In this episode, the founders discuss the challenges of getting paid by clients, and how we deal with it.
Connect with the owners on Twitter!
• Todd Werth: @twerth
• Jamon Holmgren: @jamonholmgren
• Gant Laborde: @gantlaborde
Todd Werth: Hello everyone. Welcome back to Building Infinite Red. My name is Todd Werth. I'm a Co-founder and CEO of Infinite Red. Today we're going to be talking about cashflow, why it's king, why it's difficult to get paid often by your clients or your customers. For those who are just starting out as an entrepreneur how it's different than getting paid by your employer. So let's get started. First I'd like to introduce Jamon Holmgren.
Jamon Holmgren: Hey everybody.
Todd Werth: And Gant Laborde.
Gant Laborde: That is my name if you're trying to sell me something, please call up and say Gant Laborde so I can hang up or start messing with you.
Todd Werth: Yes, it's like "Chenandler bong”. Gant Laborde is his real name. Welcome Gant. If you're a business owner or you run businesses this part you probably know very well, but for the people who don't know this, if you're an employee and your employer doesn't pay you, you can go to the labor board and go to various government agencies and they will get that pay for you generally speaking. They'll take care of it. They'll enforce the laws, that kind of stuff, and you're going to get your money.
Todd Werth: Employees are pretty well protected and most companies would not dare not pay their employees because of this. If you run a business and you're dealing with customers or clients, it's very different. Let's just say a business like ours where we offer services and clients pay us for those services or our time, for example. If they decide not to pay us, there is no government agency to go to, you basically, if you can't talk them into paying you or if you have no leverage over them, for instance, they want you to keep on working for them. You're really left with only two choices. One is to sue them, and then get a court order for them to pay.
Todd Werth: Now, that only works if they have money or if they're still a company or they still exist.
Gant Laborde: Or if they're actually in the same country even. It gets really complicated if you're doing world level work.
Todd Werth: Correct. The other thing can do is you can send them to collections, which is even worse than the first option. The only thing that does is often the collection agencies won't charge you until they get money, but if they get any money, it's a very low amount compared to what they owe you. And the same problems apply if they have money, if they exist, if they're in your country, that kind of stuff. I just wanted to set up the basic issue where people have to be incentivized to pay you outside of some sort of law or government agency enforcing it because that's not going to happen.
Jamon Holmgren: There's two different sort of ways to look at money in a business. There's profits, revenue that you're essentially earning. We have a contract, let's say it's for $100,000 and we do the work. We've earned $100,000, but you can't pay bills with that. You have to have actual money in your bank account to pay for it. And so that's where the cashflow comes in, because if you got paid upfront, great, you have the money before you even earn it. Now you probably don't want to spend it yet because if they cancel the contract or something happens like that, then you didn't earn it. You have to give it back. But then if you didn't take any money up front and they don't pay you until nine years later, it kind of doesn't do much good right away. And that really causes problems because you still have to pay your employees. You still have to pay your bills. So that's why cash flow matters.
Todd Werth: Yeah. I do want to clarify one thing. Jamon, you alluded to this. So if you have a $100,000 contract and you do the work, the revenue is 100,000, then you have all your expenses for doing that work. And I'm not talking about general business stuff, but actual expenses you paid to do that specific work. In our case is paying mostly humans. That say you paid 80,000, so now we have as $20,000 of margin or $20,000 profit even if they pay on time. Let's say you have net 15, which means they have to pay in 15 days after you invoice them. Even if you send out the invoice a week later and in 15 days they pay you, you may have already paid the $80,000 for that month, in which case you're basically giving your client a loan for 30 days of that money.
Todd Werth: That's part of cashflow as well. You always have to think in two ways. When you're tracking how well you're doing, you should be measuring your revenue. You should be measuring your revenue, you should be measuring your margins and your profit and that's actually what you should be basing your business decisions on. So we got this contract and it was profitable. We made lots of sales, that kind of stuff. However, you can look at your financials and say, "We've done awesome. We're hitting all of our metrics." And then our bank account has $7,000 in it, and you could go out of business while being successful. And cashflow has almost nothing to do with whether you're running the business well or not.
