#226 - How to resolve client disputes before they escalate
Send a text message to the show
Client disputes are one of those things every business owner deals with eventually. Not because you are doing a bad job, but because business involves people, expectations, pressure and money. The thing is, the goal is not to never have a dispute. The goal is to stop it from turning into a drawn-out, energy-draining saga that hijacks your business.
One of your best success metrics as a business owner is keeping your business out of court. That starts long before a dispute appears. As I always say, solid legal documents, clear processes and a client journey that manages expectations properly are the preventative work that saves you later. Misaligned expectations are the number one fuel source for disputes, so the more clarity you build in upfront, the fewer fires you will be putting out down the track.
Yet even with great foundations, disputes can still happen. And when they do, the biggest risk is making emotional, reactive decisions. I saw this constantly in my years as a litigation lawyer. People get hurt, offended, defensive or panicked, and then they send the email that makes everything worse. The moment you feel yourself getting heated is the moment to slow down and switch into process mode.
A Simple Framework to Resolve Disputes Early
1. Do not delegate it to the wrong person
If a client issue is serious, do not hand it to a junior team member or someone who is not equipped to manage conflict. As the business owner, it is on you, or a qualified team member, to handle it properly.
2. Take the emotion out of it
This is the hardest part, and also the most important. Step back. Breathe. Read the message again later. Your job is to deal with the facts, not the tone.
3. Pick up the phone
Once you are calm, have a direct conversation. Let the client speak. Ask questions. Often, what they are upset about is not what you think it is. You cannot resolve what you do not fully understand.
4. Check what was promised and what happened
After the call, go back to your agreement, proposal, emails and notes. What was agreed? What was delivered? Where did expectations drift? This is where you get clarity before you respond.
5. Put the resolution in writing
Then send a clear, non-combative email proposing a way forward. This is not about “winning” or proving a point. It is about finding a practical middle ground that protects the relationship where possible and prevents escalation.
If it cannot be resolved, consider mediation
If you hit a wall, mediation is the next step before court. It is usually faster, cheaper and far less emotionally exhausting than litigation. It also gives both parties a structured way to move forward without burning everything down.
The big picture here is simple. The faster you get calm, get clear and get into a process, the more likely you are to resolve the dispute early and protect your time, energy and reputation. If this has sparked questions about your agreements, your onboarding or how you manage client expectations, reach out. Sometimes a dispute is not just a one-off problem. It is a sign that your systems need tightening.
-
[00:00:00]
[00:00:49] Tracey: Hello everyone. Welcome back to another episode of the podcast. If we lived in a perfect world, we would never be in disagreement with our clients. We would never be in dispute. Everything would run smoothly just as we planned. But we don't live in a perfect world, and when it comes to business, things will come from left field. Things will catch us off guard. The unexpected thing will happen at some point in time, more than once. One of the driving forces behind me starting this business just on seven years ago was to support business owners to set themselves up for success and to avoid being caught up in litigation, to avoid the disputes. One of the success metrics for me and that I talk to my clients about when running a business is to avoid court, to avoid litigation, to avoid disputes. Part of setting yourself up for success is not ending up there. And it all starts with legal documents, legal foundations, processes and systems.
[00:01:50] And if you're a longtime listener, you'll know that processes and systems are my love language. But it all starts from there, all of the preventative steps. I talk a lot on this podcast [00:02:00] about those preventative steps and how to take care of the business and how to set the business up for success, but what I haven't spoken about on the podcast is what to do if, despite best laid plans, despite all the preventative steps you've taken, you still end up with a disgruntled client or you still end up in dispute. I'm gonna talk about that today.
