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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?

 

Quadrille




msg:3388387
 1:50 pm on Jul 7, 2007 (gmt 0)

You can see her point of view, even if you don't agree.

Looks like you have a choice of offering a 'no deals within this niche' option (for a fee), or losing her contract.

If the others are minor jobs, negotiating a pay rise (spoecific to her niche), may be a reasonable way out.

Gibble




msg:3388401
 2:43 pm on Jul 7, 2007 (gmt 0)

That's a tough one.

On one hand, a lot of freelancers do good business because in a single market through word of mouth, and work with several competitors because of it.

On the other hand, if this is a really good client, who you make a good chunk of change off of, do you want to risk losing them. But then again, would you make more doing work for the competitors or just this one person?

And then there's always the option of referring the competitors to a friend, and negotiating a finders fee...

Marcia




msg:3388409
 3:03 pm on Jul 7, 2007 (gmt 0)

It's true that some designers make their mark with specializing in a certain field.

and this client wants me to turn down any offers from her competitors, stating it's a loyalty issue.

Is it a loyalty issue or a business issue?

Did you approach her and ask her permission about accepting those other offers? How did it happen that the conversation came up about offers from competitors?

TMarie




msg:3388416
 3:18 pm on Jul 7, 2007 (gmt 0)

Exactly - word of mouth has brought in more business for me. I make good money working for the one client - but when small life issues such as a water heater takes a dive, extra income comes in handy!

In regard to how she was informed about the competitors - it's a tight knit business, if I had not mentioned that I had been offered work by the others she'd have found out eventually and at that point she'd see it as a betrayal.

I suppose I see her point of view, but turning away a few thousand dollars in order to keep the "peace" makes me resentful.

vincevincevince




msg:3388417
 3:23 pm on Jul 7, 2007 (gmt 0)

This is business and in business everything has a price attached, loyalty included. If she wants your loyalty then she must pay for your expenses and a reasonable profit margin.

In this case, your expenses are the loss of income which such an agreement is anticpated to produce, and your profit is on top of that. If you estimate the other companies would bring you an additional $10k over the year, then you need to be billing her $10k plus (e.g.) $5k markup for the agreement. Note the compensation is based on bottom-line profit, not bills paid.

Don't forget that the potential income from those other companies includes an estimate of the earnings you will make from those referred to you by those companies. If, in your experience, each client brings in others by recommendation, then increase the lost client-base for which you are being compensated each year, so $15k in the first year should rise to at least $20k the next.

Why do you need to add profit? Profit is the decision maker. If she compensates you at the same level as the loss of income, then you are just as well off to continue working for the other companies. She needs to pay a premium so that her offer becomes better than their combined benefit to yoru company.

Don't accept a promise of work equal to that which you would have lost. That's very bad business and you end up working twice for the same money.

At the end of the day you are in business to make money.

Tip: provided you kept the copyright for the designs, you can scare her off hiring another developer for her next changes on the basis that the third party would be creating a derivative work.

TMarie




msg:3388421
 3:31 pm on Jul 7, 2007 (gmt 0)

vincevincevince - My thoughts exactly! Thank you all for the input! I have some descisions to make...but like you said, in the end, I am in business to make money and I have worked long & hard to get where I am.

stever




msg:3388428
 3:35 pm on Jul 7, 2007 (gmt 0)

>> You can see her point of view, even if you don't agree.

Not at all, unless there was a previous agreement in place about an exclusive contract. The OP is in the business of selling services.

If I want (say) a weather feed from a local supplier, I expect to pay more if I can persuade them to make me the exclusive user of their feed for a certain area. I certainly know what the answer would be if I went to them and complained that they had offered their feed to another local rival when I had just paid the normal price for their services.

The point here is whether a refusal to comply with the current client's wishes is liable to be more damaging than the extra business may be profitable (in a more than financial sense).

But a misplaced sense of loyalty has nothing to do with it.

(Incidentally, I do have a "limiting" agreement as discussed above with several clients, but this was explicitly arranged up front and is reflected in the charges they pay.)

vincevincevince




msg:3388429
 3:40 pm on Jul 7, 2007 (gmt 0)

Just a suggestion - 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.

