By Garrett Sutton, Esq.
Excepted from “Toxic Client: Knowing & Avoiding Problem Customers

How do we identify Toxic Clients at the start? It can be very difficult.

It is not always easy to tell who is or is not toxic until a business relationship has taken a serious turn for the worse. On the plus side, the more experience you gain from being in business, the easier it will be to identify a Toxic Client. Still, even longtime business owners can be caught off guard. One reason for this is that, to some extent, being a business owner means being a bit of an optimist. You must expect success in delivering goods or services to satisfied customers, or you wouldn’t be willing to try it at all.

Get a free Chapter from the book and learn a listening technique to identify toxic clients.

Frank Troppe is a sales and management expert and author of two books who consults for sales organizations around the country. Frank notes: “Not many customers look toxic at the outset, so it’s easy to get lulled into a sense of complacency because we want to believe the best is going to happen. Whether we’re in a small business or a large enterprise, one wealth lever is to focus our optimism only on those people we can help the most.”

The unfortunate truth is that Toxic Clients have a way of sneaking up on us and infecting us with their toxicity before we even detect the symptoms. Even savvy, experienced business owners can fall victim.

That’s why it’s so important to practice identifying the signs of Toxic Clients before we ever do business with them. Here are the most common identifying marks of toxicity to be found in clients:

• Asking for or expecting free advice
• Not paying, or manipulating the payment process — negotiating for discounts, trade-outs, credit, or other non-standard arrangements
• Missing appointments or deadlines
• Making impossible demands
• Being abusive
• Acting irrationally
• Not making good use of your services

This is designed to show you some of the most common signs of toxicity. Work on using the strategies presented so that you can immediately identify these behaviors and develop a resistance to them.

Protect Your Business from Toxic Clients

Toxic Client: Knowing and Avoiding Problem Customers
Toxic Client: Knowing And Avoiding Problem Customers,” by corporate lawyer Garrett Sutton, equips business owners with the knowledge to detect and avoid toxic clients before they poison the business. Not only will the book teach you how to identify, avoid and “fire” Toxic Clients, you’ll learn additional strategies to protect your time and your business.

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Clients who want free advice

As an attorney, I used to face this issue. I would receive phone calls from people who’d present legal scenarios to me and ask for my opinion about how they should proceed. They were often looking for fast, free advice on a matter, but didn’t intend to hire me. Now, we have a receptionist screening calls. Unless it’s my wife or kids, you don’t get through without a booked appointment.

The same thing happens to me in social situations. At a party, I might be asked what I think about some legal problem someone’s having. After years of practicing law, I know that a small amount of this is to be expected, and with good friends I am happy to listen. But with new acquaintances, I have learned to draw firm boundaries and not overly engage in such discussions.

Anyone willing to spill out personal and confidential information in the midst of a very social gathering is someone who should be reigned in by suggesting that an in-office consultation is the more appropriate venue. I am very thankful if they do not call since, chances are, they were toxic to begin with. Over the years I have, as will you, become good at identifying this sign of a future problem customer and steer clear of it.

Frank Troppe has been a sales consultant for decades. But despite expertise in his field developed over many years, he had to learn some important lessons after he went into business for himself. And one of the most important lessons was that some potential clients were only interested in picking his brain.

“When I started our firm,” says Troppe, “we were willing to talk to anybody. What I soon came to realize was that we were having meetings at which people were not really interested in budgeting for an engagement. They just wanted free advice. This happens all the time in my field. ‘Thanks for the information, but we’ll try and do it ourselves.’” (For a humorous reenactment of these kinds of situations watch the below YouTube video for The Vendor-Client Relationship.)

Managers with an employee-staffing company, in fact, burned up two separate two-hour meetings with Troppe, who had spent an additional four hours apiece preparing for each meeting. The 12 hours he lost weren’t the end of it, either. The meetings were followed by subsequent phone calls that totaled another two hours. The managers never hired Troppe. Live and learn.