Jamon Holmgren: There's a few things you can do to kind of hedge against this. One is the take money down, right up front, take a deposit. If you have $100,000 project, maybe you take $30,000 down or whatever might cover your what we call exposure being. Like if you stopped the project today, how much money would they owe you? And if they didn't pay, you'd be out.
Jamon Holmgren: If the maximum exposure that you might have ... Well, example of this, let's say that you charge just for easy math, you charge $10,000 a week and the project is on a net two week type of a situation at net 15, then that means that you have $20,000 of exposure because they're supposed to pay you within two weeks of you sending the invoice. So you need to make sure that you have at least $20,000 in your deposit, that's pretty normal in business and preferably more like cover your exposure even more. And if they stop paying, you immediately stop. And if they just ghost on you entirely, you keep the part of the deposit that covers how much money they owe you.
Jamon Holmgren: So that's how you kind of cover for that. You can get into situations though where they want these ridiculous terms, they want a 30 day terms. You have a big team on it. We've been in the situation where we've had long-terms big teams on it and in some cases, inadequate deposits. That's something that would be good to kind of dive into a little bit more as we get into this.
Todd Werth: I think we explained the general concepts, that's kind of get the boring stuff out. There's a lot more to it. But what I'd love to do now is let's get more into entertaining stuff for our listeners and just talk about some real difficulties because a lot of what Jamon just said too is also ideal. Every aspect of what he just said could not happen. Like, yes, it's wonderful to get paid up front, but it may be impossible for you to get that done, you haven't been able to. I'm kind of curious, let's give some ... We're not going to mention names or anything or even infer... We don't want to disparage anyone or whatever, even though what we're going to say is absolutely true.
Jamon Holmgren: Yeah. I've been doing this a long time and I've got lots of stories from the early days when I had no clue what I was doing. Just assume people would pay me, right? Because that's what I would do if I owed a bill. I would pay it. I remember one time, this guy, he had a small company that had to do with sports, I guess. And I was just building a website for him and it was mostly just me, although I think there may have been one or two employees at that point. And I did the work, and the check never came. It wasn't even that much, this is my early days when I wasn't charging very much. And so I kept emailing him, emailing him, never got back.
Jamon Holmgren: And then little bit later I was just like, you know what? Forget this, I still have access to his website. I'm just going to take it down. I'm just going to take it down. And I took it down and a day later he calls me up in panic, like, "Hey, how can I pay you? How can I pay you as quick as possible?" So he PayPals me the money and then I put it back up and I forget about it. Then the next year I was doing the hosting, so I sent him an invoice for the next year's hosting and we're talking like 120 bucks or something. This is not much and he doesn't pay it, he doesn't pay it, he doesn't pay it. And like two or three months later I'm like, you know what, I'm going to take this website down again and he calls me up.
Jamon Holmgren: So this thing happens again. And then I got a little bit more wise and I was like, "Okay, well I'm just going to put a little ticking time bomb in his code where it just says if the date is less than a year from now, then continue to work. But if it's more than a year from now, just die." Because I know it's going to happen again. And so I forgot about this and then I sent the invoice off the next year and I'm just sitting there and he calls me up in a panic, "My website's down, how can I pay you?" I'm like, Oh, okay, that thing went up.
Jamon Holmgren: I actually did that for a client who was obviously ... At that point I pretty much cut him loose and said go find your own hosting and your own a different web developer because I'm tired of dealing with this. But it was kind of like a forcing mechanism. And I think what this comes back to is you have to have some level of leverage over them. You have to have something, some power in your possession to make them pay.
Jamon Holmgren: The nuclear option is like suing them and that's using the legal system. But there's other things like number one, have some of their money, like the deposit or number two have ... They need you, they need you for various things. Hopefully you actually have the level of trust and good relationship where you can just say, "Hey, we didn't get that check." And they send you a check. But that doesn't always happen.
