said. “The landscape job was an $8,600 job, which could pay a lot of bills.”
Today, after nearly two decades as a contractor, Washington has a strong, thriving business. He benefits from the fact that his reputation and customer base consistently generate good clients for him. Word of mouth is the best kind of advertising. Marvin’s clientele for landscaping is largely self-selective. Washington’s typical landscape client tends to be professional, well-educated, and upper middle-class—not rich, but with enough disposable income to afford his services.
It’s not surprising, then, that what Washington calls his “crown jewel of miserable experiences” in business occurred toward the beginning of his career, before he’d carved out his niche.
The Collingsworths’ home was nice but not pretentious, and sat in an idyllic pocket of the greater urban community: a “farmlet” area of winding lanes, green pastures with grazing livestock, pretty trees, ponds, and creeks.
The Collingsworths, by all appearances, could afford to pay for landscaping. They wanted a patio garden installed. Washington prepared a detailed written estimate for an area with interlocking pavement stones, several trees and shrubs, a drip- irrigation system, and bark mulch, all for $8,600.
Elena and Dexter Collingsworth accepted the estimate.
Washington and his assistant got to work. And almost immediately the Collingsworths became less and less communicative. In fact, while the work was being done, they had become rather distant and unfriendly.
Nonetheless, the job was finished on time and on budget.
Everything had seemed to go well until Washington and his assistant finished the work and it was time to pay.
Washington mailed off the bill, but several weeks went by and no check arrived. Instead, he was in for a surprise: On Christmas Eve, he received a registered letter stating that the Collingsworths had found the landscaping work “sub-standard” and had no intention of paying for it!
The letter, signed by both Elena and Dexter Collingsworth, stated that they didn’t like the way the pavers had been installed, in addition to several other complaints. Washington was flabbergasted. A legal nightmare was starting, and he had no idea what would come of it.
Washington realized he was out of his depth. He knew that the small claims limit was only $5,000, precluding him from collecting the full amount. Washington did not know about mechanics’ leins (discussed further on) and had not filed one.
Washington contacted his attorney, who helped him to sue the Collingsworths. The family then countersued, alleging that Washington had been working in their yard without their approval. In other words, they alleged he’d opted to work for free. Not only that, but while incomprehensively working for free, he had improperly staked the tree saplings.
The ugly legal dispute put the two parties before the judge three times, all in an effort to collect the $8,600 owed to Washington, plus $9,500 in legal fees (which would be over $20,000 in today’s dollars). His lawyer told him “I’ve never experienced such a level of viciousness before.”
But when all was said and done, Washington won, and both he and his lawyer were ultimately paid.
This leads us to the next important point about Toxic Clients: Some of them will purposely deceive you.
Since he was just starting in business and needed customers, it’s likely that Washington appeared vulnerable—a quality that the Collingsworths were practiced at sniffing out.
While it can take some time to develop the instinct for spotting liars, every new business owner needs to consider whether that’s precisely the reason they’re being hired: Because they’re new.
There is a class of Toxic Client out there who will take advantage of your limited experience in the business world. Your honesty and flexibility is seen by such calculating types as a vulnerability. While they will say that they like to give new business owners a chance, what they really mean is that they’ll take a chance that new business owners won’t know how to deal with their deceit.
This type of behavior is accentuated by the expense to resolve matters within our legal system. Most deceitful Toxic Clients know that it can quite easily cost $50,000 in legal fees to resolve a $10,000 dispute.
They know that the expense, combined with the stress and time commitment of litigation, makes it more likely for a new business owner (and sometimes even seasoned ones) to walk away.
How do you deal with this type of client? There are a few things you can do.
First, check to see if a potential client has been involved in litigation. You can go down to the county courthouse (or, in some cases, go online) to see if he or she has been involved in court cases previously. Typically, if the person has been a plaintiff (the person bringing the suit), they claimed to be unsatisfied with the work. While some grievances are certainly legitimate, it can also mean that the person bringing the case was using the court system to gain concessions.
If the person was a defendant, it’s possible that they were sued because they never paid for the services rendered or products purchased.
A review of the county clerk’s files to see whether your potential client is litigious, either as a plaintiff or defendant, can be very enlightening. If you are a contractor, a review of mechanics’ lien filings (which can indicate a lack of payment for work performed) may also reveal a potential client’s true colors.
Second, check the potential client’s credit. You’re probably used to having your credit checked when you apply for credit. But unless you are a landlord, you have probably never checked someone else’s credit. That’s because there are strict limits on who can check your personal credit reports. But those restrictions don’t apply to business credit reports. Not only can you check the credit of someone you are planning on doing business with, it’s a good idea for you to do so. There are several sources for checking business credit:
• Cortera
• Nav
• DNB
• Experian Small Business
• Equifax
You generally don’t need your client’s permission first, unless you are ordering a blend of reports that contain personal information about the owners or principals. The source you choose will depend on how much information you need and how much you want to spend. You can often get a single report for less than $100. It can cost you more than that if you wanted detailed information. But if you are going to spend time or money working with a client, don’t you want to increase the odds you’ll get paid on time and in full?
If you, as a new business owner, see a pattern (or even one instance) of nonpayment and/or litigation, you should probably think twice about taking the client. Or, perhaps, ask the client to explain the situation. (“I see you were sued by Marvin Washington. What happened?”) How he or she answers the question hopefully will give you plenty of insight into the situation. You’ll have to go with your instincts on the response: A calm, reasoned explanation may sway you one way, again remembering that none of us are all that good at identifying the liars in our midst, while an angry or defensive tirade might sway you in the other direction.
Another strategy is to develop a retainer program, if you don’t already have one. You can ask for a 25% to 50% deposit on the work to be performed. The client who objects to