Marcia




msg:3388431
 3:56 pm on Jul 7, 2007 (gmt 0)

Don't forget that the potential income from those other companies includes an estimate of the earnings you will make from those referred to you by those companies.

And it's probably safe to assume that this client hasn't referred others in the past year, and is unlikely to.

buckworks




msg:3388439
 4:19 pm on Jul 7, 2007 (gmt 0)

Take the high road here and avoid taking on multiple clients in the same sector.

It might feel like you're making a sacrifice, but it's an investment in your professional reputation. Making sure to avoid conflicts of interest will pay off in the longer term by making you a more desirable designer for premium clients.

It's not just about "keeping the peace", it's about your existing client being able to have confidence that you're not doing anything that would undermine her interests... which strengthening a competitor would certainly do.

I'm familiar with a case where a designer lost a six-figure account because of conflict of interest issues. The web designer took on other projects in the same sector as an existing client, and over time the client (who is a friend of mine) became so uncomfortable that he ended up moving his business to a different design firm. I don't think he told the designer that's why he moved, but that was the heart of his decision.

When my friend was looking for a new design firm I approached someone who is a highly respected member of this forum. The minute the sector was mentioned, he said he couldn't even consider it because it would conflict with an existing client.

That's how people play in the big leagues ...

stever




msg:3388464
 5:19 pm on Jul 7, 2007 (gmt 0)

>> That's how people play in the big leagues ...

I would imagine that if the people here had six-figure contracts then they indeed would be somewhat more philosophically and financially inclined to restrict their activities in the sector that the contract was involved in.

The original poster was talking about smaller-scale web clean-up operations which certainly didn't give the impression that they were working in this kind of area, however.

And, while I don't move in the rarified circles that WebmasterWorld mods obviously do, I would have expected six-figure contracts to have included a non-compete clause as a matter of course.

Certainly it was something I have raised initially with any larger contracts without prompting from the client. That's how we do it the normal world, buckworks.

buckworks




msg:3388466
 5:29 pm on Jul 7, 2007 (gmt 0)

smaller-scale web clean-up operations which certainly didn't give the impression that they were working in this kind of area

The original poster needs to decide what kind of web design firm she wants to be. If she's willing to sell services to anyone who comes along, regardless of how it might affect existing clients, then she'll be forever limited to smaller scale operations.

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.

stever




msg:3388472
 5:50 pm on Jul 7, 2007 (gmt 0)

>>If she's willing to sell services to anyone who comes along, regardless of how it might affect existing clients, then she'll be forever limited to smaller scale operations.

It depends... and I certainly don't agree with your sweeping assumptions.

There are contracts and clients where I would automatically assume off my own bat a non-compete because of the worth and weight of the contract both to myself and to the client.

There are contracts and clients where I would raise the issue and offer options of non-compete (or not) before any work was done so that we knew where we stood.

There are contracts and clients where I would happily take on competing business because the worth and weight of the contract to myself and the existing clients does not reach a sufficient level.

I think the main points here are:
i) as in many areas of client relationships it is far better to get this clear at the beginning of a relationship
ii) the idea of client is ill-defined in this discussion.

One reason I took umbrage at buckworks' previous comment was that I have a client which is a fairly good-sized international company. But our relationship is, quite happily on both sides, pretty casual. When they want something doing, they ask me, I give them a quote and they accept it (or not). But I would have no qualms at all about doing some work in the same sector and I doubt if the idea of it being a problem would ever cross their mind because our relationship is informal and quite tenuous. I in turn would have no problem with them getting another web developer to do some work on their site.

Marcia




msg:3388475
 6:04 pm on Jul 7, 2007 (gmt 0)

Thank you, stever. :)

...in my mind it's income...

And not everyone plays in the big leagues. Most don't, and for most folks extra income comes in very handy.

...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...

It isn't about pleasing anyone, it's about business and finances and getting the bills paid.

...when small life issues such as a water heater takes a dive, extra income comes in handy!

Your client won't pay for fixing the water heater out of loyalty. Do what you need to do.