[00:02:19] It really is a passion project of mine to support businesses staying away from disputes and litigation, because as longtime listeners will know, my background is a litigation lawyer. My background is in court work disputes and litigation. For the first 12 years of my career, I spent as a litigation lawyer acting for businesses, suing or being sued, usually over money, in court, in mediation, in arbitration. So dispute resolution was where I spent my time. It's where I spent those first 12 years. Fast forward to now, I've been running this business for just on seven years, I focus on the front end of business support, and that is the preventative steps, and that's all the things that a business owner can do to protect the business and set the business up for success to avoid becoming a litigation client like one of the ones I acted for all those years ago. And the reason I'm so passionate about that is because most of what I saw in those earlier years could have been avoided. They could have been avoided if the business owners had have had the right legal advice or any legal advice, in some cases, proper documentation.
[00:03:28] It really was a classic of two things. First thing, business owners don't know what they don't know, and often they weren't positioning themselves well with proper advice or proper documentation, but two, emotion. Emotion drove a lot of what I saw, and in my experience, no good comes from being driven by emotion.
[00:03:49] I saw so much destruction in those earlier years, and I've spoken about this really openly on this podcast and frequently over on social media where I'm very active, but I've spoken about [00:04:00] it real life examples, what I've seen, what you can do to prevent ending up there because hand on heart, I don't think any small business owner should end up in court.
[00:04:09] I just don't. When it comes to civil proceedings, so I'm not talking criminal proceedings or the salacious that we see on tv, all the really exciting things. We're not talking criminal, we're talking civil. That is where businesses end up when they're being sued or they need to sue when they end up in legal proceedings, they're in civil proceedings. That's the context of this episode today. And here in the civil proceedings, what I say to clients so regularly is we have a legal system here, not a justice system. So whenever a client says to me, it's not about the money, it's about the principle, and I want my day in court, I've got a lot of work to do to share context and to share reality around what that actually entails and what it looks like, because at some point it will always end up being about the money. At some point it will always end up being about something other than the principle, and I've heard it all. In this episode today, I wanna talk you through the approach I take business owners through when they reach out to me to say, I need a lawyer. I'm in a dispute. Here's legal proceedings, or I want my day in court. So I'm gonna talk you through all of that. Before I do get into that, what I really want to place emphasis on here is the preparation. There is no substitute for preparation. So when it comes to setting your business up properly with proper legal foundations and the proper documentation you need, and processes and systems that work to support your business, that's where the magic happens. That's the gold. That's where you get the most bang for your buck in spending time, energy, and focus. Because if you spend the time, the energy and the focus, setting all of that up really well, and then training your team and making sure everybody knows how you operate, everybody knows what to do now, when we're onboarding a client, when we're [00:06:00] delivering, when we're issuing invoices.
[00:06:02] And I'll get to what happens when things go sideways in the pointy end. But if you spend the time and the energy and the focus on that front end setup, documentation, team, education, implementation, you have significantly reduced your chances of ending up in a dispute with a client because everything has been rolled out so seamlessly and consistent with your documentation.
[00:06:29] In my experience, there's a couple of factors that will see a business owner end up in a tricky situation with a client, and usually it's around misaligned expectations, failure to manage client expectations or confusion where a client thought that they were getting something, they're really getting something else, they weren't clear on the invoicing, they weren't clear that they were going to receive an additional invoice for something. Scope creeps a big one when it comes to that, but managing expectations is crucial to set a business up for success. That's how we manage the client expectations and we avoid ending up in a dispute or worse legal proceedings.
[00:07:10] So I just wanted to pause to place emphasis on that yet again, and I know I say it a lot, but really your money and your time and your energy is better spent setting the business up at the front end with all of that infrastructure than it is waiting until something goes wrong and then trying to bootstrap it to resolve it, and then just hoping for the best.
[00:07:34] It really is the approach that people take if they've got a very healthy appetite for risk. I don't have a healthy appetite for risk, and I've never had a client say to me, I have a really healthy appetite for risk, Tracey. I don't wanna protect myself. I'm very happy to wing it and see how we go. So if that's you and you like to limit and manage your risk as much as possible, then your legal framework and your [00:08:00] processes and systems are one of the most important pieces of your business infrastructure.
