As a service provider offering essential phone service to our clients we need to make a lot of tough decisions regarding how we run our business, and that’s doubly true when our clients experience rough economic times. This is true not only for DLS but for many other smaller companies that develop close, personal relationships with their business clients over the years.
On the one hand service providers can be rather hard-nosed and impersonal with their clients and demand full payment, on time, every time their bill comes up due. Lots of providers take this approach. They don’t listen when their clients experience financial difficulties and they don’t make any overtures to help their partners out when times get tough. This hard-nosed approach is pretty common among larger service providers who tend to be less likely to ever meet their clients half-way.
Other, smaller providers like ourselves opt to “work” with their clients when economic situation falls a little bit apart. Smaller providers often look at this as a way to protect their investment in a client or a way to build customer loyalty. Being able to work with our clients on this sort of compassionate one-on-one basis is a big perk involved in running a smaller, independent, more personalized business than the really big guys.
So, which of these two approaches to client-management should we abide by?
Often we would stand by our clients, even if that means we occasionally find ourselves burned by individuals and organizations that aren’t quite as scrupulous as we are.
Here’s a good example of how playing it kind can sometimes blow up in your face.
The Real Estate Bust
You don’t need us to tell you the economy’s been a little turbulent over the last few years. The economy really took a hard knock back in 2008, and the real estate market was one of the hardest hit industries from this most recent financial collapse.
We provide telecommunications services to a number of real estate agencies, which meant a few years ago we found quite a few of our clients encountered difficulties paying their full bill on time every month. We made the decision we were going to stand by our clients and help them get through the financial crisis with their phone lines intact. By working with these agencies individually and determining what they could pay, when they could pay it, and how much we could let them build up in past-due payments, we helped a number of real estate agencies stay in business as their market crumbled around them.
The Burden Accumulated
Few of these companies wracked up thousands of dollars in past-due payments. This might not sound like a ton of money to some, but considering multiple clients accumulated these debts, we shouldered a relatively significant financial burden on their part. What’s more, we know plenty of our competitors would switch the lines off on any client who couldn’t make full payments for a couple months in a row. For many of our competitors, the thought of allowing thousands of dollars in past-due payments from clients would be completely unthinkable.
Yet we made an unconventional decision on the matter and took on debts from our clients to help them get back on their feet. After all – some of them were our clients for over 10 years.
Did we make the right decision or the wrong decisions helping to keep our clients afloat? And what does this decision say about how we now run our business?
If you figured out some of our clients decided to skip out on settling their debts to us you’re right. Some of the real estate agencies we decided to help out during the worst stretch of the financial crisis ended up switching to another service provider in order to avoid paying their bill to us.
These clients did not switch to another service provider because they were dissatisfied with the VoIP phone service we offered them, they switched service providers because they didn’t want to pay off the debts we let them incur month after month over a couple of years.
How do we know this?
Well, these clients stayed with us as long as their businesses weren’t doing so well. They stayed with us for the whole stretch of time when they needed phone service but couldn’t afford to pay for it. They stayed with us for the entire time we kept their phone lines on while accepting their partial payments. As soon as they could afford full payments they changed service providers and, most tellingly, never attempted to settle their debts with us or to set up some sort of payment plan where they could slowly pay down what they owed us, the past-due payments they accumulated when times were hard.
In other words, these clients took the easy way out of jumped ship to avoid paying the bills we let them build up.
No Pity-Party Here
Now, we’re not playing a “poor me!” card here. We made a clear business decision here to help our clients out, and it’s not like we were suddenly blindsided by thousands of dollars of unpaid service charges overnight by our clients. We didn’t see the financial crisis coming any more than anyone else did, but our clients rang up these debts over a long period of time. These debts accumulated over months and months, over a number of years, as we let our clients make incomplete payments to help them stay afloat. They were still paying us for our services over this period of time, they simply weren’t paying everything they owed from month-to-month.
Putting Clients First, Keeping Clients First
Is this debt worth pursuing? That’s a topic for separate discussion. Well, for one thing pursuing debts in court can take time and effort. The whole process requires commitment of organizational resources we’d rather put towards other elements of running our business.
The other aspect of this is that some customers actually did come through, caught up on their bills once their circumstances improved. And it did help us forge stronger relationship with those clients who ended up honoring their commitments. But are we sending the right message here ?
Maybe we should have adopted a firm disconnect policy a long time ago. But is it the right way to run a small business VoIP service provider?