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Client Wants Me To Refuse Services To Competitors
She claims it it a loyalty issue
TMarie




msg:3388380
 1:44 pm on Jul 7, 2007 (gmt 0)

A little over a year ago I went to work for a client that was starting a new business, since then she's become very sucessful. Two of her competitors have contacted me, asking for website updates - nothing major such as a re-design, just clean up thier sites, make some small additions - and they are willing to pay very well for my services.

My dilema is this - I have worked hard for the last 9 years to get where I am at as a freelance designer - and this client wants me to turn down any offers from her competitors, stating it's a loyalty issue. Now, it's not like I am divulging company secrets, etc...in my mind it's income - I feel like I'll be cutting my own throat by turning down work that will help me pay bills in order to please this client.

Any advice?

 

andye




msg:3388875
 1:49 pm on Jul 8, 2007 (gmt 0)

vincevincevince is right, if she wants your contract to include a non-compete then she should pay extra for it.

Otherwise, she has no right to pressure you into rejecting work.

A.

buckworks




msg:3388904
 3:53 pm on Jul 8, 2007 (gmt 0)

Some professions assume loyalty as a matter of course.

In the legal profession, for example, the "duty of loyalty" owed to a client prohibits an attorney (or a law firm) from representing any other party with interests adverse to those of a current client.

Loyalty to the current client is not an optional add-on available for an extra fee, and does not depend on the size of the job involved. It's one of the basic standards of the profession and also a formal legal requirement.

Gibble




msg:3389160
 12:56 am on Jul 9, 2007 (gmt 0)

That's Law, where you are literally fighting for both parties against each other. You don't have an athlete playing for two teams in the same competition that could play against one another.

Design, is not like that.

vincevincevince




msg:3389174
 1:33 am on Jul 9, 2007 (gmt 0)

I'd liken this less to the law and more to one of the following:
  • Store selling isotonic drinks near an atheletics stadium and customers from one team asking them not to be disloyal and sell them to the other team as well
  • As a bank manager, being asked not to permit any other widget manufacturers to bank with you
  • As a hotel owner, being told you can't rent rooms to those from a rival conference in town at the same time

    In all of these cases, that of the original poster included, rejecting the other offered business is not a problem so long as the entity being protected is compensated in full for their losses.

    Even in the case of the law, whilst working for both sides in one case is understandably not accepted, there are plenty of lawyers who work with many clients in the same nice and local area. A good example is a lawyer specilaised in conveyancing who is likely to act on behalf of a large number of developers and estate agents who are all mutually competitive.

    What needs to be remembered is that TMarie is not an employee of the firm requesting 'loyalty'. Were that the case, then it would be reasonable to suggest that work done outside of working hours should not be for the competitiors of your employee; in fact, this is specified in most work contracts as a standard clause.

  • Marcia




    msg:3389192
     2:35 am on Jul 9, 2007 (gmt 0)

    So I looked at the site of one of the web developers I mentioned who has many, many clients in each of many niches. In fact their portfolio categories are listed by industry. Industry A - 22 clients, Industry B - 56 clients, Industry C - 60 clients, then 44, 17, 23, on and on. Those numbers represent companies in the SAME industry, some very close by niche.

    This is a large, successful company with many employees, including developers, programmers, sales people, CSRs, etc. If they let their first few clients "guilt" them into being "loyal" they couldn't have grown, and today they're one of the biggest names in their type of development and do total marketing campaigns, not only web design.

    There are web designers that specialize in specific industries - real estate websites, attorney websites, doctor/medical sites, artists, crafts sites (one actually specializes in teddy bears and another in miniatures), and locally for musicians, motion picture and recording industry clients.

    Sure they do work for competing companies and individuals - that's the nature of the business. Those who may do work for 6 figure accounts or fortune 500 companies and have exclusives (which they are being AMPLY financally compensated for) are in a different type of business with an entirely different business model.

    incrediBILL




    msg:3389203
     3:38 am on Jul 9, 2007 (gmt 0)

    do the work for the other companies - but do it all via a shell of some kind. A friend's company, your wife's name, just anything so that the invoice isn't from you. Let her proove otherwise.

    Yikes!

    That's a recipe for disaster if it becomes known that you're double dealing behind her back and your reputation could go down in flames. Not to mention losing your main account and possibly getting sued. Even if the lawsuit and goes nowhere, they could do it just to cost you time and money if they feel betrayed. Defending a lawsuit can really damage your business as the dirty laundry becomes a matter of public record so it's just a bad idea.

    Before you do anything you have to ask yourself isn't it better to keep the good client that pays the bills and sends you lots of work or risk the whole thing on "possible" clients that you may find you can't stand to work with, jerk you around on paying on time, or worse yet you get used once and tossed to the curb.

    If you decide to risk the good customer and you don't have a exclusive agreement for that customer's niche then I would offer one for a slightly higher fee to help offset lost revenue for exclusivity. If the customer doesn't want to pay the premium for an exclusive, not much they can do besides cancel your business.