Gant Laborde: Well, Jamon, have you heard of someone took your idea and actually coded like WordPress plug in an Android and a bunch of stuff. It's called not paid. Have you seen it?
Jamon Holmgren: I have not seen this. No. This sounds interesting.
Gant Laborde: Not paid is hilarious. On the date that they're supposed to pay you every day after that you can just see how many days it takes, the website slowly fades away. It just changes the opacity of the entire website. So that like after 60 days and them not paying you, their website is essentially disintegrated.
Jamon Holmgren: This is great. That's great.
Gant Laborde: It's pretty funny.
Todd Werth: I do want to mention that this may or may not be legal in your jurisdiction.
Jamon Holmgren: You actually could get in trouble for this. That was something that obviously I would be very careful about that at this point. There's a lot of other ways to have leverage.
Todd Werth: If you steal a stick of gum, that is a theft. It is a crime and you can go to jail for that, depending on how much you steal. What we're talking about is actually contract law.
Gant Laborde: Mm-hmm. We're civil.
Todd Werth: If someone owes you $100,000 and they don't pay you, it's not a crime they didn't steal it from you. They violated your contract for sure. Also often you're talking about companies. They're not humans. There's no human ... I mean, heck, even with the financial crisis 2008, I think only two humans went to jail. Which is so you can ruin the entire world economy and not go to jail. You're not going to jail for not paying a $50,000 bill to your designer. Breach of contract isn't a crime and it has to be dealt with in a civil way.
Jamon Holmgren: Of course, we are not lawyers, consult your actual lawyer for this sort of advice. This is just our experience. I had another situation come up years ago. We had this kind of extensive contract negotiation where we went back and forth, back and forth, and they kept trying to strip out certain sections and they kept wanting to remove the deposit for example. And I kept putting it back and saying, "No, we need this. I'm not going to do this job without a deposit." We got to the end and they said, "Okay, we'll sign it with the deposit." The latest one I had sent, they said, "We'll sign it." And they sent it back signed and I signed it and we started the project.
Jamon Holmgren: Well, little did I know they had removed the deposit language from the contract before they send it back, even though they had agreed to sign the one with the deposit. It went to my project manager at the time who read the contract. And rightly, he was like, "Okay, no deposit on this one. We're just going to keep working on it." He was just kind of looking at it from that perspective. I didn't notice it because I didn't go reread the contract assuming that they had in good faith signed the right one.
Jamon Holmgren: That wouldn't have been an issue if they had kept paying me at that point, but they didn't. At one point they stopped paying and we started noticing it like, "Hey, our account's receivable." What they owe us is getting pretty big and this became a bigger and bigger problem. The problem was we had no leverage because we didn't have a deposit. We could stop work and we did eventually stop work.
Todd Werth: That was our leverage.
Jamon Holmgren: Yeah. That was the leverage. That was the only leverage we had. And eventually it worked and they paid us. It ended up being more of accounting snapper than anything. I don't even to this day know what was the deal with that contract, like why they sent back the one with the statement removed with the deposit. But since that point, I'm much more careful to reread before I sign the contracts.
Todd Werth: Don't feel bad about that, Jamon, everyone does that. It's hard because you want the work, you may actually not have any work. We've had situations where we really worry that they're going to pay us, but we decided to work anyways because the alternative was we didn't have any work, so we rolled the dice and often when you roll the dice you lose. But it was at least a conscious decision, because this company we knew it was probably going to go out of business. There's not going to be anyone to sue if you wanted to sue them that kind of thing. You brought up an interesting point and there is a lot of differences why people don't pay.
Todd Werth: Sometimes it's a smaller company and the owner just understands how this works and they'd have no interest in working with you again, maybe they're mad at you for some reason. Who knows? And they know if they owe you $10,000, you're not going to do anything about it because talk to a lawyer, if it's not 50 hundred thousand dollars, it's not worth it because you're going to pay way more than lawyer fees. And they know that, so they just play the game and they don't pay you.
