Finding the best customers for your business

Some clients aren't worth the headaches. Advance vetting and precautions can spare you the pain.

Chris Walker, Phoenix

I started a concierge service on a tight budget. I am not looking to conquer the world in a day. I would like to attract the "right" customer and grow the business within my means. What would be the best methods to find that "right" customer?

By Kathleen Ryan O'Connor, CNNMoney.com contributor

For an entrepreneur just starting out, it's tempting to taken on any client willing to promise cold, hard cash in exchange for your services. But the seasoned small business owners we spoke with all say the same thing: Do all the due diligence you feel is necessary for your particular business – credit checks, background checks, reference requests – but never forget the most important check of all, your instincts.

"Twice during the past year, I've signed clients about whom I felt uneasy," says Steve Winston, who runs a marketing and communications firm in South Florida. "And both times, I should have listened to my gut feeling."

One client was unable to communicate what he wanted from a marketing campaign and frequently left Winston waiting for an hour or more at appointments. "Yet, because of fears of about the economy, I took them on," Winston says. In the end, they parted ways.

The client never paid for the initial work completed. "I wrote it off as bad debt and lessons learned," Winston says.

If you want to formally vet potential clients, you have a few options. A Google search is an easy first step for finding out more about an individual or a business. If your potential client is a company, you can go to the Better Business Bureau's Web site and check to see if complaints have been filed against the company, and if so, how they've been resolved. A Dun & Bradstreet background check is commonly deployed for vetting. The most extensive report will give you a complete snapshot of the business: who owns it, how long they've been in operation, how often they pay late, details on any court judgments or liens, and even a recommendation about how much credit to extend.

You can also ask for references and check them by calling others with whom your potential client does business. What's been their experience? Did they get paid on time?

Consider joining a trade group to swap ideas and advice with fellow concierges working outside your geographic area – i.e., those who aren't direct competitors. The National Concierge Association is a good starting point for your industry.

And because the best defense is a good offense, it's critical to have a contract that spells out all the details. Unless you've comfortable drafting one yourself, it's worth paying an attorney to help you create a basic template contract you can use on all of your future engagements.

One excellent and often overlooked way to guard against deadbeat clients is to require that at least a portion of your fee be paid up-front.

"'Will they pay me, and will they pay me on time?'" are the key questions every business owner needs to ask about potential customers, says Dave Richards, who has run niche marketing firm Resort & Golf since 1990 in Bloomfield Hills, Mich.

"It sounds simple, but so important, especially now," he says. "I'd rather have one client that pays than three that don't."

Before accepting a new client, Richards calls his contacts within the business and checks with the potential client's suppliers. For a golf course, he'll go all the way to the company that sells them fertilizer or mows their grass to find out how timely the company is with its bill payments.

You're in a business where you'll have to spend a lot of time catering to a client's needs and wants, so it's essential to make sure you're personally comfortable with potential customers. All the legal vetting and paperwork in the world won't be as valuable as your initial impressions.

"Intuition is a real big part of this," says Ellen Delap, a Houston-based professional organizer.

Pay attention to the client's motivation, and whether it fits your business goals. Are they looking for the cheapest service, or are they looking for the best?

"We are always leery of working with a prospect whose sole motivation is saving money, because if they buy on price then they will leave you on price," says Lauren Brenner, president of the HR division of HCR Group, an HR and benefits consulting firm in Waltham, Mass. "We are looking to build an on-going relationship with our clients."

One final bit of advice: "Don't be desperate," says marketing specialist Winston. "You cannot be desperate, recession or not. Those kinds of clients pay you the least money and give you the most headaches."

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Help! My client won't pay!

How to handle bounced checks

How to avoid deadbeat clients