“It was my fault,” Troppe says. “I should have laid out terms of the engagement in our first meeting. In the consulting business, this can happen pretty easily and requires discipline on the part of the consultant to say ‘no’ at certain points in the sales process. We learned from this experience to close the sale on paid engagements early in the process—including requiring that the client will pay for our analysis.”

After several years in business for himself, and having built a solid track record, Troppe has become more selective about whom he’ll consider as a prospect. And he considers his time valuable, and to be paid for, during the screening process.

“I’ll meet once with anyone who looks like a qualified client,” Troppe says. “I often get a fee up front for initial consultations. Or at the minimum, I’ll have my expenses, such as research and out-of-town travel, covered.”

Troppe has extensive experience in coaching managers and sales forces. Before becoming a consultant, he earned a law degree and spent 15 years managing field operations himself for various companies. He is a certified facilitator for Miller Heiman—the worldwide company well known for its innovations in the sales-training industry.

But being in business for oneself involves the extra challenge of scrupulous time management—especially while marketing one’s services.

“Anybody with a small consulting firm will have to be disciplined in the time he or she spends selling to prospective clients,” Troppe says. “You can get people to talk about their problems all day long, but it doesn’t make you any money—or, in the end, the client any money—if all you’re doing is talking.”

After several years of running the Branch Productivity Institute, Troppe has developed profiles of “standard engagements” with good clients. These are the relationships he pursues with new clients. Troppe also has learned to watch for several warning signs when screening prospects, including:

• Lack of a budget to pay for services.

• Not openly sharing business goals. This implies that the client isn’t envisioning a long-term relationship. “It means you’re viewed only as a commodity provider, not a specialist,” Troppe says.

• Appearing only to be interested in a one-time, low-level engagement, such as a speech or seminar, regardless of the outcome. “They’re seeking a flavor-of-the-month program for their company,” Troppe says. “That for us is good for short-term cash flow, but in the long run it’s not the kind of business we want to build. We’re less interested in short-term gratification and more interested in long-term growth for a client. Then we can point to a track record of success.”

• Asking for payment terms that diverge significantly from Troppe’s standards: net upon receipt for speeches or seminars; 30-day net for retained services. “If somebody says, ‘Let’s wait for six months and see what the results are,’ that’s a no-go unless we’ve also contracted for gain—sharing at the end of those six months.”

Troppe always keeps an eye out for clients deliberately—or even unintentionally—using his expertise without paying for it.

Not paying

Not paying on time is always a red flag. If the client has agreed to pay the monthly retainer, but is paying invoices 90 or 120 days out, that’s a sign worth paying attention to.

“Usually, people don’t come out and say, ‘We need four months to pay our bills,’” Troppe says. “But if that’s happening, it’s already looking like a non-standard engagement.”

Troppe’s diplomatic term “non-standard” could be said another way: flaky.

A Toxic Client complicates the payment process. His check bounces, he asks for credit, he negotiates for discounts or wants to barter and do a trade-out. Or he lets a balance run seriously overdue. The concept of “no pay, no play” doesn’t register with this Toxic Client. And there is no end to the creativity when it comes to covering a bill.

Sometimes, the client will fall into the habit of making a partial payment on an outstanding balance. The client will insist that he or she will have more work coming to you, and then he won’t pay the balance until there’s another job on the table—a completely different job. You’ll be asked to add the
outstanding balance to the new order, so despite attempts to appear current, this client is perpetually, strategically, behind. Sometimes clients bite off more they can chew. They can’t afford the goods or services for which they’ve engaged.

The most common problem clients for contractors are those for whom the work is outside their financial range, says Marvin Washington, the landscape contractor in Case No. 6 who was forced to take the Collingsworths to court for nonpayment.

“They want work done, then when they realize they actually have to pay for it, they get squirrelly,” says Washington. “They’ll whine, nitpick, and try to get you to cut them a deal for some imagined fault with the work or do additional work for free. They usually just want to pay less than agreed upon.”

There are several strategies to employ with this kind of Toxic Client.