Todd Werth: But for bigger companies, for bigger corporations, corporations aren't good. They aren't bad. They aren't immoral, they aren't moral, they are robots. It is not uncommon if a corporations having cashflow problems to say, stop paying vendors. The person you're talking to, the person who hired you for the job really wants you to get paid. Even tell him you're going to stop working. They're freaking out because they need this done. They are contacting their accounting department or whomever. It doesn't matter because the corporate robot said that we're not paying vendors right now. Now in that situation, we can talk about how to rectify that situation. There's things you can do, but the point is, even if you have the best relationship, and of course, Joe would never not pay me as such a wonderful guy. We went skiing with his family. Joe made me not be in the position to guarantee that payment.
Gant Laborde: Ken, I think had a really cool way of describing corporations saying they have the same stomach, but they don't have any soul, which is a pretty interesting way of taking a look at it.
Todd Werth: That's interesting. I mean, they have a bigger stomach.
Gant Laborde: A bigger stomach. Yeah.
Todd Werth: I don't know if anyone who's ever listened to the podcast knows, but my wife's an accountant. Did you guys know that?
Jamon Holmgren: No, no. Yeah, the first I heard of it.
Todd Werth: As an accountant, she knows how it works and she's unfortunately worked for startups that put the accounting department in this horrible position of not paying their vendors. Just real quick spoiler, you just want to be the nicest or the most annoying or tack on the most fees or threatened to sue the most to get your name put up to the top. So when they do pay a vendor, you're the first one. I would always start out with be the nicest, a pro tip for all entrepreneurs. Be really nice to accountants and be really nice to your IT people. Both of them can make your life miserable.
Jamon Holmgren: I had a client again years ago, I've been doing this for a long time, where he owed me I think $8,500 or something like that. I was like, "Hey, you need to pay this bill." We were pretty much wrapping up the project and he called me up and he was just yelling, swearing at me on the phone, telling me that we had done a horrible job. I knew that wasn't the case because, I was working on the project. I knew that we had done good job, but he had a couple of small things where it was kind of like maybe he had like a half a point. So I was like, "Okay, we'll fix that and then will you pay us?" Yeah, yeah. If you fix that then I will pay you.
Jamon Holmgren: And so we went in there and I had one of my developers work on it for another week, and got that knocked out and call them up. And he says, no, it's still not fixed because of this other thing. We spent another week on it. I was just being dumb. There's no reason why I should have kept going at that point. I think we spent another three weeks on it. And then I was like, "Okay, I'm done." We're not going to do any more free work for you. Pay us what you owe us.
Jamon Holmgren: I look at my inbox and he had revoked our hub access and I never heard from him again. Like, he was just gone, just a complete scam. He owed me at that point, well, if you count the free work, it would've been well over $10,000. I remember one time when he called me up, he was yelling at me. I thought you were a man of your word. This was one of his statements. And he this whole time was planning to scam me. This is the exception rather than the rule. I've worked with so many people that have bent over backwards to make sure that we got paid, that we're on time, that if they ever missed a payment, they were super apologetic and embarrassed by it. That's the normal, at least with the people we've worked with. That's been awesome. And that's probably why I was willing to give this guy more slack I guess. In this situation I thought he would be more like that, but clearly he wasn't.
Todd Werth: I do agree with Jamon. The norm is people do pay you. The problem with the business's often your margins are so low. If you have one or two people who don't pay, it really hurts. I don't want you listening to think that none of our customers pay. That's completely not true.
Gant Laborde: Well, on top of that- Sorry, we're going to have edit one second.
Todd Werth: Oh, I'll edit it, but not in the way you mean to narrate for our listeners Gant just muted and is now yelling at his dogs.
Gant Laborde: I did. I muted. My dog wanted to be on this podcast so bad and I appreciate that if you don't edit it they will.
Gant Laborde: What I wanted to add to that is, we talked a little bit about leverage and people who have trust issues for certain reasons will be a little bit afraid of that, but people who have trust issues for the wrong reasons, because they do plan on messing you over, they're going to be very hesitant about it. I think that saying like, here's it's bonafide, it's like good faith money. Then that's something that's good meeting of the minds between two people. And that's part of what we're talking about.