[00:08:06] It really is. There's no other way to say it, and if you don't have it set up well and properly and tailored for your business so that you've got peace of mind that it works for your business and that you are protected, then really you are winging it. By extension, you're exposing yourself to risk. We can manage that risk.
[00:08:24] So that's all I'll say about that. I've got plenty of other podcast episodes that talk about the documents and what you need and how, and all the things and what not to do, and there's loads of episodes on that. Now I'm going to talk about what to do in your business if you find yourself in the thick of a client situation, a tricky situation, a dispute. What to do. And my approach to this is designed to keep a business out of court. I'm not a cowboy. I'm not gung-ho. I don't say screw it, let's just go have the day in court stuff them. That is not my style. And the reason that's not my style is because I've seen what happens when a business gets there. When businesses end up in court, the winners are the lawyers because the lawyers get paid no matter what the outcome. It's the businesses who suffer, even the businesses that are successful, because the time, the energy, the stress that's had to be poured in to managing those proceedings can't be called back, ever.
[00:09:25] So when we end up in a dispute with a client, now whether this is something small or something significant, whether it's about an unpaid invoice, whether it's about a deliverable, whether it's about an outcome, whatever it is, imagine you are in a situation with a client where the client's unhappy, there's confusion, and now it's awkward.
[00:09:45] What a lot of business owners do here is stick their head in the sand, palm it off to someone else. I've got a team member, you deal with it. Now, that's fine if your team member is trained for that responsibility. If [00:10:00] they're not, my advice to you as the business owner is for you to take the reins and deal with it and not delegate it to somebody without the necessary experience or expertise. So if you don't wanna get on the phone with a disgruntled client, your junior staff member shouldn't. That's the first thing I wanna say. Have a think about the team and who you're delegating to. If you have a ops manager or a client relationship manager or something like that where you have a sufficiently experienced person to be able to deal with a disgruntled client or misaligned expectations, by all means.
[00:10:36] But my first red flag here is when you delegate to the wrong people in the team because you are uncomfortable. At the end of the day, you are the business owner. The buck stops with you. So that's the first thing I say. The second thing I want to talk through is something that business owners can find really confronting, and that is remove the emotion.
[00:10:58] You're an adult, you're the business owner, you have an obligation to run the business, remove the emotion. That can be really jarring to some business owners. Because they see it as, this is my baby, this is my business. I'm really offended. Of course, I'm going to be emotional and you can't tell me not to be.
[00:11:17] I can and I just did. It's in your best interest to remove the emotion. Take a breath, step back, take the night. You don't need to jump on it straight away. When you are at the point of experiencing heightened emotions, step back, pause, because the very first thing that needs to happen here, if there's going to be a chance of a smooth resolution, is for you to remove the emotion, and that's your obligation, it's your responsibility to be able to do that because you are the business owner. So you can feel it.
[00:11:50] Of course you can. You can feel it and you can process it, and you do you what you have to do. But when it comes to the way you're showing up with your team, and when it comes to the way that you're [00:12:00] dealing with the client, you must remove the emotion first if you want a chance of resolving the matter swiftly and smoothly and without fracturing the relationship.
[00:12:12] The reason, I'm just gonna pause here. The reason that's important is because we think about it as, as small business owners being able to meet or better exceed our client expectations is so important as a business owner because from that comes repeat work, word of mouth referrals, positive reviews, the ripple effect is significant.
[00:12:32] On the flip side, as business owners, we know that unhappy clients tell more people about their feedback than happy clients. So the ripple effect of leaving things jarred or disgruntled or worse, severed, in an unpleasant way is really significant, and no small business can afford that. So when I'm talking you through these steps, my end in mind is positive resolution, long-term vision for the business. That's what I'm talking about. And there are ways that you can part ways with clients, and I'm not saying work with the wrong client or anything like that. There are really professional, articulate, clever ways that you can achieve the outcome you want.