“Confronted with this situation,” Washington says, “a graphic artist I know very sweetly says, ‘Gee, I’m sorry. I didn’t realize you couldn’t afford this work.’ That seems to do the trick.”

Appeasement is a second strategy that Washington has used.

“It’s usually easier than going to court or getting into a pissing match.” He adds, “Sometimes it’s good policy if the client is just fussy and hard to please, and it results in return work. You can recoup the expense the next time around. In the end, though, what happens is that our rates increase overall for that client, to cover those instances when you don’t get paid for everything you do.”

But the best strategy is to avoid these clients in the first place. “Over the years,” Washington says, “I’ve learned to try to ascertain what kind of financial resources people may have. I’m particularly careful with young people who may not have learned to manage their money well.

“With others, I think it’s just a bad habit of trying to get something for nothing. I consider it a type of neediness. If I can’t appease them, then a letter indicating that I will hand the matter over to my attorney usually takes care of the problem.”

Unfortunately, dishonest people exist in our world, people who try to avoid paying their bills altogether. During the process of suing for payment, Washington discovered that the Collingsworths had stiffed a number of contractors. And they may have been playing other financial games.

At one point during that period, a private investigator contacted Washington. He was representing an insurance company that suspected Dexter Collingsworth of filing a false claim on a private unemployment policy. Washington told the private eye that he had met Collingsworth in his office before, but had never seen him actually performing any work.

“These clients made a career of defrauding people who perform work for them, including stiffing the teenage babysitter,” Washington says. “It was a perverse game for them. The pains they took to cheat would have exhausted a normal person.”

Missing appointments

Your time is valuable. Especially in business, when “time is money.” You fill your workday with productive hours. A client who shows up late or stands you up is stealing from you. This is even true if you are able to bill for the missed time or appointment. Why? Because your business’ reputation is based on producing results. When a client arrives late or doesn’t show up at all, it prevents you from providing goods or services to the client at that time, and therefore to produce results in that time.

Clients who consistently flake on scheduled appointments usually cause waves. They may resist paying. They may blame you or your support staff for the missed appointments. The bottom line: A client who lacks punctuality lacks respect for you and your business. It is a form of passive hostility. Consider this a big warning sign of toxicity. The time allotted to such a Toxic Client would better be given to a good client.

Making impossible demands

The Toxic Client is frequently disorganized and needs to be bailed out at the last second. The client often will change an order after the quote or approval of the work, creating further downstream work, and there’s always a rush job.

But there are even harsher demands made by Toxic Clients: To be on call 24-7, as if you didn’t have other clients as well as a personal life; to fit the client into your schedule no matter who else has been scheduled first; or even to perform magic.

Customers sometimes come to Jenna Starr’s salon looking for miracles. She recalls one scenario in which a woman had bleached her hair herself and then re-colored it with products from a supermarket. “It was all crazy, and then she wanted it to match a perfect color in a photograph in a magazine,” Starr says. “We told her that it was going to take three or four treatments at the salon to get the hair back to that shiny, beautiful color.

“The hair would have to keep being covered and coated to keep it healthy and to gradually restore the color.”

Most clients accept this reality. A few, however, throw a fit after the very first session. Such a client makes a clear point to Starr: “This is a person who can’t be pleased. This is a Toxic Client.”

Being abusive

Taking Abuse from Toxic Clients
Sometimes clients’ abuse is subtle, such as when ad director Pauly tried to undermine and sabotage designer Marla Welch.

Sometimes the abuse is overt, shaming, and hostile. Examples of this include a woman who called the dermatologist’s office and screamed insults at office manager Kenny Adams (From my book read Case No. 3: The Dermatologist) when he couldn’t get her in immediately for an appointment.

All such abuse is sending the same message: The client does not respect or value you. And that is not an indicator of a healthy business relationship—either short-term or long-term.