Gant Laborde: If you don't have leverage in your contract or if they're afraid to give you some kind of leverage like that situation that happened before, of course those are the contracts that are going to end up not paying you because they know that they're going to fail and they're afraid to set themselves up in that situation. Most of our people who do bend over backwards to make sure we get paid are also the people who are very friendly and understanding and have strong contracts with us that they would like to be held accountable to.
Jamon Holmgren: That's a great point Gant. As you get into these situations and you start negotiating, you can't always negotiate, like contracts are not ... Before you sign it, it's a conversation. It's always something like, "Hey, this won't work for me for one reason or another." And I would get a lawyer involved because they can spot things that you won't notice. But a good lawyer will also tell you this is not ideal, but if you really want this project, it's maybe a risk worth taking and here are the risks so that you can actually make a decision based on that rather than just maximum coverage, which isn't always possible.
Jamon Holmgren: And sometimes you need the work. Now, if you were like me with this deposit thing, if I had actually done my job and looked at the contract after they signed it, and noticed, Hey, there's no deposit there pushing back, and they won't budge on it, then it's not worth doing, because you get yourself into a world of hurt. It would hurt a lot more honestly to do three months worth of work thinking that you're going to get paid and then not get paid rather than just honestly take a vacation for a month and then find another job.
Todd Werth: Yeah. That's good advice Jamon. We all do realize it's super hard to do, especially when you're new negotiating contracts, and by new I meant I didn't do this for like eight years.
Jamon Holmgren: Yeah, me either.
Todd Werth: And it's really hard to pass over a work as well. The stuff is all very difficult. You don't want to negotiate. This is assuming you're a decent person now, how we interact with our vendors, meaning we’re their clients, we really try to interact with them well and be the best. I mean our goals would be their best client.
Jamon Holmgren: Absolutely.
Todd Werth: Because we know that we will get priority service because we do that with our clients. First off, you be a good client for sure. I do want to talk about real quick, Jamon, mentioned something, the gentleman, and I'm being nice with that word, the gentleman was calling up and yelling at Jamon and telling him he was doing a horrible job and Jamon knows he wasn't.
Todd Werth: One of the red flags, which I highly recommend you run screaming away from clients is if they're gaslighting you. If you don't know what that means, they're trying to make you believe in a reality it doesn't exist. The truth is the gentleman didn't want to pay. That's the truth. But they don't say that. They'll come with all sorts of little tiny things to make it why it's your fault and try to change reality.
Jamon Holmgren: And if there's any little like possible truth to it, they will just dig and dig and dig at that. But you have to think in terms of what's reasonable.
Todd Werth: Right. This kind of person is not having a genuine conversation with you. They are not a partner with you, which is really want with your clients. These people aren't going to change. They're toxic. You want to get as much money as you can out of them and then move on as cleanly as you can.
Gant Laborde: Actually, I want to ask, I think something that's really interesting for our listeners is, we have varying sized contracts and sometimes you'll go to a contract and they'll say, "I'm sorry. We're a mid-sized company. The only thing we can do is net 60 for paying you." And they start to take away or they have some inflexibility or they need you to sign this NDA or they need you to sign this extra indemnification clause or something like that. What are some of the places that we've seen before, and this is definitely for you, Todd and Jamon. If you are stuck one way that you can ask for other things or you would just say, "I'm sorry that's too much." And you would walk away from the contract.
Todd Werth: The right thing to do is say, "I'm sorry." And walk away from the contract. None of you all are going to do that, especially when you're starting up. Here's the truth. When you're starting out, you don't have a lot of leverage. You don't have a big pipeline of people coming in. And so you have to take less than desirable projects. You know why? Because you're on the bottom. It's sad. It sucks. But it's true. A less desirable project in this case, maybe great client, there may be lots of margin or revenue. But the less desirable is the horrible contract and someone who's more established and has a big pipeline of clients may pass them over. That's why you're getting the chance to get the project because you're taking a much bigger risk. It's risky. You have to decide that the risk is worth it.
