If you have been in business for any length of time, you will likely have served clients of all stripes. Some will be fantastic to work with: those who never complain, pay on time and bring in new clients just like them. Then there are the clientzillas: taking up the majority of your time with negativity, only wanting the free advice and allowing their bills to become overdue. While not every client can be ideal, filling your client list with difficult ones can sap your time and energy, and it takes time away from finding better clients. Here are four ways to avoid the headaches these clientzillas can create.

Develop Acceptance Criteria for New Clients
The best way to avoid taking on bad clients in the first place is to know the signals that manifest in the first meeting. Start by analyzing your good clients. What makes them good and what common qualities do they have? It may be that they listen carefully to what you say and ask for clarification when they don't understand something. It may be that they have a certain income level or that they own their own homes.

The commonalities of great clients will be different for every business and every industry, but it comes down to the fact that, with some experience, you will be able to spot good clients - and conversely, bad ones - quickly. Formalize your criteria for taking on clients and ensure that you only accept those who meet your standards.

Have Clear Billing and Payment Terms
Collecting accounts receivable can be one of the most time-consuming and aggravating tasks for any small business owner. You may never be able to get every client to pay on time, but you can increase the odds by formalizing your billing and payment policies. For example, you may decide to bill at the time the service is provided on a net 30 basis, meaning that interest is tacked on after 30 days. You may send a statement every 30 days, including the original invoice amount and the interest that has been added. At 90 days, you may choose to turn bills over to a collection agency to collect.

Whatever you decide your policies to be, give a written copy to every new client and have it posted on your website so that every client is clear on what will be expected from him or her.

Use Contracts
For all but the tiniest pieces of work you do for a client, having a detailed contract signed by both you and the client can clarify expectations and lessen conflict. A contract outlines the responsibilities of each party, as well as the deliverables and time frames. It becomes the guiding document if your client complains about the work or the deadlines. It also protects you if your client decides to take legal action. The best part of having clear contracts, however, is that they can help avoid the conflict altogether in many cases.

Show Them the Door
No matter how careful you are in taking on clients, you will likely still have a few problem ones. Before they get to the point of affecting your bottom line and your employees' morale, fire them. Yes, you can do that. It can be as simple as explaining to them that you feel they may be a better fit with a different company. If you're just starting up, you may be hesitant to pass on any business, but getting the time back to seek out better clients is worth it.

The Bottom Line
Every entrepreneur has to deal with clientzillas at one point or another. Building processes into your business to both deal with them and to avoid them altogether will make your business life easier.

Related Articles
  1. Professionals

    Career Advice: Financial Planner Vs. Wealth Manager

    Understand the differences between a career in financial planning and wealth management, and identify which is better for you based on your goals and talents.
  2. Professionals

    The Best Schools for Financial Planning

    Among the best universities for financial planning are the University of Georgia, Boston University, The College of Financial Planning, Texas Tech, San Diego State, Baylor, Fairleigh Dickinson ...
  3. Economics

    What Do Central Counterparty Clearing Houses Do?

    A central counterparty clearing house facilitates trading in European derivatives and equities markets.
  4. Investing Basics

    What Is Schedule 13G Used For?

    Schedule 13G is an SEC form an investor must file upon taking ownership of 5% or more of a company’s outstanding shares.
  5. Economics

    The 6 Industries Driving New York's Economy

    Learn about the six most influential industries in New York, the most economically productive city in the country, and home of Wall Street and Fifth Avenue.
  6. Professionals

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  7. Professionals

    Tapping Mind Maps for Better Financial Planning

    Here's how to use mind maps to better assist your financial planning for clients and, ultimately, improve your business.
  8. Home & Auto

    Before you Buy That Home: Find a Great Realtor

    Most people think of a good realtor as a successful salesperson, but we should not assume than that's what makes a great or even a good realtor.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
  10. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  1. Do financial advisors work only in banks?

    While the majority of financial advisors work for financial institutions such as banks, a large proportion of them are self-employed ... Read Full Answer >>
  2. What are the benefits of financial sampling?

    Financial sampling allows auditors to approximate the rate of error within financial statements. For accounting purposes, ... Read Full Answer >>
  3. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    The differences between a Chartered Financial Analyst (CFA) and a Certified Financial Planner (CFP) are many, but comes down ... Read Full Answer >>
  4. How do I get started with a career in asset management?

    The asset management industry has a variety of different career paths. Depending on what asset management area you would ... Read Full Answer >>
  5. How do I attract high net worth individuals (HNWI) as clients at my financial advisor ...

    While the majority of financial advisers provide wealth management and comprehensive financial planning to a wide range of ... Read Full Answer >>
  6. What developed countries have the highest concentration in the banking sector?

    The developed countries with the highest concentration in the banking sector, as of 2015, are the United States, the United ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!