How to avoid legal problems in consulting

via GIPHY

I posted a newsletter recently entitled “When Clients Don’t Pay”.

I got a lot of responses in email, which is always encouraging. I’m happy to know that folks are reading and getting something out of my ideas.

One colleague suggested that I modify my last point about going to court. He suggested that legal action does make sense after other avenues are exhausted.

Join 38,000 others and follow Sean Hull on twitter @hullsean.

My feeling about avoiding court, has only grown stronger over the years.

There are usually only a few reasons a customer won’t pay. In my experience each of them are avoidable without going to court.

Here are my thoughts on those…

1. Misaligned on tasks, deliverables or deadlines

I find weekly progress reports and endless notes go a long way towards avoiding this problem. If it does arise, there is usually something specific in those notes that can be remedied.

One also needs to be willing to compromise. Putting yourself in the other’s shoes will help to understand their perspective.

Communicate, communicate, and communicate more!

Related: When you have to take the fall

2. Budget problems

Here there isn’t a lot to do anyway. Although companies are obligated to meet payroll by law, they are not so with vendors. If they are out of cash, will court really resolve that?

My way of heading off this problem is, billing/invoicing in smaller increments, getting a deposit, and keep on top of things, so larger debts don’t build up.

Related: The fine art of resistance

3. Shady customers

These I usually suss out well before becoming engaged. I’ve had a few incidents where a prospect was meeting me to get “free advice”. They ask a lot of architectural questions, and take careful notes. Then don’t engage, or use their own people to implement.

One situation in particular I remember was around scalability. The product was a website & app for teachers. From the beginning they built it to sync data instantly. As they got bigger and more customers used the platform, their servers became heavily loaded.

I suggested, instead of looking for a technical solution, why not offer your customers, silver, bronze & gold service levels. For the gold customers, yeah they get their own servers, and can sync all the time. But for the silver ones, once-a-day would probably suffice. Much less load on the servers, because 75% of customers would go silver, 20% bronze and 5% gold.

They actually ran with the idea and implemented it, but never hired me even for an hour of work. I knew they implemented it because I had a friend in the company. It is experiences like that which teach you quite a lot about business and about how you conduct yourself.

This has happened a few times, and I guess it’s part of doing business. But usually that comes out before we go much further, so in a sense it’s a blessing in disguise. ๐Ÿ™‚

Related: How to hire a developer that doesn’t suck

Get more. Grab our exclusive monthly Scalable Startups. We share tips and special content. Our latest Why I don’t work with recruiters


Also published on Medium.