Sales Negotiations and Customer Reputations

Thoughts on how to handle negotiating before the sale when a customer has a reputation for late payment or non-payment.December 24, 2012

I have been trying to get work from local contractors for a while now and finally last week someone called and says he was referred to me by a local builder. I was excited because I finally have my foot in the door. I measure for a pantry in his home and come up with a price, then I start asking other local business about him and everyone of them without exception tells me to be careful when dealing with him as they all have had a hard time receiving there payments.

I think of how I can still do the job and get more work from the contractor and also be assured that I won’t lose money. I asked for more money upfront so I will be making some money if he decides to give me problems after the install. Now it looks like I have lost the job and probably the contractor also. I am just wondering if I’ve done the right thing. On one hand I cannot afford to lose money, and on the other I cannot afford to lose clients.

Forum Responses
(Business and Management Forum)
From contributor J:
If your customer doesn't want to pay for the things he buys, there's no magical approach that will make them into a good customer. If his reputation is accurate then he's looking for a sucker and he dumped you because you don't seem to be one. Don't beat yourself up over that.

Did this guy explicitly object to a particular aspect of your bid? Do you know that he was okay with the price but not the large up-front cost, or are you guessing? If you've been trying and failing to get work from local contractors for a long while already then your problem probably runs deeper than how you approached this particular deal. It might be more fruitful to explore why you keep having problems rather than minutely dissecting this one event.

From contributor E:
Call the customer and ask why you didn't get the job. Explain you spent time on their estimate and were trying to figure out why you didn't get the job. For me, if a customer has a history of not paying. I pass on the job. It's not worth the hassle.

From contributor O:

There are quite a few contractors that are actively searching out the new shops (read: inexperienced) so they can give them that “School of Hard Knocks” education we all hear about. These people are parasites and will always be there, ready to take you and anyone else for a ride. The best you can do is reach higher and be the best professional you can be and run away from those types. While the appearance of money is there, it is just an illusion. You may consider reaching beyond the contractor to the homeowner. They are less likely to active cheat you, and they control the money. If you seek work with contractors, you are always at their mercy.

From contributor D:
You can't lose something you never had. I have been warned about a few over the years and I knew going into the deals to be careful. I have never had a bad experience with those I worked for like you speak of. If you get a gut feeling the guy is not going to pay then walk. Otherwise I will give them a chance and make sure the relationship is cohesive. What the others say may be true but you would think by now after ripping them all off the bad guy would be gone? You can set your contract up so you get all except maybe 10% until after install.

From contributor T:
The last time I had a prospect that raised the "will I get paid?" red flag it was a lawyer not a contractor. He had a window seat and mantle made incorrectly by someone, and he himself was complicit for not insisting on a shop drawing. Still, I looked at the job and provided a proposal to do it right. Given the baggage, I skewed the payments in my favor so I would get a larger deposit to do the drawings, a larger main payment, and would only have 10% due at install. He sent an e-mail in which he quibbled that my terms would "leave him with no leverage in the event of unsatisfactory performance." I'm not making that up. I replied that if he had contacted any one of the six references I provided, he would not be worried about unsatisfactory performance, and thought that would be the end of it. Amazingly, he called me a week later and wanted to negotiate the terms, but I (politely) hung up.

Being a good judge of character is a major asset in business, but you should also temper your communication by biting your tongue as much as possible. Just follow your gut, bite your tongue, and move on. Recently I was getting coffee in a local shop and an elderly gentleman asked if that was my van (I had just gotten some graphics with photos) and we had a nice chat followed by his visit to my shop to discuss the home library he'd been wanting for many years. He even had a plan drawing of it. I provided a proposal, to which he replied that his budget was only half as much as my quote. My immediate instinct was to offer four letter word (IKEA) but I bit my tongue instead. My expectations were minimal, as I get very little work from my immediate locale. About three months later he e-mailed me saying he had saved the money and was ready to move ahead, and it turned out to be a nice job for me, and he was really delighted with the results.

As was said, some contractors are parasites that can only survive on the backs of others who do good, hard work. All those negative reports you got couldn't be a mistake, so be glad you didn't get sucked in and ripped off.

From the original questioner:
He was fine with the price until I told him I needed money up front and he asked for a price list so he could see what he was paying for. I didn't produce a price list and told him it was for materials. That’s when I got the feeling I was better off without his business.