In this episode Josh talks with Lou Bortone. They discuss how to identify and deal with difficult clients.

Lou Bortone is known as The Video Godfather.  He has been a pioneer and thought leader in the video space since the launch of YouTube in 2005.  He’s helped thousands of entrepreneurs and companies create and leverage online video to build their brands and dramatically grow their revenues.

Prior to his industry leading work in online video marketing, Lou spent over 20 years as a marketing executive in the television and entertainment industries, including stints as National Promotion Manager for E! Entertainment Television and Senior Vice President of Marketing for Fox Family Worldwide in Los Angeles.

In today’s episode you will learn:

  • How to deal with difficult clients
  • How to spot a bad fit before it’s too late
  • How to get paid what you’re worth
  • When to cut your losses and run

Transcript

Narrator:             Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program. When you do this, you’ll have a sale ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want in the way you want.

In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh:                      Hey, how are you today? This is Josh Patrick. You’re at Cracking the Cash Flow Code. My guest today is one of my favorite repeat offenders. His name is Lou Bortone. Lou is like the most talented video guy I’ve ever met. He’s helped me out a ton on how to make good videos. When we get done, I have to ask him about fixing my sizzle reels.

I actually [inaudible 00:01:30] some live footage that I can use. Send me on Yammer on today. We’re actually not going to really talk much about video although we’ll probably get over there. Already really talked about is how to deal with difficult customers and clients.

Lou just did a little short book on that which I found really amusing. Then of course, I had immediately reach out to him and asked him to be on the show again. So since he’s a repeat offender, you can blame me for that. [inaudible 00:02:00].

Hey, Lou, how are you today?

Lou:                       Good. Thanks for having me back, Josh. I appreciate it. We’re near peace Air Force Base in New Hampshire. I have a guy making tracks takeoffs and landings. So I apologize if it has some plane noises in the back.

Josh:      That’s okay. I used to live in [inaudible 00:02:14] Air Force Base and when I was over there, this is off topic, but I’ll tell you that. I was wondering how to fly? They used to let you do touch and goes on the Air Force Base. You could do three on one run on the runway. So you could take off and ran three times because the runway was so long was like 13,000 feet or something like that.

Lou:                       Oh, wow. It’s cool. I think that’s what this guy’s doing because he’s buzzing me every 10 minutes.

Josh:                      It makes it really interesting. Let’s talk about difficult clients for a little bit.

Lou:                       Yes.

Josh:                      What would you define a difficult client as?

Lou:                       Wow, there’s a wide range. A mutual friend Michael Port talks about the red velvet rope policy and how you should you let certain people in behind the red velvet rope. That red velvet rope needs to get stricter [inaudible 00:03:00] based on how desperate you are for business.

A bad client varies it’s like, okay, sometimes if you’re just starting out, you really want a client that’s any client that can pay or what Mike used to say, anybody with a pulse. But really a default client is just somebody who is not a good fit that you almost know in your gut right from the start, like, “Okay, this is going to be a tough one.”

As freelancers, especially solo service providers, that’s our lifeblood. Everything is one to one clients. I know we’ve dealt with a show of tough people in the past. I was like, try to be the really nice guy and bend over backwards. At some point, you become a doormat, and then you say, “Wait a minute, I have to own my value and stand up and charge what I deserve.”

Josh:                      One of the things that we used to do when I used to own a catering business, we used to have what we call the asshole fee, which essentially was we knew we had a catering client, a very difficult customer may increase your prices by 50%.

Lou:                       Yeah, I call that the [00:04:06] the pain in the ass fee.

Josh:                      If they said no, that was fine. If they said yes, that was also fine because at least we’re going to get compensated for having to jump through 19,000 hoops that we normally didn’t have to. At some point in your career, you want to get to the point where you can actually just say no to these folks because it just doesn’t worth working with them in the first place. But while you’re building your business, you need to have a methodology for making sure you don’t lose money when you’re working with a difficult client.

Lou:                       Yeah, because the scope creep especially it’s like, “Okay, well, this is what we agreed to.” Suddenly we’re doing this and this. So, as a solo service provider, I don’t typically do big, long agreements and things like that, which may or may not be a good thing. In some cases, it’s like, “Look, I know Josh. I’ve known him for a long time. We’re going to do this on a handshake.” Other people just don’t know until you’re into it. Then you so far into it, it’s like, “Okay, now how do I get out of this mess?”

Josh:                      That’s part of the problem is that, what am I supposed to do? How can I avoid doing this? I guess one of the questions I have is, how do you know beforehand you have a difficult client coming into your world?

Lou:                       You can typically, what some folks do, what I do is, if I do kind of an initial meeting or an initial call or assessment, you can almost always tell within 15 minutes, I think that, okay, this is going to work out great, or, I don’t know, you sort of had that gut feeling that like maybe this isn’t quite the right fit. You can do that.

