Tips for Dealing with Profit-Draining Customers

Anyone who has been in the design and remodeling business for any length of time can tell you about customers from “Hell.” We have all had them, and we’ve all wondered, at some point, how we got involved with them in the first place.

There are many warning signs with these customers that indicate they’re not going to be your best friends in this future partnership. Identifying these profit drainers, and avoiding them, will save you not only money but the headaches and stress that go along with them.

Not Paid in Full
Early in my career, I sold kitchen cabinets to a couple who’d had a fire in their house. They gave me a deposit for the cabinets and I ordered everything we had discussed. When the cabinets came in, I called them and set up a delivery. While they said they needed the cabinets as soon as possible, they were waiting for some insurance money. Though I explained that our agreement stated that I was owed the balance upon delivery, they begged me to install the cabinets then. The woman gave me the sad story about her young kids and how much it would mean for me to help them out. Well, I decided that this might turn into a great referral, so I had the cabinets delivered the next day.

After several unanswered phone calls, I confronted my customer in person, only to have her tell me that she had no money and wasn’t going to pay me, and if I wanted payment, I would have to sue her. Though I considered suing, the truth is, it would have cost me more to go to court than to write it off. It was a hard lesson, but we now follow the letter of our agreement exactly, no exceptions.

How can you tell if your customer has no intention of paying his bill? Here are some tip offs.

  • You make a presentation and the customer decides that your agreement needs to be rewritten just for him. When this happens, you need to find out the real reason for the changes. For many, it’s a way of controlling the process after a previous remodeling project didn’t go well.

    To deal with this type of customer, we explain that the contract is not the most important thing; instead, it is the reputation of the company that the customer should look for. We give all of our potential clients a list of 100 current referrals of past customers. We also give them a list of our vendors with a contact name and phone number so they can check with them as to the quality of our business.

  • The customer challenges your pay schedule. For material delivery on jobs, we ask for a 50% deposit with the order and the balance due upon delivery. For installed projects on a standard install of a kitchen or bath, we ask for a 50% deposit with the order, 40% deposit due when the project starts and the balance of 10% upon usable condition. If customers owe us money for a final amount, and we have completed the project as per the agreement, that money is due us. If we don’t get paid because the customer wants us to service something, we explain that this is the service part of our agreement. We do not service work that is not paid for. There are some customers who will be sure you can never complete their job, so get away from using “upon completion” for your final amount due.
  • The customer seems to know more about your business than you do. He questions everything you do. He does not like what you tell him, or he says that no one else does it this way. To deal with this, we use interview forms that are great qualifiers. They request contact information, source of the lead, and enough information to decide if this is going to be a profitable lead or a waste of time. We prefer that the first appointment be in the store because we want to meet the client first to be sure we are compatible. We also want to avoid having our designers go to the house of someone we’ve never met for security reasons.
  • Beware of people who are overly friendly. These are customers who want you to think they are your friends. You’ll start thinking of them as friends, and they will earn your trust. However, when it comes time for payments, they will try to push it off, playing on that friendship. They will not understand why you don’t trust them and why you won’t allow them to make the payment on their terms.
  • Be suspicious of the job that sells too easily. The fact that the customer made the purchase with little or no concern about price might mean he has no intention of paying the full amount.

Complainers and Know-It-Alls
I’m sure many of you have had a great job go south – not because there was a real problem, but because the customer became impossible to work with. No matter what you did, it was not right because the customer did not want it right. She found a problem with something that was really not an issue.

At this stage, we usually walk away because it is easier than fighting. It’s usually a losing battle to try to fix problems that are not problems to begin with. This customer is betting that she can wear you down until you just go away.

The way to work with this customer is to stay on top of everything: Any extras that are ordered must be paid for in full, collect all deposits according to the agreement, and ask for the customer’s input all along the way to avoid complaints.

Red flags should also be flying high whenever you run across a customer who tells you that a friend, a co-worker or a relative is helping you with this project. When this happens, let the “expert” voice his view and let him lead the way. By doing this, you will have the opportunity to show what you know. When the home-owner starts to see the wrong information being given by the “expert,” and that you are the one providing the correct information, he will usually come around.

Finally, beware of the person who calls the showroom and identifies himself with his title, such as “I am Joe Smith, the CEO of XWZ company.” Be very careful with this person, because he sees himself as special. You will be expected to jump through hoops to make him happy.

There are a lot of things that customers do to send up red flags. We have to recognize that not all customers are good for us. Some customers are going to be more work than they’re worth, and may just end up costing us money. Recognize these customers, and walk away.