Meantime, there are "certified" developers who work on a certain type of ecommerce stores who have multiple clients across a number of the same markets - and do not only web design and development, but darn good SEO as well (one is a HUGE outfit). And their client lists are listed right on their sites - plenty of clients probably found them through search engine listings, through links on other client sites .

jbinbpt




msg:3388477
 6:07 pm on Jul 7, 2007 (gmt 0)

Growing is number one for any business, large or small. I come from a manufacturing background. Exclusives sound great, but rarely benefit both parties.

buckworks




msg:3388479
 6:21 pm on Jul 7, 2007 (gmt 0)

took umbrage at buckworks' previous comment

My comment was not intended as a swipe at anyone. Apologies if it seemed that way.

Marcia




msg:3388482
 6:23 pm on Jul 7, 2007 (gmt 0)

>>Exclusives sound great
They'll benefit a client who gets an exclusive, which is a great deal to get without compensating for it - for them.

>>but rarely benefit both parties.
They won't benefit the service provider who's getting the short end of the stick and losing business.

If you're doing Best Foods Mayonnaise, don't take on Kraft. If you're doing American Airlines don't take on NWA. If you're doing Volkswagen, don't take on Toyota. Ask for payment and get enough payment for granting an exclusive to compensate for the loss of business and potential business growth. Otherwise, get the bills paid.

It all depends on the individual situation and the individual type of client base.

skibum




msg:3388517
 7:14 pm on Jul 7, 2007 (gmt 0)

If she's willing to sell services to anyone who comes along, regardless of how it might affect existing clients

It depends on sooooooooo many things. We had one big homebuilder client who paid on time, was easy to work with and was a big chunk of agency revenue. When they wanted us to be loyal to them it wasn't an issue. If it had been a small regional builder who was saying we won't do business with you if you take on a big national builder that probably wouldn't have held any weight.

Online it seems like very few businesses compete directly with each other, yet almost everyone competes with everyone else if they are even in related industries so where can you draw the line?

When you take on multiple businesses in the same industry, they all tend to benefit collectively.

It also depends on the level of involvement. If you are running top to bottom marketing programs for competing businesses then their might be a conflict but again success and strategy is dictated by the marketplace and the actions of two related companies virtually always veer off in different directions. If it is working on small design projects, will that really affect how two companies compete?

Exclusivity is a good thing to discuss up front and get paid for if you think it will be an issue. Who has the stronger hand? Is your client a major chunk of your revenue, sending you incremental business, a growing part of your business? If it is, then its probably best to tow the line. If the grass is really greener on the other side, then its time to step over to the other side or work hard to explain why you think working for multiple companies in the same industry could actually benefit the client.

buckworks




msg:3388577
 9:39 pm on Jul 7, 2007 (gmt 0)

I'm missing something: how does it benefit Client A if you build a website for Client B that pushes him down in the rankings?

bmcgee




msg:3388580
 9:52 pm on Jul 7, 2007 (gmt 0)

Someone else is going to do it anyway for the other client, if you don't. So if your client is not appreciative of your business to grow as you help them grow/thrive, they are a poor client and business person.

This all assumes you don't use specific knowledge and trade secrets you gained from the original clients site in order to serve the new client.

Marcia




msg:3388582
 9:56 pm on Jul 7, 2007 (gmt 0)

This isn't even SEO, it's straight web design work:

I have worked hard for the last 9 years to get where I am at as a freelance designer

And the other offers aren't even for design work, they're just for light updates and routine site maintenance.

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.

This in no way is competing with Client A, and the advantage to A is that she won't have to shell out extra cash for exclusivity that makes no difference anyway.

One advantage I've seen with web developers who have multiple clients in the same industry (BUT the ones I've seen also do SEO, and a darn good job of it), is that judiciously done link relationships between them benefits them all.

This person here is not even mentioning being asked about SEO.

plumsauce




msg:3388636
 12:09 am on Jul 8, 2007 (gmt 0)

There are contracts and clients where I would automatically assume off my own bat a non-compete because of the worth and weight of the contract both to myself and to the client.

This is an assumption that is unwarranted.

Exclusivity, like copyright assignment, access to source code and other such matters is a point for discussion, and, when granted, has a dollar value.

Whether it is thrown in as part of getting a contract is a matter between the parties. But, exclusivity has an opportunity cost to the grantor, and the grantor ought to be compensated.

