Take Jim, a software developer who wrote a small program that he was selling for a modest fee via his website and through direct sales. A company contacted him after using his application to find out if they could license the distribution rights to his software, or purchase it outright.

Since this is not a normal course of business, at least to date, Jim had to get a crash course in negotiating this kind of deal.

• Will the deal be exclusive, and therefore limit his own abilities to distribute the application, or find other distributors?
• What kind of support packages would the client want?
• How is the deal to be structured – flat fee, annual rates, usage based?

The smartest thing to do in such a case is to put the onus on the buyer to come up with the initial terms. That is, politely respond to the buyer that you are interested, at least in concept, and ask them to provide a more detailed offer. Imply that there may be more available than the publicly available version – part of the up-sell that could create some room for leverage later on. Ask them to include a section for support and maintenance.

If the buyer has gone through this process ever before, then they will know how they would like to structure the deal, and the kind of terms they can expect to end up with. By asking them to provide an opening offer, you create room for an immediate acceptance if the offer is overly fair (unlikely, but possible), some haggling over the details if the general ideas are acceptable, the issue being with the number, or a flat refusal if the offer is so poor as to be offensive.

If the buyer has not gone through this process ever before, they will have no idea how to present a fair offer. However, they will now have to evaluate the costs of leaving you out of the loop, something they likely have already done before contacting you in the first place. This gives them their limit on how much they would spend on such a product or service, and they will work backward from there.

In either case, pushing the buyer to start the negotiations can only benefit you – if they ask you what your terms are, then you will still have to come up with a fee structure and pricing model, but it is more likely that the answer to your query will be exactly what you need – a starting point for the offer.

Related posts:

1. Upsell Your Investors
2. Think About Boxes from Inside the Box
3. Brokering Investments and Referral Fees

In order to give yourself the best possible chance of being able to collect, you need to ensure that you have a clearly worded contract, in which it is outlined what you are to deliver to the client, the amount to be paid by the client, and how and when that money is due. In case of dispute, such a document will play a crucial role in determining whether or not you can collect your money.

Assuming you have such a document, and the client is not making the proper payments, you should attempt to open communication by asking the client, politely, why the payments have not been made.

It may be an honest error (in one case, the client had assumed an invoice I sent him had been copied to his bookkeeper, when in fact it hadn’t been). In that case, the question regarding payment can be quickly resolved.

It might be an issue of timing – the client was deferring payment for cash flow reasons, and had forgotten to inform me that the payment would be late.

It could be related to cash flow and ability to pay – the client might not have the funds to pay the invoice, and is embarrassed to discuss it. In that case, by opening conversation, you can work out an alternate payment schedule to ensure you get paid.

Last, it could be that the client has no intention of paying. If this is the case, regardless of the reason, you need to look to other options other than merely talking to the client. (You also need to get rid of the client – read my article Firing Customers for more information on that topic.)

First, you can choose to write off the money owed as a loss. While this doesn’t regain any of your money, it does keep you from having to pay taxes on that money, which at least keeps you ahead of any future expenses on that particular account.

Second, you can hand over the funds to a collections agency. The cost here is usually a percentage of the money recouped by the agency, often as high as 50% of the money paid. Going this route is often not worthwhile to small businesses, as it generates very negative views of your business in the eyes of potential clients.

Third, you can sue the client. Here in Ontario, if it’s a relatively small amount (as of this writing, the maximum is $25,000), then you can sue them in Small Claims Court, and you don’t need a lawyer. In this case, you may be given the option of seizing the assets of the client to pay for the amount owed. However, the amount of effort involved is significant, although the direct cost is not, since the client may be ordered to pay the court expenses if you win the case.

Whatever option you choose, and each case needs to be handled on its own, you need to remember to always act professionally, and to assume that every document and e-mail that you handle may end up one day in court. If you treat the client with respect, and give them alternatives to defaulting on payment, you may find it easier to get your invoices paid.

Related posts:

1. Managing Accounts Receivable
2. Tips to Getting Paid Promptly
3. Pay the Debt or Save Away