Gant Laborde: Well, I mean, I guess you could finagle as well. So if they have something where I guess you could ask for a larger deposit or perhaps change your rates so that way some of the risk is mitigated, especially if they have like a really long payment period. I'm not sure.
Todd Werth: If your girlfriend or boyfriend are constantly being a jerk to you. It's because they think they have more power in the relationship and they're not really into you to be honest. If they were, they wouldn't do that to you. The reason this particular client is pushing back is because they have more power or maybe they have someone else they can go to. You're not a big deal to them. So yes, you're absolutely correct, Gant. But since this is already a risky project, if you make it less risky, it makes you less desirable in their eyes, because everything you reduce risk on your side increases the risk on their side. You're just at a power imbalance here, whether it's real or perceived by them, it doesn't matter.
Jamon Holmgren: It's almost always a power imbalance issue. Now, there are some situations where it is kind of just an unfortunate circumstance. For example, the business just literally suddenly it goes out of business and it was kind of unexpected on their end and they didn't realize it was coming or something like that. And I've had that happen before.
Jamon Holmgren: Really again, having a good deposit is your protection there, where you can apply it to the end invoice and get what you can because you're not going to get anything else. Even if you sue them, there's nothing there. That's a situation again, where having a good deposit is really important and good terms.
Todd Werth: By the way, if you sue them, go to court, the judge rules in your favor says that company X owes you $100,000, there's no court that's going to make them give you that $100,000. There's things you can do, for instance, if they shut down their business and go work for Exxon, you can have their wages garnished and that kind of stuff.
Jamon Holmgren: In some cases, yeah.
Todd Werth: In some cases. But people find this out too. Like just because you're awarded some cash in a court case does not mean you're going to get that cash. Sorry to be such a Debbie Downer on this, but it's true.
Jamon Holmgren: It's a little bit of a Debbie Downer topic to be honest. Is there anything positive we can pull out of this guys?
Gant Laborde: Well, I think that one of the key aspects here is that if you can be willing to be worth it and then be really cautious of your cashflow, make sure you have some kind of deposit.
Jamon Holmgren: And when you have your expectations set way up front, like once you learn this stuff and you're good at it, and you're like, no, this is our contract. This is what we need. We need these things for this reason. You can be up front with them. You can say like, "Hey, I need coverage for my exposure." That's a very valid thing to say. A legitimate business will understand that.
Jamon Holmgren: If we were to hire, just for example, we were to hire a consultant. They were to tell us we're $3,000 a month, but I need a $3,000 deposit first for this six month contract to cover my exposure because it's net 30 or something like that. It would totally make sense to us and we would do it. A legitimate business will do that. Now, if you're there pushing back against that, then they could possibly just be wanting you to give them a free loan, that happens all the time. I want to owe all my vendors a bunch of money because then it's basically like a free loan for my own cashflow. That's a terrible way to do business in my opinion, but it happens. Or they're not intending to pay you.
Todd Werth: Yeah. Or they're ignorant. Ignorance does happen, meaning they're new to this. They're treating it very emotionally. They're treating it like problems they've had in their personal life. They're, very nervous and worried that you're trying to take advantage of them. There are definitely kind of inexperienced people. I wouldn't assign malice to this people when ignorance is a perfectly good reason why.
Todd Werth: However, you still may not want to work with them because ... And this gets to another point, if you don't get paid by someone, it's going to happen. What you don't do is react like a human. You react like a company. Your company should be a robot as well. Like, should we write a blog post or a tweet about how horrible this person is?
Jamon Holmgren: No, do not do that.
Todd Werth: You should not do that. It's solving nothing. You're doing it for emotional reasons. And trust me, you can say you want to do it and you get into a zoom call with your good friends, Gant and Jamon and complain and vent and stuff and say-
Jamon Holmgren: Not that this has ever happened.
