When it comes to working with vendors like freelancers and development teams, treat them just as you would treat a large corporate vendor. That is, pay them and pay them on time. Don’t play games like blaming a third party for delays. Even if you are unhappy with a vendor’s performance, you must pay for that vendor’s time. The solution to unhappiness is to replace the vendor; it’s never to withhold or lie about payment.

One would think that personal relationships with a small vendor would lead to more honorable transactions between the two parties but ironically the opposite is true. I have seen entrepreneurs routinely withhold, delay, contest, or ignore payments to freelancers and vendors because smaller vendors have little recourse. Meanwhile, these same businesspeople would never delay payments to large vendors like AT&T or their utilities companies.

Having been on both sides of the entrepreneur / vendor relationship, I have noticed that entrepreneur (buyers) are far more often bad actors than vendors (sellers). Vendors will generally bend over backwards and even lose money in hopes eventually getting paid, while entrepreneurs sometimes systematically underpay their vendors.

From one entrepreneur to another, I urge you to honor your payment obligations even if you’re not happy with service. Doing so is ethically right. If you’re not swayed by that argument, then do so to protect your most valuable asset: your reputation. You don’t want to develop enemies, and you don’t want vendors to retaliate by assassinating your character online. And when it comes to fund raising and growing an online business, it’s a small world, especially at the top.

If you’re a vendor, here are a few tips to avoid bad customers:
• Don’t work with customers who have fired many previous vendors for the same service.
• Don’t be flexible with payment terms. Realize that you’re not a bank, able to extend credit.
• Don’t work with customers who say a third party is responsible for paying the bills.
• Don’t tolerate customers who want to edit invoices, for whatever reason (even if it’s supposedly to benefit you).
• Don’t allow customers to renegotiate rates after hours have already been worked.
• Do have a clear contract, written in plain English.
• Do have an annual Master Service Agreement and a monthly Statement of Work.

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