    Personally, I would probably look at people in other niches and use your showcase client to get their business. Offer all your new clients an exclusivity clause (list of competitors in writing) in the future right from the start for a premium, maybe 30-50% more per job (give them room to negotiate down), and if they refuse then it's known up front you may work for their competitors because they weren't willing to pay the difference.

    [edited by: incrediBILL at 3:38 am (utc) on July 9, 2007]

    calicochris




    msg:3389212
     3:59 am on Jul 9, 2007 (gmt 0)

    I once turned down a new customer on the basis of loyalty to an older customer. The older customer does not want to adapt .. and I'm working on old technology and it is boring - takes months to convince them to do a simple test or change of ad format. Yes, they are bread and butter. The newer customer, whose business I lost grew stronger and are going places, would pay for bread and butter and some jelly too. I've never turned down a customer on the basis of loyalty since then. If the customer does not trust me to take care of their interests, they should be using someone else.

    Quadrille




    msg:3389333
     8:59 am on Jul 9, 2007 (gmt 0)

    I'd liken this less to the law and more to one of the following:
    # Store selling isotonic drinks near an atheletics stadium and customers from one team asking them not to be disloyal and sell them to the other team as well
    # As a bank manager, being asked not to permit any other widget manufacturers to bank with you
    # As a hotel owner, being told you can't rent rooms to those from a rival conference in town at the same time

    I don't think they are quite fair comparisons, VVV.

    None of your examples would hurt the original customer. But in the topic issue, there is a perceived risk of spiking the isotonic drink, discussing the other person's banking policy, and placing cameras in the rivals bedrooms.

    Yes all those could really happen - but the risk would be seen by most as infinitessimal. But letting your coach work for the opposing team ... the risk seems higher, if only because he couldn't do that job without using info gained from the original customer.

    It's not loyalty as in 'he doesn't love me anymore', but disloyalty as in 'the sonova-b is stabbing me with my own knife!'

    I totally agree that there is compensation issue; 'I'd love to be exclusive, but I need the money'; but this really should have been dealt with at contract stage.

    I've always offered exclusivity, at an optional 10%. Half the clients take up the option. Either way, it's no longer an issue.

    Unless he's prepared to lose his primary customer (or sour the relationship forever, which is probably worse), he'd do better to swallow hard and learn for next time!

    Marcia




    msg:3389361
     9:55 am on Jul 9, 2007 (gmt 0)

    >>10%

    So with a $500 a month maintenance client, not unreasonable or unusual for site maintenance for a small business client, that would be $50 extra a month for an exclusive. That could (and probably would) result in the loss of not just one other $500 a month maintenance client with steady work - but several more as word grows. PLUS the original site design and setup for other websites down the road, which could run a thousand or two each for small sites would be forfeited - for $50 a month. That's a very costly $50.

    This is not romance or friendship, it's BUSINESS - do the math, that's a differential analysis that's part of the accounting/business management part of the business.

    If that's someone's business decision and their business model, to give an exclusive for 10% it's their choice so it's fine for them. But it does't constitute the role model that serves as the prototype for emulation by other business persons to fashion their business model after.

    First of all, and this is a critical point; this is an indepndent contractor web designer (that is the LEGAL status) with a *business* to run and businss decisions to be made. And apparently bills that need to be paid.

    There was no mention made of marketing, SEO or link development - and not even web design it's just a little bit of grunt work. (It is grunt work - have had to do it, and don't much like it).

    Site updates are FTP and HTML and CSS and possibly some shopping cart stuff if it's an ecom site. What big trade secrets does HTML take? How does updating a site with HTML hurt anyone?

    Quadrille




    msg:3389463
     12:24 pm on Jul 9, 2007 (gmt 0)

    I think it's good value.

    Exclusivity would only count 'within the niche', and there's plenty of other niches.

    A client deserves to feel that they can trust you - I couldn't do business any other way. And in fact, I very rarely have to decline business on the exclusivity basis. The web is a big place, with plenty of opportunities.

    Is it really unreasonable to expect someone who knows your methods, aims and business model not to work for your rival? Even if they totally honest, they are using the same skills and experience they used for you, to help a competitor. That must pose a threat, and reduce the value of the work they did for you.

    It's usually a good idea to look at these things from the client's viewpoint; if you disrespect their (legitimate, even if exaggerated) concerns, you'll lose ALL your customers as word spreads.

    DXL




    msg:3389501
     1:04 pm on Jul 9, 2007 (gmt 0)

    Turning down a job because it would conflict with an existing client will not hurt her reputation in the least, and she is unlikely to lose recommendations because of it.

    That's actually an incorrect assumption. Designers typically know when a client has been referred to them by an existing client. Who is to say that the existing client has made any referrals to the designer so far? Who is to say that the new client won't refer you to 10 other business owners that they know from their church, or from people that they happen to do business with? So in theory, you can "lose" recommendations by turning down a new project.

    I generally limit the number of projects that I handle for a particular industry to several sites within a given city or state. So while I don't believe in exclusivity, I think that its practical (from an SEO standpoint, not from a loyalty standpoing) to at least have a certain limit on certain projects by location.

    Quadrille




    msg:3389510
     1:15 pm on Jul 9, 2007 (gmt 0)

    A client is hardly likely to recommend you to a competitor, surely?