You can certainly have assessment forms or onboarding or things at the beginning where you kind of say, “This is what the agreement is.” I think the more that you do up front and the more you manage expectations, the easier the whole process is going to be.

Josh:                      It make sense to me. I wish I was as good at that. I’m not always – the person you’re going to be working with is going to turned out to be [inaudible 00:06:03].

Lou:                       You don’t always know. I mean, you just sometimes everything starts out great in the honeymoon period and then things slowly start to deteriorate. So a lot of it is like, “Okay, well, if you’ve been through this enough, and you’ve learned enough hard lessons” then you start to go yourself against like, “This is I want to have some outs in place, I want to have some clauses” where I can say, “Hey, this has gone well beyond the scope of our initial agreement or after 30 days”, I’m like, “Okay, this isn’t working.” Yeah, always want to kind of have a note.

Josh:                      So when you have an out, do you give refunds?

Lou:                       Usually, I’ll try to be as generous as possible. The thing about the folks who trade time for money or, again, if we’re service providers, and our time is our asset, you have to be really careful about that. Because you can’t get that back obviously and try to really bend over backwards to leave on a good note to say, “All right, look, if it’s going to make them happy to get them a little bit more back than I should then I will.” But you don’t want to totally just be a doormat and say, “Yeah, here take it all back.” Because you’ve already done things.

I’ve had cases where, “Okay, I’m on the sixth version of this video.” If a client says to you, I don’t know what I want, but I’ll know when I see it. It’s like, “Well, I can’t work with it because that’s like working on spec.”

Josh:                      That makes some sense. One of the things we’re talking I found as far as managing project creep is one thing and then working with a difficult customer, I think is is a different. I mean, sometimes they’re combined, but in my experience, they usually aren’t. Your project creepers and one of the ways I stay away from that is, I work on retainer and not on projects.

Lou:                       Oh, that’s a great way to do it.

Josh:                      If you can figure out where you’re working on retainer, project creep doesn’t become an issue. Now, sometimes time usage becomes an issue. So let’s I’m charging $4,000 a month. My target time is $800 an hour, which means I’m actually giving somebody I expect to spend five hours a month working on that client. And if I find that every single month I’m working 12 hours, 12 hours, 12 hours and say five hours, five hours, five hours. I need to have a conversation about that. It almost never happens.

Typically, when I say it’s an all that you can eat, it might be one hour, two hours, one month in 10 hours, the next month, go back to five hours and then it bounces around, but it’ll average out pretty close to five hours a month.

Lou:                       Yeah, exactly.

Josh:                      So if you’re actually doing this sort of stuff and you’re working on it, it just seems to make sense that charging retainer is way better than doing a project fee.

Lou:                       It is.

Josh:                      In your case is difficult because you often get, “I want help on a video.” I know that my website designer, she has a good way of handling that, which is that she says, “We do the website, you get two revisions.” So if you’re in a project thing, and you’re in a tight project, it might make sense to say, “Okay, here’s the scope of service. We’re not going to just make you a video, but here is what we need to do before we go into overtime.”

Lou:                       Exactly, yes. Then the other problem with doing sort of the hourly is, you can say, “Well, why are you charging me so much? You said it only took you half an hour.” There’s that old expression. It’s like, “Well, if I do a job in 30 minutes, it’s because I spent 20 years figuring out how to do it in 30 minutes instead of 30 hours.” So you’re paying for the 30 years at a shorter time.

Josh:                      Yeah, well, I would agree with the old joke with the plumbers and said, “[inaudible 00:09:51] or five minutes he charged me $80.” He said, “Well, I knew it was screw the [inaudible 00:09:57].”

Lou:                       Exactly, yes.

Josh:                      And it fix your problem. Well, the truth is when you give somebody a sour price, they generally don’t give you a hard time about how much time you spend unless you spend five minutes on it. They’re paying you $5,000.

Lou:                       Because ultimately, they’re paying for a solution not for time. That’s definitely one way to do it. It’s hard if you do fall into that time for dollars trap, because you’ve got to constantly monitor like you say, especially if it’s retainer. It’s like, “Okay, well, this is taking much more time than I anticipated. Let’s go back and take a look at it.”

Josh:                      The truth is, if you’ve been doing it for a while, you’re probably going to know within a pretty narrow band, how much time is going to take?

Lou:                       Yes.

Josh:                      If you only say, “Okay, I expect five hours, but I’m going to charge for seven hours.” It takes four hours, you’re actually way ahead of the game.

Lou:                       Right.

Josh:                      Once in a while it will take eight or nine hours when you thought it was going to take seven hours. Instead of focusing on that, which is like 5% of the time, it makes more sense to focus on the 95% of the time where you actually are winning on that. I got into this argument with CPAs all the time. You try to get a CPA to stop charging by the hour.