Todd Werth: ... say you want to destroy them so you want to hire the Russian mafia to take care of him, all this stuff. But then they-
Jamon Holmgren: You know what is better than the Russian mafia? The Finnish mafia, I've got connections.
Gant Laborde: Oh, here we go.
Todd Werth: Well, it's because they always finish the job. If you work with Jamon you hear a lot about the Finnish. Anyways, there are lovely people. They all bathe naked together. It's very strange in some ways.
Jamon Holmgren: Not bathe. We take saunas, which by the way, that's how you pronounce it. Sauna. But it is naked. Yes, it's true.
Todd Werth: So what was I saying?
Jamon Holmgren: Something about hiring the mafia.
Gant Laborde: Hiring the mafia.
Todd Werth: Right, right. Don't react emotionally. It's really stupid for you. You just have to take it on the chin and tell your accountant to write it off as a loss. It will reduce your taxes for that year. Perhaps send them to collections, that kind of stuff.
Jamon Holmgren: I think we were told by a lawyer that it's somewhere in the range of like $50,000 or more where it starts becoming worth it. Because like below that you're just spending so much money in legal fees. And it is true that you can get that money back if you have it written into your contract that they pay legal fees. But then you're also talking to your real life too because that's how long it takes.
Gant Laborde: Yeah. It decides as the opportunity cost of your time. I think it goes zero to 50,000, don't do anything. 50,000 to a hundred thousand, get a lawyer. And 100,000 higher 1800 go mafia.
Todd Werth: That's good business actually. I wonder if it exists. Probably does in the dark net. And when we say don't do anything, just to clarify, this is assuming you've already done all the normal stuff. Like you want appeal to their humanity, appeal to the fact that you want to be partners and explain why this is hurting. Explain that you had to take a line of credit out to front them this money, which we've done in the past and explain it. Once you've went through all the ... Be a decent person, try to be a partner with them, try to get them ... I mean if you're really gifted negotiator and you know yelling at them will work, then sure yell at them. If you're not, it's probably not going to work. But then once that's done, then that's what we're talking about.
Gant Laborde: There's a really cool story by the company Ustwo, where they had one client who was continuously never paying their invoices and someone found out that that client really loved Bulldogs. So whenever they would send the invoice to that person, they would do a cover photo of a bulldog on all the invoices. And after they started doing that, every invoice got paid exactly on time.
Jamon Holmgren: That's hilarious.
Todd Werth: Literally sometimes they'll look and say, "Okay, we want to pay 50% to our vendors the next three months. Who has the highest fees, if we don't pay them, we pay them first." It's sometimes as robotic as that. Cool. Any other fun stories about not getting paid?
Jamon Holmgren: I have too many. Actually, merging with your business and more proper business practices was a big boon for me because there were too many situations like the ones that I described, and I was just wasn't very good at it. I guess I'm just too nice of a guy or something like that. I'm an optimist. I want to believe that the best in humanity rather than always going around being a cynic. So that's why I brought Todd on board.
Gant Laborde: He brought a cynic ringer.
Todd Werth: With Jamon and I, it’s the tale of two sons his father, super trustworthy, great guy. I've met him and I really enjoyed him. My father was a nice fellow, but he was a scam artist and I learned from a very early age to see gaslighting BS detectors very strong. I recommend Jamon's life, not mine.
Gant Laborde: Well, I'll toss into that. Jamon, I don't know if you've ever been next to him, but he works out and he's about 10 and a half feet tall. I imagine when he's doing local work that he just has to show up in person. Todd, you're better architected to be more of a digital hammer in our sort of wide scope of-
Todd Werth: Hey buddy, I'm 6 feet tall. I have lots of stories. Some of which I don't really want to tell just for obvious reasons, but it's really just power. The more power you have, the more power you have to say no. But I strongly recommend regardless of your power, even if you're on the very weak side of the contract negotiation, avoid people who are gaslighting you or seem to have some sort of personality defect where they don't trust anyone at all possible. It's never going to work out. Trust me, it never works out.