    Turning down one referral for 'potential conflict' reasons, is really not likely to hurt you at all, and, if explained tactfully, can enhance trust - and get more word-of-mouth.

    It all depends, of course, but, on balance, declining for a 'good' reason would be seen by most potential customers as a positive, not a negative.

    Make it a marketing opportunity, if it cannot be a money-maker!

    andye




    msg:3389608
     3:16 pm on Jul 9, 2007 (gmt 0)

    Some professions assume loyalty as a matter of course.

    In the legal profession, for example, the "duty of loyalty" owed to a client prohibits an attorney (or a law firm) from representing any other party with interests adverse to those of a current client.

    Sure, lawyers have to avoid conflicts of interest.

    Bankers have to be regulated by the financial authorities.

    And stuntmen have to wear asbestos long-johns.

    I don't think the OP needs to do any of those things, not being a lawyer, a banker or a stuntman. :)

    The point I'm making is that I don't see how the 'conflict of interest' argument applies to web design. Sure, the new client also gets the benefit of the OP's presumably kick-ass design or programming skills or whatever, but that doesn't take anything away from the work they did for the old client.

    I'm assuming here that the OP isn't reusing any IP that's owned by the first client - of course if they are then the first client has a perfectly valid point. Similarly, the OP shouldn't tell the competitor about any trade secrets etc that belong to the first client.

    Best wishes, A.

    Receptional




    msg:3389611
     3:22 pm on Jul 9, 2007 (gmt 0)

    I'll add my two pence (5 cents?) here.

    if you DO agree to not work for competitors to your client, my advice is that the agreement SEPCIES EXACTLY who she considers is her competitor. A list of not more than 10 companies, I would argue give her reasonable protection without you having to think twice about whether you can take on a new client or not.

    Also - a small and reasonable exclusivity premium is not unreasonable.

    rocknbil




    msg:3389754
     5:47 pm on Jul 9, 2007 (gmt 0)

    It's been mentioned many times but an exclusive agreement is the only thing to lock you to one client.

    I wouldn't make it small either. You are potentially losing as much money as you are making with this client.

    From the client's viewpoint, it makes perfect sense, even if you try *not* to, it's only a matter of time before the "things that work" start showing up on the competing websites.

    TMarie




    msg:3389770
     5:54 pm on Jul 9, 2007 (gmt 0)

    Well, in a nutshell - I spoke to her and voiced my opinion - I was simply cleaning up a mess that was made by the other company when they decided (after thier webmaster quit) they could do updates on thier own. They were willing to pay very well since they'd seen the work I had done on the other website- I explained to my client that I was not re-designing the site to "out-do" her, that I was mearly "cleaning house" and that they'd find someone else to take care of it on a regular basis.

    The bottom line was - she agreed she had over reacted, offered me a percentage of the companies profits - I agreed not to design or maintain competitors websites and I recieved an instant bonus... all worked out to my benefit!

    I learned a valuable lesson here though, and I appreciate all of the input from you here! Thank you!

    Demaestro




    msg:3389822
     6:50 pm on Jul 9, 2007 (gmt 0)

    I completely understand why she would ask this of you and I also see why you would want to tell her no.

    What I would do is tell her in order for you to turn down other clients and basically loose out on money that she needs to secure your services with some sort of guarantee. Imagine turning down jobs only to have her not spend any money with you for a year or more.

    One way would be to have contract that guarantees the minimum dollar amount she will spend with you each year. This will at least secure your income with her..... Another would be to get her to pay you what would amount to a "retainer" that includes a clause that makes it so you can't work on her competitors sites. the retainer doesn't have to recoup all the money you would loose doing other work but it would at least make it easier to swallow.

    Either way she should compensate you for turning away business. This isn't an unheard of practice and is par for course with a lot of places.

    Example.... Cola companies.

    Ever notice how more and more you go to a bar or restaurant and they serve only Coke OR Pepsi... almost never both. The reason is that the sales reps get companies to agree to not sell their competitors products... what I can tell you is that for complying with this request they are compensated with lower product prices.... or some other monetary compensation.

    She as a business person will have to understand that you can't afford to just turn down money because you are loyal.

    Demaestro




    msg:3389826
     6:53 pm on Jul 9, 2007 (gmt 0)

    TMarie

    I must have been replying as you were.

    Glad it worked out.

    andye




    msg:3390440
     10:56 am on Jul 10, 2007 (gmt 0)

    The bottom line was - she agreed she had over reacted, offered me a percentage of the companies profits - I agreed not to design or maintain competitors websites and I recieved an instant bonus... all worked out to my benefit!

    yay. :)

    It's nice to hear there was a happy ending for everyone. You must have done a good job of managing the relationship in what could have been a difficult situation.

    (One to make a note of for those future 'name a time when you ... ' interviews :)

    All the best, A.

    vincevincevince




    msg:3390690
     3:39 pm on Jul 10, 2007 (gmt 0)

    TMarie - excellent and congratulations! And as you said this business is 'going places'... great to be getting a cut and a motivator to make sure your objectives match that of the owner's.

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