When a client suggests an exclusive arrangement, it's wise to think carefully about the potential downside. March 18, 2006
Question A design firm client has asked if I will work for them exclusively. They have (and get) more than enough work to keep my shop busy. On the surface, the arrangement appears as though it would be amenable for both parties. (I would be sole source on jobs they send me, they get someone they are happy with to handle their designs and make them work.) However, I am hesitant to do this because it would alienate the rest of my client base, since I would not be able to do their work, and I wonder about repercussions, should there be a problem in the future with my sole client. It would be hard to reestablish good faith with the clients I currently have, and it would feel like starting in business all over again should I have to rebuild a client base. Have any of you worked exclusively for one client?
Forum Responses (Business and Management Forum)
From contributor L: I don't think I would want to agree to exclusively work for them. I feel that once they have their hands around you, you will be taken advantage of. If you sign something that makes you theirs and something goes amiss, where will you be? If you want to give them high priority and you can still work your own client base, that would be a better arrangement.
From contributor M: I get nervous when one of my customers is getting anywhere close to half of my business. I'd hate to have all of my business dependant on their success (or failure). Like you said, if there's any problem with the relationship, you're left out in the cold. I'd pass.
From contributor P: Would it be impossible to expand your business to service this client and your existing clients? Could be a good opportunity. Or a nightmare. If the design firm is easy to work with and provides steady, profitable work, I would try to figure out a way to do it. If they are a PITA, then you lose nothing by refusing.
From contributor R: Why do they want you to give up all your other clients? Are you going on their payroll? Will you still be working for yourself? This will really limit what you can make. I would never give up my business for a deal like this, because it looks like that is what they are asking.
From contributor T: Once they know that you are dependent on them for work, they will start playing head games. They will complain about your prices, punish you for not being more reasonable. They will delay your payments, hold back good work. They will expect you to do all sorts of little pain in the butt jobs. This is a standard designer's business practice to keep costs down. Say yes, but keep all your old business and be quiet about it. If your work is good and on time, they won't mind.
From contributor B: Charge 'em a freakin' retainer! Take the loot and buy some more tools, space, people, trucks, boats, and whiskey. Tell 'em you'll work for them and handle anything they throw at you, and whatever else you do is your business. Possible growth opportunity here.
From contributor D: Been there, done that, lost the t-shirt. One word - don't.
From contributor S: This is called the "Sears" syndrome. You'll have one big client right up till the time you go out of business. Diversity in every area is the key to staying alive these days.
From contributor Y: Seems to me the only reason they'd want you to work for them exclusively is so they'd have a measure of control over you they wouldn't otherwise have. Which means they want to dictate how you run things, and probably will start making demands on your time and money. So what is the trade-off? You get steady work - is that it? Do you have steady work now? Or enough to make a good living?
If you stay your own boss and are able to take other work, then you have an upside potential for greater success - but not with them as an exclusive. Why not just seek to expand your business so you can handle all the work they give you - if you can satisfy their needs on your terms, why restrict yourself?
From contributor I: I had this come up years back and had the good luck of a friend telling me how to handle it. I told them that if they want me at their beck and call, they have to give me a non-refundable retainer of $20,00.00 per year. This will keep them at the top of the list on projects that come in. But I am going to work for others as well. Today I have two clients that have me on retainer. (Used to be three.) They still have to pay me the whole price I quote them for the job. You should have heard them scream when I told them this. They didn't even talk to me for a couple of months. But when they did come back, they had to wait in line for their work to be done. They screamed even louder. I just reminded them they had not been around for some time and they didn't have a right to talk to me that way. Then I told them that for being so rude, they will wait a little longer. That's when I got a check in the mail. Now I don't worry so much about money. I still bust my butt, but at least I sleep at night.
From contributor F: Yes, it can work! But there are pitfalls. If you're feeling good about it and there's more money in it, why not? I've sold work in the past to furniture stores that required this agreement. You can go for years without problems, and you will know when it's time to start getting out of it. At that time, you start looking for new customers before you get out. If I didn't do this in the past, I wouldn't have had as much steady work or income. Sure, you're going to be more or less at their mercy, but they're depending on you to help them sell their product, so it can work both ways.
