Professional Services Accounting ARTICLE -
Thanks But No Thanks -
Signs You May Want To Decline A Prospective Client

Target Audience: Professional Services Providers, Consulting Services, Law Firm Professionals, Lawyers, Law Firm Associates

During tough economic times, no firm wants to turn away new clients or business. But the fact is: It’s never a good time to relax your client-screening process and standards. Having an effective intake process enables you to assess potential clients from a strategic, operational and risk standpoint, helping you to head off “bad business.”

Risky business

Although the client intake process will vary from firm to firm, the challenge is the same for all: to balance the objective of landing new business with the need to mitigate risk. Determining when both goals are occurring in harmony is difficult, but not impossible. To find the right balance, ask questions such as:

• Is your firm capable of handling the new business successfully?
• Will the prospect create a conflict of interest with an existing client?
• Will the prospect prevent you from taking on new, more profitable business that better fits your firm’s long-term strategic goals?

The idea of new revenue walking in your door is enticing, particularly if you spend little or no time finding the new client. However, the seemingly quick revenue may be detrimental to your firm’s profitability. A better option is to develop effective due diligence procedures to help you expose hidden risks, such as a prospective client’s sketchy credit history and financial dealings, pending legal claims, or a reputation for conducting business poorly.

Without performing this due diligence, you could end up with a greater percentage of high-risk clients who dispute fees or refuse to pay them altogether, resulting in collections nightmares and write-offs. Or you could be faced with difficult clients, which can pull your legal team away from key clients, thwart business development efforts and put a damper on office morale — not to mention damaging your firm’s reputation.

Reasons to say no

There are several warning signs that may indicate when it’s best to decline a prospective client’s business. Here are a few:

It’s an emergency

Unless you have sufficient staff or your firm specializes in crises, a prospect with a “life-and-death” situation can be risky. Working in crisis mode with insufficient time can force you to delegate work to less-experienced lawyers or other staff, which makes your firm more vulnerable to errors. Statutes of limitation and the quick turnaround time needed to complete and review your legal work for accuracy can open the door to time-element malpractice claims.

Prospective client is high maintenance

Prospects who all but insist that you put your other cases on the back burner to deal with their legal matters can spell trouble. They may use pressure tactics — such as constant phone calls and an incessant need for updates and progress reports — and make irrational demands, such as requiring that a suit be filed the same day or that a matter be closed by the end of business. Prospects who have unrealistic expectations about how much attention and handholding you’re able to provide can zap your firm.

Prospective client knows it all

Does a prospective client interrupt your comments, dispute your points and turn a deaf ear to your advice? Does the prospect act as if he or she knows the legal process and how to run the case better than you do? If so, this prospect’s lack of confidence in your firm’s abilities may make it impossible to service the legal matter satisfactorily. Additionally, this kind of behavior could be signs of a hidden disdain or contempt for the law or lawyers. In these instances, it’s difficult to establish the bond of trust that’s essential to lawyer-client relationships.

Fee phobia

Suits against clients for unpaid legal fees are a prime source of malpractice claims, so be wary of clients who make a big fuss about them or don’t want to discuss fees at all. And if a prospective client refuses to sign a fee agreement or pay a retainer, he or she should be avoided altogether. Rejecting these types of clients before representation could spare you the aggravation of fee collection difficulties and future claims.

You’re not the first legal representative

Be leery of prospective clients who have been represented by one or more lawyers on the same matter. This may indicate any number of problems with the prospect, such as he or she being uncooperative or difficult to satisfy, or making unrealistic or unethical demands. In addition to these concerns, there’s also the matter of splitting fees. Even if you work out a fee-splitting arrangement, there’s still a concern that the prospective client will seek other representation later.

The matter isn’t your specialty

If you specialize in real estate or intellectual property but the prospect needs an expert in trusts and estates or environmental issues, it may be tempting to expand your practice. But doing so can be problematic because your firm might not be ready or qualified to specialize in a particular area.

You have ethical concerns

Of course, if a prospective client has a questionable character or you have negative feelings about the business or the case, it’s a good idea to pass. It’s likely that many lawyers who find themselves in malpractice suits wish they’d listened to their “gut” and not taken the case in the first place.

Think about the long term

Saying no to a prospective client can be difficult, especially during a sluggish economy when business has stalled or, in some cases, come to a grinding halt. Although your aim is to improve the bottom line with new business, turning away potentially difficult clients actually may be more profitable in the long term. It enables you to dodge costly suits and claims, conflicts of interest, collections nightmares and write-offs while steering clear of those clients who may drain your firm’s time, talent and other resources. 

Find out how our expertise in professional services accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

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