In my mind, doing at least some work for other clients is a means of ensuring that there will be avenues to gain more work should the major client tank, or take a hissy fit over some other matter and pull the work. Having those contacts could put food on your table, never mind the water heater.

This is a distinct possibility since by playing the "loyalty" card she seems not to have grown up yet.

digitalghost




msg:3388638
 12:16 am on Jul 8, 2007 (gmt 0)

Exclusivity is a contractual arrangement, not a card to be played to prevent a designer from earning a living. As was mentioned, this was about design, not marketing.

This client is requiring the equivalent of asking an architect not to design a building for a competing enterprise. Just doesn't work that way.

Quadrille




msg:3388651
 12:38 am on Jul 8, 2007 (gmt 0)

It's about trust; she feels she cannot trust you if you are also working for someone else.

A better comparison would be a coach working for two football teams - not just the fear of the coach working harder for one than the other - but also the fear of secret tactics being passed on.

Her fear is perfectly reasonable; her solution is simplistic.

You need to find a solution that satisfies BOTH her fear and your legitimate desire to earn a living.

So it's about finding a price that will keep your exclusivity - unless you really do not want to discuss it with her - but word about that may get around, too.

Good Luck. :)

King_Fisher




msg:3388667
 1:24 am on Jul 8, 2007 (gmt 0)

Loyalty is not a one way street, If she demands exclusivity, then she must
compensate your for it. If you buy a stock photo, you pay more to have it
exclusive. If you buy a website template you pay more if you want it exclusive.
If thats not forthcoming from her then you have decide on an economic basis what is best for you!
If you have done a good job for her she might stick around any way.
Good Luck! KF

buckworks




msg:3388669
 1:32 am on Jul 8, 2007 (gmt 0)

she feels she cannot trust you if you are also working for someone else.

The opening post was about doing work for the client's competitors, not just any random "someone else". That's an important distinction.

And the other offers aren't even for design work, they're just for light updates and routine site maintenance.

A conflict is a conflict even the job is small. And what happens when the new customer wants more things done?

It's wiser to draw the line before you even start.

I like the coach analogy.

Jon_King




msg:3388670
 1:45 am on Jul 8, 2007 (gmt 0)

Loyalty. Been there done that, it's not a valid argument in todays business environment.

The test... will they do the reverse for you? No way. There are no one-way agreements that are fair. The loyalty argument always fails, they will not be loyal to you.

So, if your potiential customers are direct competitors, I mean DIRECT, meaning you see and hear about them in your specific business world, don't do business with them, it is very likely unethical.

If they are not direct competitors go for it, the loyalty argument is an emotional smoke screen, do what is best for you.

[edited by: Jon_King at 1:49 am (utc) on July 8, 2007]

Marcia




msg:3388673
 2:01 am on Jul 8, 2007 (gmt 0)

There's an important distinction that needs to be drawn. A coach for a team is an employee and a level of control and exclusivity is part of that kind of arrangement. The relationship with a client as an independent contractor is an entirely different matter, from a legal and contractual standpoint. Work is paid for, but there's no control over the person's activities.

For example, with a designer or a programmer working as an employee, copyright and trademark privileges belong to the employer, and hours and regulations and specifications on how, where and when work is performed can be expected. Not so with an independent contractor. Intrinsic in the description and work status of an independent contractor is that they're "independent" and also, can't be resricted in any way from doing work for others, unless there's a specific agreement to the effect.

This loyalty ploy is emotional blackmail from the sound of it.

stever




msg:3388737
 4:26 am on Jul 8, 2007 (gmt 0)

There are contracts and clients where I would automatically assume off my own bat a non-compete because of the worth and weight of the contract both to myself and to the client.

This is an assumption that is unwarranted.

Well, that is just my view of the relationship between some clients and myself (and I meant "assume" in the sense of "take onto myself" rather than "presume").

For example, I have a substantial client that I do consistent work for which includes marketing (note that the original poster does not mention anything other than design work).

I also have a domain name which I plan to develop in the client's industry. But I have not yet developed it because I feel there could be a possible conflict of interest. (As others have pointed out, the development could also be advantageous to the client, but in this case I have other projects to work on.)

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