From contributor N: Hire some help to handle all their work, plus your other clients. Sounds like they want you exclusively because you cannot handle the workload. Figure out how to make it work without losing clients you already built relationships with.
From contributor H: I was in a similar spot years ago. I was doing a large volume of countertop work for a plumbing/cabinet wholesaler who really retailed. They wanted me to make tops only for them. My response was "I will. My asking price for building equipment and stock is xxxxxx.xx. My salary requirements will be xxxx.xx per week." Their response: "What??"
You're in business for yourself because that's what you want to do. It will most likely turn out to be a PITA, but set your terms... they may accept. An option would be to offer to hire one or more employees to do only their work under your control. But a minimum weekly/monthly fee would have to be paid to cover the basic costs. Having been there and done that, I know better than to do it again.
From contributor O: I'm in the middle of bankruptcy right now because of the very thing you're talking about. Did I mention that the owner of the company was, so I thought, my friend? That was a lesson learned the hard way.
From contributor K: Where are you located? I think the problem for most people is that the designer is selling your work for their own price. However, if you live in California, you are working for the homeowner, not the designer. The designer gets paid hourly for the design and the homeowner pays you direct for the work. Otherwise, the designer would be working in the capacity of a contractor and would have to be licensed as such.
I work with more than one designer and I am their only woodworker. Of course, these are full service interior designers and they don't have to get clients that need woodworking. I will never work with someone who needs to run the show. The designers I work for basically kneel down, because once the job is signed, it is out of their control. If they want it done quickly, they will do what it takes to make me happy.
You also have to realize that the designer's customers will refer you as the woodworker. They typically won't refer the designer, because designers are the ones who take too long to get things done.
Think of ways to make it work so that you can do their work and the referrals and keep your current client base. How did the large companies get so large? Have you thought about outsourcing the jobs that are simple or the ones you don't have time for? It's still your company's name on the contract with the customer, and the job gets done. Find another small shop that needs the work and does a good job. Outsource doors and drawers and finishing. Get installers. Before you know it, you'll be Home Depot's biggest competitor.
I don't care what jobs come my way, as long as I can get the bills paid. Making money in the business is top priority. You need to think about quality, but you also need to think about staying in business. If someone you are outsourcing to doesn't do the job as good as you, it doesn't mean that the customer isn't happy and you don't get paid. Just collect your check, tip your hat and move to the next one. Make sure that the company you outsource to signs a contract with you saying they are reliable for any mistakes.
Just because the designer wants your company to work exclusively with them doesn't mean you can't outsource the work. Tell them that is how you do it for everyone. Like it or leave it. In the end, it really depends on what you think success is for your company. Whether you want to stay small and do all the work yourself (like me) or you want to grow and get a bunch of people to do the work for you. More work = more people = bigger shop = larger equipment = bigger bills = more headaches. Enough work = less people = less overhead = less mistakes = self gratification. But you won't be rich, either.
From contributor W: You could also set up a separate division to do the work for them. If this division is its own legal entity, you could then be exclusive to the designer and keep your original division working for your existing clients.
From contributor X: Proceed with caution. The moment you have to hire more help to get their work done… reevaluate. When you start thinking about equipment that will allow you to do the work faster and cheaper… reevaluate. When they throw more work at you and want a better price and more commitments… reevaluate. Should you buy more supplies in expectation of future work because buying in bulk is cheaper… reevaluate.
The list can go on and on, like needing more space, services from others, insurance, OSHA, etc. When you let control of your business be dictated by others, you're on the road to bankruptcy. I've seen many businesses go belly up from expectations that never came through from others. Be firm and tell them what your business will do for them. It's your show, not theirs. You're creating and doing what they can not do.
From contributor J: Beware. All eggs in one basket… I agree that it can have its upsides, but there are many downsides. Basically, they want to own your company without paying for it. Even if they can pay my total cost, that still doesn't cut it. They need to own the risks as well.
I'd think about setting up a company on the side affiliated with my company and doing all work through the new company. In that way they get the service and the risks - none. I'd also ensure that this company has exclusive rights for all of the woodwork from the designer company. What's good for the goose must be good for the gander. I shouldn't risk the clientele and relationships I've created over the life of my company. Anyway, exclusivity doesn't always work for the receiving party bounded by it.
