Aug 30, 2018
What do you do if you've won a big agency deal and hired a team to work it, but you haven't been paid and there's no signed contract? YIKES! Right?!?
"I just won a large deal ($890k) with an existing client and given the green light from the COO to go ahead and build a larger team to execute on the agreed plan.
I have hired 5 new contractors and currently onboarding them. There challenge with cashflow issues on the horizon as the client is way behind in paying previous invoices (about $70k owed currently). I now have weekly contractor expenses of around $10k.
I have been reassured that this is simply an Admin /Accounts timing issue (up until recently there was no Purchase Order for the new project) but I'm burning through personal savings at an alarming rate.
To compound the issue there is no formal agreement signed with the client either (again I'm promised it is happening). This client is large - $7B in revenue - so I am not worried they don't have the cash but need to come up with some way of coping with the cashflow inconsistencies.
Any suggestions on managing cashflow challenges like the above? Also any suggestions on how to encourage the agreement to get signed ASAP?
Well, that's a real doozy, Daniel, but don't worry - we've all been there before!
First -- When you don't NEED extra cash, get a line of credit. Do this when it's not needed because it never fails that when you do need it you won't be able to get it! A line of credit is to be used for temporary situations just like this... In the long run, you know you're going to be fine, but in the short term a line of credit could really help.
Next -- I know you know this, but verbal agreement with a longterm or high revenue client is not a good way to do business. You have to put your foot down and just tell them that you cannot start work until the proposal is signed and you get paid. Without a contract or purchase order you don't have a foot to stand on. If someone leaves the company or changes directions on the project, you're left on the hook for the time, money and resources you've already invested.
What you can do now, is STOP all work on the project immediately. Make a phone call to the COO and explain the situation. Tell them you cannot move forward until you get the signed contract and purchase order.
So, Daniel - here's the steps you need to take to correct
#1 - get a line of credit
#2 - get a signed contract
#3 - get a purchase order
#4 - get paid
#5 - never do this again!
Comment below and tell me if you've ever run into a situation like this? What did you do to reverse it, and how did it work out?
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JASON SWENK IS AN AGENCY ADVISOR THAT GUIDES MARKETING AGENCIES THROUGH A PROVEN FRAMEWORK FOR GROWING THEIR AGENCY FASTER & EASIER.
Fresh out of college Jason was off to work for Arthur Anderson, one of the big 5 consulting firms. He quickly realized that he could never work for anyone other than himself. He decided to change direction, launch a digital agency that quickly grew to a multi-million dollar operation working with brands such as AT&T, Hitachi and Lotus Cars. After 12 years of steady growth, the agency caught the attention of bigger agencies and Jason sold it in 2012.
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