Gerald Westerbrook has a straightforward, decisive policy for handling abusive clients:

“The first time that the client treats me or my staff with disrespect — I don’t care how big or how small the client is — our relationship is over. Because our business is all about trust and respect. If clients don’t trust me and my professional opinions, and don’t respect me and the people who work for me, what do they need me for?”

This is the rule in our office. We have people who are nasty to the receptionist, but then very calm and pleasant to me. We call these clients ‘Eddie Haskells’ after the character in the classic 60’s TV show ‘Leave It to Beaver.’ Eddie would be downright nasty to his friend’s younger brother, Beaver Cleaver. But
then when Mrs. Cleaver showed up he was nice and charming, to an almost oily degree. We don’t tolerate the Eddie Haskells who are nice to the boss but mean to the rest. If you are mean and abusive to even one member of our staff you are toxic. You can find another firm.

Unlike other scenarios, a client’s propensity to be abusive is often easy to spot. Heed your common sense and you can detect this warning sign with ease. And a final warning: “If someone greets you with a drink
in hand at 2 o’clock in the afternoon, run like hell,” landscape contractor Marvin Washington says. “Drunks are extremely unreasonable.”

Not making good use of your services

Sometimes this is a difficult form of toxicity to detect, especially if a client is non-toxic in key areas. The client may be keeping current on your invoices and may be pleasant enough to work with. He or she may be showing up right on time for each and every appointment.

The problem is that the client isn’t making use of the services you provide, or considering the fact that you are a professional in the field. The result is that you have been put in an uncomfortable position. You are getting paid for something that isn’t benefiting the client, or you are forced to do something that
goes against your professional judgment.

In some cases, this means that, whether you intend to or not, you are milking the account. Chances are, your tip-off here is a feeling of guilt or of time wasted.

“The biggest issue for us is that it’s a distraction,” says Gerald Westerbrook. “If we’re not working together, moving forward on your plan as a client as with all our other clients, then we’re just chasing our tails.”

The principle of helping a client meet his or her goals far outweighs the collection of the retainer fee, Westerbrook says.

“Seeing your client be successful is vital. It’s a roadmap. It’s a process. It’s important to feel like you’re doing your job for your client, and that your product is of value.”

Sometimes a client is heading down a dangerous path and refuses your best advice. You are asked to go against your professional judgment.

“During the tech boom of the late 1990s, when dotcoms were going crazy, we had a few clients who wanted to get involved with those companies,” says Westerbrook. “We wouldn’t do it. As a result, these people left us. We would’ve had to drop them anyway when we had exhausted efforts to set them on the right path, but they were usually in such a hurry to “get rich” that they were willing to sever the relationship before we were. It was getting to the point where we were going to let them go anyway. It was in their worst interest to
advise them in the way they wanted to be advised.”

Westerbrook knew that investors in dotcoms were taking undue risks. A typical dotcom was a company whose defining characteristics included being an Internet presence instead of a brick-and-mortar location, with lots of venture capital raised, and an inflated stock price based on optimism and hype.

Sure enough, Westerbrook’s instincts proved correct. The dotcom bubble burst. Paper fortunes deflated massively and quickly.

“With investing, there should always be some intrinsic value or fundamental reason for why you’re going to invest in a company or other opportunity,” Westerbrook says. “And if you can’t justify an investment based on the basic tenets of investing, then you should never do it. If a client ignores your advice and wants you to proceed with a transaction, and you do, then you’re just not good at what you do.

“It’s like a lawyer saying, ‘Go and do this,’ when all the law books stacked on his shelf say, ‘Don’t do this.’ There are certain guidelines a professional must follow. Any good businessman will tell you that you have to follow your guidelines and give your best professional service. If you don’t, in the long run you’re going to have unhappy clients.”

