point, so do your best to set expectations before work has even begun, and you can help to limit the number of deadbeat customers that you’ll eventually have to deal with.

If you’re interested in becoming a general contractor, or any kind of contractor for that matter, you need to prepare yourself for the occasional customer who expects you to work for free.  No, I’m not kidding.  Let me give you an example.

Recently, a local homeowner contacted me to ask for a written estimate for work at his home.  I, of course, said that I would and then asked if there were any other related services he needed from us so that I could price those as well while I was at the home.  The homeowner declined.

So, I gave the estimate.  That evening the homeowner contacted me to say that he was very interested, but added the caveat that if he “gave me the job” he’d expect me to perform some other tasks for free that had not been mentioned previously.  He then topped it off with my favorite line: “If you do a good job word will spread”.

Needless to say, I was a little peeved, as I always am when people expect something for nothing.  It was bad enough that he withheld this information from me during our first series of conversations, but by doing so he also deprived me of the opportunity to even investigate the other issues while I was on his property.  He essentially was giving me the choice of either saying I would perform free work on something that I had not even physically examined or saying that I would not perform the work for free.  I chose the latter.

As expected, he wasn’t thrilled with my response and I didn’t get the job.  Good riddance.  Dealing with difficult people is not a hobby I particularly enjoy, and in my experience the customers that act weird in the beginning tend to act weird for the duration, and are more likely to make petty complaints, ask for even more freebies later on, and take so long to pay that I end up having to send out a demand for payment letter.  Those kinds of people lose me money, and I can’t have that.  My attitude is, if you want to wheel and deal, go to a car dealership.  Don’t expect a small business owner to make all sorts of concessions on labor and price, especially the specialty contractors who do small-revenue jobs.  I have bills, too, and my company is not a charitable organization.  If a homeowner is  going to try to bargain with a contractor, they should at least let him/her know up front all the services that need to be performed, and then bargain on price after the estimate has been given.  Otherwise it’s just a waste of everybody’s time.

I know, I know.  Everybody likes a deal and I’m being too harsh.  Maybe, but the real point of this story is that you, as the contractor that wants to grow your business, must accept the fact that with every concession you make and with every free service performed you are just delaying your ultimate success.  You’re allowing yourself to be held back.  Once your business is established you have to stick to your guns when it comes to price or people will take advantage of you.  Most of these customers are not business owners and don’t recognize the multitude of costs that we face, so while they might be thinking you have room to budge, you should know better.  You should know when to walk away from a losing proposition.  In the meantime, double your efforts to target wealthy, time-challenged homeowners who appreciate quality and who recognize that it comes with a price tag.

In my recent post about keeping the customer for life, I spoke about how you should send every customer a thank you letter or card after the job is complete.  A few of you have expressed an interest in seeing a sample thank you letter.  Well, here you go!  Just download the document below and you should be able to edit it according to your needs if you have Microsoft Word.  It's short and sweet, as thank you letters should be.  Hope this helps.  This site now also has a sample demand for payment letter as well, so check that out if you have any customers that are dragging their feet as far as paying up for services rendered.

Download sample_thank_you_letter.doc

In my last post I talked about treating your employees with the dignity and respect they deserve, but that’s not to suggest that you should let them walk all over you.  As a small business owner, your job is to set expectations for employee behavior from their first day of employement, and then to stick to these rules and expectations for the duration.

Indoctrinate New Hires

New employees should immediately be given a packet that details what is expected of them, specifically with regard to uniform or dress codes, treatment of customers and co-workers, and quality of work.  In addition, it should include information about what they can and should expect from you as their boss and/or owner.  Then have them sign it and make copies for both parties.  This will serve to set clear guidelines from day one and to provide a record in case you have to fire them later for failing to live up to the agreed upon expectations.  Don’t be a jerk during the orientation process, but let them know that you have certain goals and rules in place and adherence to them is required.

You should then immediately assign the new employee to a trainer who can show them the ropes for a few days.  Many people feel overwhelmed during their first few days at a new job, and you owe it to them to provide enough training and support to make the transition easy.  It’s also in your best interest because an ill-trained employee, especially in a home services business, can cause amazing amounts of damage to your reputation and brand.

Rules Are Rules.  No Exceptions For Friends.

Becoming a contractor who has hired help will mean that you’ll need to be vigilant in practicing workplace equality.  It’s natural that over time you’ll become close friends with some of your employees, especially those that have been there a long time, but it’s very important that you hold them to the same standards as everyone else.  You’ll be tempted to let them slack off on occasion, or maybe you’ll overlook something that they’re doing wrong because, hey, your buddies.  But you must know this kind of favoritism will not go unnoticed by newer employees.  They will begin to grow resentful of this perceived lack of fairness, and the result will be a loss of respect for you, which always leads to a deterioration of workplace morale and productivity.  We’ve all been in that workplace situation where the boss is all cozy with one or two of your peers who seem to get preferential treatment.  Remember how mad that made you?  Don’t be that kind of boss!  If your friends at work have a problem with being treated the same way as your new hires, then maybe they’re not such great friends (or employees) after all.  Run a tight ship, respect and care about the help, practice equality, and you will have a productive and happy workforce.