They start charging a retainer fee is, “Oh my gosh, I can’t do that.” I will say, “Why?” Well, we might go over hours. I said, “How long have you been a CPA for?” They said, “How often can you estimate exactly how many hours you’re going to spend?” This is all about 90% of the time. So I said, so you’re worried about a possible 10% error rate when you have a 90% win rate? Does that make any sense whatsoever?

Lou:                       Exactly. I find they’re usually warning signs with certain clients to let me know if they can quibble right from the beginning. Are they going to ask the discounts and this and that, if they’re a pain in the ass up front, they’re going to be a much bigger pain in the ass when they’re a client. Ironically, it’s usually those people that are paying the least that are the biggest pains in the ass.

Josh:                      There’s actually a reason for that, believe it or not. If somebody is can only pay a little bit of money and that’s all they can afford to pay. $1 to them is way more important than $1 to somebody who’s making a couple hundred thousand dollars a year.

I mean, one of the things I have when I work on my one to one stuff with people is I always asked him, I said, “Hey, Chi, if you’re not making a half a million dollars a year, I’m probably not going to be the right person for you because I just cost too much money.” Every time you write me a check, you’re going to be really having a hard time. Because it’s such a big part of your thing. I need to have less expensive offerings for those folks.

Lou:                       Yeah, I mean, when I first started I was like, “Oh, well, I don’t really want to abandon the newbies and those people who me, but you need can provide other services for them or courses or things that don’t involve your one on one time.” There’s definitely way to do that.

Again, it’s just all about managing expectations. At the beginning, back in a previous life when I was ghost writing, one of the first projects I did, I work on a book for six months with somebody. Then you know, like I said, okay, well, we had a contract for that obviously. He said, “At the end of the six months, after all these revisions, and after him approving every chapter by chapter, you know what, my wife doesn’t like it. Can you start over?” I’m like, “Yeah, if you want to pay me the fee all over again.”

The wife doesn’t like it clause was not in the contract.

Josh:                      It’s kind of a ridiculous thing. Let’s talk about the difficult client and not just that one that we miss price on. My experience is clients— what I need to do is I need to disagree with a client and tell them the wrong upfront. The reason for that very simply is that I’m going through an engagement process. I’m only asking questions.

I’m not really talking about what I want them to do or how we’re going to work together. Somehow during my engagement project, I need to be talking with people in a way I would as if they were clients and see how they take it. You have an issue like that ever?

Lou:                       Yeah. Again, I find that especially in my video business, you have to be brutally honest with folks and just say if they give you really crappy footage and they say, “Can you fix them?” I’m like, “No, I can’t fix it.” I’m not going to tell you I can because I can’t.

You got to go back and do it again, or do this or do that. I think you just have to be like really brutally frank up front, like you say, and have those disagreements at the beginning so that you don’t end up going down a bad path later on. That’s the other thing. Again, when it comes to money, even when you’re working with friends or family things get a little weird. All of a sudden when it when money’s in play, it just changes the whole dynamic.

Josh:                      Yeah, absolutely. There’s no question about that. Even when there’s not money in play. It could change the dynamic because the type of consultant I do— there’s two types of clients that come in. One is a highly coachable client that actually wants to make improvements in the business. Then the other type of client is the type of client that wants you say nice things to them so they feel good.

Lou:                       Yeah, exactly.

Josh:                      As you know, though, I’m not very good at option two.

Lou:                       The other thing that is interesting is, I don’t know, I mean, I always say that there’s kind of this usually after you do this for a while there’s a gut feeling like this is just not going to be a fit. It’s not because they’re a bad person. It’s just that maybe it’s not a fit.

A lot of times, it’s if people have no concept of what I do or what it takes. It’s like, “Well, can’t you just push a button and fix that?” It’s like, “It doesn’t work that way.” It takes x amount of time. They have to know that like, “Look, trust my expertise and my experience and just obviously believe that I’m going to do what’s best for you in the long run.”

Josh:                      I assume this has happened to you, because I certainly think it happens to everybody is, you made a mistake and bringing a client in, you should not have brought in.

Lou:                       Yeah.

Josh:                      What do you do when that happens in your life?

Lou:                       Again, there’s usually a few outs or like maybe after the initial 30 days, you can both reevaluate and say, “You know what, I think I need to refer you to somebody else. So I don’t think that I’m the best fit for you.” That’s usually a way to do it where there’s no hard feelings if you have those out and if you have those checkpoints. So that you’re not locked into, like, “Oh, my gosh, I’m in this thing for a year and I can’t get out of it.”