Mark Goodman, the attorney in Reno, Nevada, has an active client base of all types of people. When it comes to dealing with certain toxic types he likes to refer to them as Shoppers, Nitpickers and Commodity Traders. Here are Mark’s thoughts:

“The Shopper is the prospect who only seems to care about price. The Shopper bargains aggressively on price, rates and payment terms. Obviously, price is an important consideration when looking at any product or service, and I completely respect that. However, if the only thing you care about is price, I don’t want to work with you. My staff routinely takes calls from people who (sometimes before even saying “hello”) demand
to know “How much do you charge for a trademark/contract/patent/whatever?” The Shopper will always wonder
if they could have received a better price elsewhere.

“The Nitpicker is quite simply someone who over-aggressively nitpicks your work and/or your billing. Of course, I expect clients to review my work and provide input and to review my billing’s accuracy. However, there are some people who pound you on every line item so hard that it’s impossible to have an efficient business relationship. I literally had a client once dispute a 40 minute charge on a trademark office action
stating that her uncle was a lawyer and that this trademark office action response should not have taken more than 20 minutes.

I wonder why her uncle did not take this case?

“The Commodity Trader is someone that views you, your business and/or your staff to be a commodity—merely a resource at their disposal — rather than a human being engaged in critical thinking. The Commodity Trader does not seem to acknowledge or respect your needs and circumstances as a business owner or person. One client I think about in this regard is a guy who 1) demanded to be seen right away where there was no real urgency, 2) negotiated the retainer fairly aggressively, 3) demanded immediate appointments with no real urgency, 4) demanded the work be complete by arbitrary deadlines, 5) stiffed us on the back end of the bill even though he admitted that the work was satisfactory and the bill was reasonable. It was a modest bill, and I know he had enough money.

“Admittedly, the Toxic Commodity Trader can be harder to spot than most others, but it’s worth keeping the concept in mind as it is so fundamental to your relationships with clients/customers. R “Ray” Wang wrote in the Harvard Business Review that business relationships flow on a spectrum from transactional to relationship-based. A transactional business relationship is where the provider and the client/customer do not have to interact very much, if at all. My relationship with the corner gas station is mostly transactional. I pop in my credit card, pump the gas and leave. The quality of gas seems uniform.
My buying decision is based on convenience of location and price only. The gas station owner doesn’t really care if I’m an obnoxious person, crazy or criminal. As long as I can operate the credit card machine and gas pump, we’re good. Fortunately (or sometimes unfortunately), most businesses are relationship-based. Most businesses that you and I run involve a substantial, if not intimate, relationship between the provider and
the client/customer. Managing these business relationships is a huge key to your business success.

“The Shopper, Nitpicker and Commodity Trader as potential clients share a common denominator. They view your business as a purely transactional one, like a gas station, when it’s not. It is important to identify and avoid these types of clients.”

Thank you, Mark.

A good working relationship with a client relies on you contributing your unique skills. Otherwise, you’re simply an order-taker. And while appeasing clients and giving them what they want may be an easy way to earn a living in the short-term, in the long run it’s a formula for disaster.

The client is usually too close to their problem to correctly diagnose the root causes. If you simply agree to help implement the client’s preconceived solution you are not helping the client or your career. You won’t be making a difference.

Instead, you must bring your own expertise, objectivity and outside outlook to the table. You must help the client go back and address the real challenges, some of which they are too immersed in to identify. In this manner you become a strategic partner, to everyone’s benefit.

Identifying the good clients, the ones you can help and succeed with, is a key to your business future. Identifying and dismissing the Toxic Clients is equally important. A friend of mine assigns a unique and shrill ring-tone for each Toxic Client.

That is his strategy for identifying the problems that are a part of his business. The next step is to dismiss…

For strategies on how to dismiss Toxic Clients and minimize risk to yourself get my book, Toxic Client.

Learn the Listening Technique Needed to Spot Toxic Clients

“Toxic Client: Knowing And Avoiding Problem Customers,” by corporate lawyer Garrett Sutton, equips business owners with the knowledge to detect and avoid toxic clients before they poison the business. The book distills what Sutton has learned from advising owners on corporate legal structures – where he has heard some of the horror stories first-hand – into case studies that illustrate the do’s and don’ts of dealing with toxic customers.

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