How to check out potential clients

Question: I’ve been burned by deadbeat customers. How can I determine whether a new client is going to pay his bills?

Answer: It’s unfortunate, but many entrepreneurs carry late and unpaid accounts. The deadbeats not only eat up your time, but they also can be cash-flow killers, said Stephen Dem, an Encino attorney who specializes in debt collection.

“The greater the extension of credit, the more diligence is needed in doing the background check,” Dem said. “Ask for credit references from potential clients who are going to be paying on a monthly or quarterly basis. See if their payment record at other companies has been good, and inquire specifically about accounts that are being paid after 90 days.”

Any previous bankruptcy or tax lien should be taken as an indicator of poor creditworthiness, so check those records carefully, Dem advised.

Generally speaking, the longer a prospective customer has been in business, the greater the likelihood that you will get paid. So ask about the company’s history and about how long the individual you’re dealing with has owned the firm.

As part of your credit check, request and review a company financial statement. This will help you determine the company’s financial status, its potential value to you as a client and how capable it will be of paying you on time.

“Review online information available on the company, including its websites and any other information that turns up in a search,” Dem said.

Anything that looks suspicious warrants further checking, but ask the client about it and give him or her a chance to explain.

If the explanation seems less than satisfactory, beware of doing business with the firm -- unless you establish a cash-on-delivery policy upfront. It can always be relaxed later if the customer’s payment history with you is a good one.

*

Do more than simply collect business cards

Q: I collect a ton of business cards from networking events, but I don’t really know what to do with them. Do you have any suggestions?

A: The reason entrepreneurs network is to meet people who will do business with them. Merely collecting business cards doesn’t do much good unless you follow up and attempt to cultivate relationships after the event concludes.

“You need to act immediately. New contacts have a shelf life of about one week. After that, they probably won’t remember you and those business cards you’ve collected will become cold leads,” said Denise Kotula, a West Hollywood-based marketing consultant with DK Strategic Consulting Inc.

She advises her clients to write notes on business cards they collect so they’ll remember what they learned about the person. “Don’t focus on the business; start a conversation about the individual,” she said.

The day after the event, make brief phone calls to the people you’d like to know better.

“Reintroduce yourself, express your pleasure in meeting them and create an opportunity to learn more about them, whether it is at another networking event, an extended telephone call at their convenience or a meeting for coffee. Ask permission to include them on an e-mail list if you send out newsletters or periodic updates,” Kotula said.

Follow up your conversation with a handwritten personal note and your business card. “This is a classy gesture that they will not forget. Not many people take the time to handwrite a note these days,” she said.

After that initial follow-up, look for noninvasive ways to keep in touch with people who might be clients or strategic partners. Send them articles you think they might find interesting or information about upcoming networking events they might enjoy attending.

Anyone you want to stay in permanent contact with should go into your contact database so you can touch base with them every month.

*

Got a question about running or starting a small enterprise? E-mail it to [email protected] or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012