Eat your losses or poison your reputation?
There are very rare instances where you have made a workable, formal business arrangement with a client, produced the deliverables on-time, kept the project within the budget, yet your client does not pay your fee.
There may be one or more of the following reasons why they do not pay you:
- Your client’s business is failing and they do not have the cash flow to pay you because there are other expenses that are more important.
- There has been a change in personnel and for some reason a new person in an executive position has decided that they will not take on some other person’s expenses.
- The person who is in charge of writing checks for expenses is not available.
- They are a disreputable operation.
It would appear that your options for recourse are fairly clear. You can continue to pursue the matter through your client contact with persistence and professional engagement. Over time, it is possible that your efforts will pay off and you will eventually receive your fee.
But what do you do when all of your efforts have been exhausted and it is clear to you that you will not receive your fee?
There are (at least) two options to consider. The first option is to deliver the final master, but withhold delivering the rest of the production elements until you are paid in full. This may be the least painful option for your client to endure since they have the final master in their hands and they do not need the production elements at the moment (thought they do own them). You also have a little bit of leverage while your client figures out a solution. Pursuing this course of action might be appropriate for a client that you know well enough (and trust) that they will make good on the transaction.
A more drastic response would be to initiate a lawsuit with an understanding that the time and effort to pursue a court case against your client still might not result in your being paid. If you feel that you must pursue this option, there is an important factor to consider.
Since the media production industry is a collection of specialists, there is a tendency for everyone to know everybody else who operates in a particular market. The implication here is that if you pursue a legal option, everyone in the marketplace will know about it, including other prospective clients who may be looking for media production services in the future. You do not want to be stigmatized with a reputation for being litigious against a client, even if your rationale for it is Justified.
What do you do?
Client Relations Scenario
In this scenario, you have exhausted all of your options and it appears that you will lose $3,000 from your client’s inability to pay your fee. You have already decided that you are never going to do business with this client again, but they are no small client either. They are a well-known entity who has clearly done business with other media production companies in the past, and will likely to hire others in the future.
As you can well imagine, taking the time and effort to pursue a legal solution would have to be balanced against the potential award of receiving $3,000 (assuming that you will win your lawsuit) minus court costs.
Are you better off pursuing a legal solution or simply taking a permanent loss and moving on?
What is your business decision in this scenario? What are the factors that inform this decision?
Should you publish a public announcement of your situation, such as on your professional website or on social media so that others can be alerted to the potential risk of working with this company?
Is taking the risk of publicly calling out your client worth the collateral effect of notifying all other potential clients that this is the consequence of doing business with you if a project goes bad?