I think you have to be willing to walk away from the money too. It’s like, “Look, life is too short” to say like, “Yeah, I really want the money that the clients bringing in, but I don’t want all the aggravation that comes along with it.” That’s tough when you’re first starting out, but you just have to be able to always walk away.

Josh:                      Makes sense to me, also. What you’re saying is that you are willing to fire a client if you don’t feel well?

Lou:                       Yep. Again, what I used to say was because I’m like, “Oh, yes, nice guy and sweet Lou and all that.” I’m like, “No, forget that.” I’m going to channel my godfather and say, “It’s not personal, it’s strictly business.”

Josh:                      The truth is, I’ve never actually asked the client to go away where they didn’t take offense.

Lou:                       Yeah, I know, it’s hard. The other thing that I find is like, I may say, “Well, you’re not quite ready for what I do yet. I can refer you to a junior person or somebody who’s going to charge less and give you the same thing you need because that’s what they do.” I could take somebody on, but it’s like, “I don’t really want to take your money because I’m not the right person for it.”

Josh:                      That’s true. Lou, I want to just change topics real fast for one minute because I’m really curious about this. I have never seen anybody put more courses out, more content out than you. You say you’re a solopreneur, but are you working with virtual assistants to do that?

Lou:                       I do it all myself. That’s all me. I think honestly, it’s because I have an adult ADD and a very short attention span. I’d rather create a new course than revive an older one. Part of it too is again, because what I do at working with YouTube and Facebook, I mean that stuff changes so quickly that a lot of the courses I do are perishable. I have to do new stuff, because the technology changes.

Josh:                      How do you do that so quickly?

Lou:                       I think it’s because I’ve been doing it for a really long time. I just sort of have a process where, “Alright, I know how I’m going to teach this course. I know how I’m going to promote the course.” Oftentimes what I do is I create a PowerPoint and then I narrow it and for me that’s fairly easy because that PowerPoint becomes my script for the webinar or for the class.

I like teaching. I mean, that’s the favorite part of what I do is creating and teaching courses. It’s just a little bit, if you like it, it’s easy. If somebody else may say like, “Oh my god, how do you do that?” I said, “I just do it.”

Josh:                      You got to put together a course and how you put your courses together.

Lou:                       Course on courses. Yes, definitely.

Josh:                      Was it Amy Porterfield does that?

Lou:                       Danny Yanny does it as well. There’s definitely people that teach courses on course creation. It’s a big industry. I mean, the online learning spaces exploding because so much easier, too. I can do it from anywhere.

Josh:                      Yeah. So I mean, you do so quickly and so well, I would highly encourage you to do that.

Lou: That’s a good idea. That’ll be my next course after the— so and the other thing too is I think is a sort of creative person. I just always have ideas. You almost have to have a discipline of like, “All right, I could do seven courses, but I can’t sell seven at once.” Let me try to focus on the one that’s going to work best. I do surveys and check with my folks and stuff like that and try to get a sense of what they need most.

Josh:                      I was just about to ask you. How do you decide what’s your next course topic going to be?

Lou:                       Yeah, I mean, oftentimes, it’s just as easy as a survey monkey course that I’ll send out to my list. I’ll put on Facebook and try and get just some feedback on what are people struggling with.

It’s funny because sometimes I can’t, like people say, “Oh, I really want to know how to edit.” It’s like, “Well, it depends what editing system you’re on.” I’d have to do six courses, one on Camtasia one on Final Cut Pro. Because there’s certain things that carry across but that’s so specific that we have to train somebody on.

Josh:                      That makes sense. Hey, Lou, unfortunately, we are out of time. It goes by quickly. I will highly encourage folks to contact you for the stuff that you do. How would they find you?

Lou:                       You can find me at loubortone.com and Lou Bortone on all the social networks as well.

Josh:                      Cool. I have an offer for you. One of the things I think that people always are trying to do whether you’re a solopreneur or you have 500 employees is become financially free from your business. Easier 500 employees than one employee. I have this little tool that I put together that helps you figure out whether you’re on the road to financial freedom or not.

We call the Cracking the Cash Flow Code or the four boxes of financial independence. The finance really easy, you just go to thecashflowcode, that’s one word, thecashflowcode and it’ll take you to a quiz. It will take you about seven minutes to fill it out.

At the end of that seven minutes, you’re going to get a sense of whether you’re on the road to becoming financially free from your business or not. This is Josh Patrick, we’re with Lou Bortone. You’re at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

Narrator:             You’ve been listening to the “Cracking the Cash Flow Code” where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102. Or visit us on our website at www.sustainablebusiness.co. Or you can send Josh an email at jpatrick@stage2solution.com. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: bad fit, lou bortone, cutting losses, sustainable business podcast, Sustainable Business, cracking the cash flow code, get paid what you are worth, difficult clients

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