Episode Details

What To Do When A Client Files a Business Lawsuit Against Your Agency

When a project begins to go south, you run the risk of a client filing a business lawsuit against you which can be detrimental to your agency's reputation and future.

In this episode, we'll cover:

• The warning signs of a project that's going south.
• Why it's so important to have documented processes for your agency.
• 3 ways to handle a business lawsuit from a client.

This week's podcast is a little bit of a different format. Instead of interviewing a guest who shares great strategies to help you grow your agency, you get to listen in on a coaching call with a client who is facing a client business lawsuit. I recorded the call with his permission and we chat about how to handle it without wasting outrageous amounts of time, money and emotion.

Before we dive any further, you should know a couple things:

1. This is not legal advice. I'm not an attorney :)
2. In the interest of privacy, names have been changed/omitted.

The Backstory

So today, I'm talking to Jake who owns a small digital agency in the midwest. They work with small and midsize businesses and have been in business for nearly a decade.

Jake's agency took on a client who was retired from a successful military career. She was starting a side project which included an educational website. Jake's agency quoted the project at $15,000 with payment terms as: $5,000 upfront, $5,000 at concept approval and $5,000 upon completion.

Why You Should Never Ignore the Warning Signs

Before they knew it Jake's team was two-thirds into the project, victims of scope creep, way over on hours and project scope had changed many times… Jake admits all the warning signs were there and they ignored them.

He says in hindsight they should have fired the client and walked away. Instead, they kept working in order to recoup their loss and get the last $5,000 installment.

Finally, the project was complete and delivered. They didn't hear from the client for about a month until she contacted them to help with a server upgrade. Which they did. For free. Again. :/

3 Words to Dread: "You've Been Served"

Another month after final contact with this client, Jake says it was business as usual at the agency until a gentleman arrived at the office, asked to speak with the owner, and officially served him with a lawsuit. It was exactly like the movies.

The client is suing Jake's agency for $5,000… Which is baffling because it's only for part of the project cost, not the full amount. This has never happened to Jake in almost 10 years in business.

In 12 years running my agency, I went through this process 3 or 4 times. It's scary at first. The best way to handle it is professionally. Keeping your cool and an open mind.

Why Processes Outperform Talent Every Time

Without knowing the exact reason for the business lawsuit, the first thing to look at is Jake's agency's process. Could they be at fault or negligent in delivering what was expected, promised and paid for? He says no.

Jake had purchased my Agency Playbook and has access to all my agency documents. He assures me that his team has documentation of the approved proposal, launch order forms, $0 change orders and project approval. He has full confidence that his team followed their processes and has a paper trail to prove it. So what piece of the story are we missing?

3 Ways to Handle a Client Business Lawsuit

1. Keep attorneys out of it (if possible). In Jake's case, his agency was being sued for $5,000. Attorney fees would be least that much. This is a small claim should be easily resolved without racking up legal fees.
2. Make a personal phone call. Even though you're shocked and insulted call and ask for a phone or in-person meeting to discu