In today’s episode of The Startup Chat, Steli and Hiten talk about what to do if your clients and customers are not paying you or paying too late.
When you provide your services to a client, you expect to be paid for it. But sometimes, clients pay very late or worse, don’t pay at all, and it’s important to know how to handle a situation like this if it arises at your startup.
In this episode, Steli and Hiten talk about why you shouldn’t rely on one big customer, the first thing to do when a customer doesn’t pay, how to prevent this from happening and much more.
Time Stamped Show Notes:
00:00 About today’s topic.
00:33 Why this topic was chosen.
01:44 Why you shouldn’t rely on one big customer.
02:25 The first thing to do when a customer doesn’t pay.
03:40 What it’s like working with big companies.
05:37 Things you could do when this happens.
06:10 How to prevent this from happening.
07:14 Why you should ask for payment upfront.
08:47 How cash is king and key to a successful business.
10:10 Why having a great contract really matters.
3 Key Points:
Make sure you don’t rely on one big customer.You don’t control other people.The best thing to do sometimes might be to take it as a loss and move on.
Steli Efti: Hello everybody, this is Steli Efti.
Hiten Shah: And this is Hiten Shah.
Steli Efti: Today on the Startup Chat we're going to talk about what should you do if your clients or customers aren't paying you or are paying way too late. Here's the reason why I wanted to talk about this, Hiten. I had a founder email me a few days ago, basically asking for advice. He has one very large customer, the problem might already start there, and that customer just decided not to pay and isn't paying, is basically saying that they are going to pay but he has to wait to get that money. He was describing how helpless he feels in he's like, "This is a really big company. I don't really know what to do. Should I get a lawyer? I don't have that much money. Should I just wait, but I need the money right now. Can't wait for a couple of months to get it. What do I do?". That triggered the thought like this has happened so many times in so many different situations when a customer's not paying or paying way too late that I thought, "Hey, this would be a good, cool, fun episode.". To jump to this one specific example, we might go more broad broadly, but to start there, what would you advise this founder to do? Single founder, you have a big customer, the customer decides money is going to come a little later, what can you do? What should you do?
Hiten Shah: Make sure you don't rely on one single customer. That's that large [inaudible 00:01:36]. That's what you do before you get in a situation. But even if you're in this situation, go find more customers. You don't have much of a choice. This is the reason this is going to be a fun one, you don't control other people. There are actually things to do and I know we'll talk about them, but someone doesn't want to pay you or is lagging, then the first thing I do is I go look in my contract. What does my contract say? Hopefully they signed a contract and they're contractually obligated to certain things. Usually some of them involve paying on time and on time is determined by the contract. I start there, I send them an email or a message, or a phone call, or whatever and I let them know basically work's going to stop until they pay. You don't need to work until they pay.
Steli Efti: The service will be interrupted, whatever the service is.
Hiten Shah: Just like your cable, just like your water bill, whatever. You don't pay, you don't get service. I would look at my contract because you probably forgot what you put in there,
Key points in this episode
In this episode
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