Jamon Holmgren: Look for red flags. If all of a sudden some weird thing comes out of left field. By the way, you do still have a little bit of leverage even when you're like a freelancer coming into a big company. The person that you're talking to has invested some time in making this thing happen and they don't want to go back to square one and go find someone else. Like that's annoying to them. It's usually like a big, big deal. And maybe sometimes they've already told the other people, no, they don't want to come back and look bad. It actually becomes quite personal to them to just be invested in finishing it. You do have some leverage there.
Gant Laborde: That's actually a sales trick that car companies like to use. That's why they have coffee and drinks and they sit you in the office and they go talk to the manager. The more time you sit and kind of wear down at their office, the less likely you are to go test drive other vehicles.
Todd Werth: This is a story and it just reminds me. So big company not paying us for big company reasons. I had no relationship with our contact there. The person who is contracted with us and who we are working with directly. I assume they had a department, I don't recall. But I didn't know this person, personally I had never talked to him. When I did talk to him, I started out super nice. Like just very nice, tried to appeal to his humanity. And came out with like, "Okay, Hey, you haven't paid this and stuff." Well, first introduced myself, Hey, you haven't paid this stuff. We are having cashflow problems and just being very honest with them. You owe us this amount of money. Unfortunately, we're kind of taking the loan right now to make up for that.
Todd Werth: This all true by the way. I understand sometimes companies have, if you could just tell me what's going on and stuff, maybe I can work this together. I really hate if I have to stop work because I know it's probably very important to you and I know that people work on this really enjoy talking to you and that stuff and I'm just trying to ... If you could just help me figure this out, if we can figure this out it's going to be awesome. I just really use your help.
Todd Werth: Starting like that, it's actually great because, A, if we do get paid, we want to have a great relationship with this gentleman. This guy turned out to be a really nice guy, actually did go out of his way to help out. If I would've came to their guns blazing, I don't know, depending on his personality, he may fold and do what you want. If you come at me like that, I'll dig in. You're going to pry my money out of my cold, dead hands.
Jamon Holmgren: Believe me, that is Todd's personality. You don't come out of that way.
Gant Laborde: He still owes me five bucks and every time I bring it up ...
Todd Werth: But if you come at me nicely and if you're vulnerable and you're honest to me, I will bend over backwards to help you out so you actually lose nothing by this because ... Let's say that doesn't work. Let's say you're very nice and you're super good cop and the person's just a jerk to you. You've lost nothing, because now you can start ratcheting up the bad cop and you even have more of a reason to do this and frankly, I'm not suggesting you do this, but one of the things I can do is I can seem a little erratic in these situations, like I'll go from being nice and very not being nice and being nice and it confuses them and startles them.
Todd Werth: I'm giving away my secrets here. The point is I would always start off ... You often get some pretty good results. And in this case they did have an issue with the bigger company at large. He wanted us to keep on working. We became a partner. I need help with money situation because I got a business to run. We don't want to stop work on your project. It's very important to you. And we came together and worked on it with the rest of their company to get it done. And that as a perfect example of a nice outcome.
Todd Werth: We could obviously tell a thousand stories. We've been in business a long time, various businesses and stuff, but I feel like we've given people some good advice, kind of been vulnerable with problems we've had and mistakes we've made, just kind of got the conversation started. I'd say we end it here. And if anyone has anything they want to ask us about or continue the conversation, please reach out to us on Twitter. We love talking about us, especially Jamon. I'd reach out to Jamon first. Sometimes he'll come to us and say, "Hey, such and such asking a question."
Todd Werth: You can also join our community and we have a podcast channel. We can discuss subjects you heard on the podcast. We're engineers, the three of us, and we're not business people. By default we are engineers and we do engineering things. So we love to talk about stuff we learned because we find it interesting and we assume that a lot of you just like us, were completely ignorant to these facts. Anyhoo, thank you very much for listening and have a great day.
Jamon Holmgren: Thanks everybody.
Gant Laborde: Don't forget to pay your invoices.