[00:13:09] But the very first step in that is to remove the emotion, and that is the hardest part in my experience for the business owner. That is often the hardest part. There is so much to unpack there. I won't say anymore other than I've seen the value, and I know firsthand from all of the years that I've spent dealing with matters like this, that the value in removing the emotion can't be understated.
[00:13:30] So once you've stepped through that and you've been able to remove the emotion so that you can deal with the issue pragmatically efficiently, effectively, my best advice where possible is to pick up the phone and have a conversation. Now you can see there's nothing really legal here, is there? I'm not really giving you any advice on the law, or I'm not referring you to rules and legislation.
[00:13:52] I'm talking effective strategies that will keep you out of litigation. That is what we want. [00:14:00] So we've removed the emotion. We pick up the phone. I've had clients say to me over the years, I don't use my phone for that. And I thought it was a joke because we see the memes and we see all the talk and the articles about the different generations and what they use phones for.
[00:14:15] And back in the day, we had the phone with the circle and you had to spin the numbers, how things have changed and o, how things have changed when it comes to communication. My goodness, pick up the phone and have a conversation is my very next tip here, because that often is one of the most effective ways to diffuse a potentially volatile situation.
[00:14:39] Have a conversation seeking to understand. If you have a conversation with the client to seek to understand and to hear them, you are putting yourself in a strong position because you've taken the time to understand their perspective and to understand their grievance or their concern or their issue.
[00:14:55] You'll also, at the same time, allowing them to feel heard. So that the client knows you care, or the person that you've put in charge of this, the person you've delegated to in your team, the sufficiently qualified and experienced person that you've delegated to in your team, you or that person.
[00:15:10] The client knows you care. They feel heard. You can then again, pause to go back and reflect and think, you don't need to achieve a resolution on that call. That call is not about resolving the matter. That call is about two things. One, you seeking to understand so you can understand the perspective and the grievance.
[00:15:31] And two, the client feeling heard. Now, in my experience, that goes an enormous way to diffusing the otherwise volatile situation. It takes the sting out of it. It's not emails back and forth because we all know emails can be misconstrued, taken out of context. They're read in a particular way, depending on the frame of mind.
[00:15:52] The person who's reading it at a particular time, they're rife with challenge. The email, that comes later. [00:16:00] First and foremost is taking the time to have a conversation. There is no need to get combative in emails. There is no need for people to misunderstand your tone or your intention. Honestly, the most powerful thing you can do at this point to seek to diffuse this situation is to pick up that phone and have that call.
[00:16:16] Only though once you've been able to take a breath and pause and remove the emotion, if you haven't been able to remove the emotion, don't call. Wait until you can. Once you've had that conversation, and like I've said, that call is not about resolving it there, and then that call's about understanding and allowing the client to feel heard.
[00:16:35] You can then go away and reflect. You can look through the documents, you can look through the emails. You can have a look back to the contract. What was the deliverable that was promised? What did the team say? You can then start doing your investigating to really understand what's going on here, taking the time to do that.
[00:16:49] Once you've done that and you've got a really good understanding of the facts and what's actually transpired, you are then in a position to give thought to what's the next step and how do we resolve it. If at this point you have proper documentation, like I talked about at the beginning, proper systems and processes in place, this should be a really easy and powerful exercise for you because you can go back to the proposal or the quote, or the engagement letter, your contract. You go back to that. That's your starting point. What was promised, what wasn't promised, what's the issue? Then you can have a look at the correspondences that have exchanged.
[00:17:25] And for the love of all things good in the world, this is why I say to clients, please don't run your business via text exchange or WhatsApp message or something like that because it's inherently challenging to go back and retrospectively understand what's gone on when you've got different modes of communication coming at you, and some texts might have been deleted or some WhatsApps may not be there, or someone may have left your team.
[00:17:48] If your system and process for your business is such that all main communications with clients takes place via email or phone, and then you've got notation [00:18:00] processes or you've got documentation in your workflows, it's much easier for you. It saves you time when you're trying to go and reconstruct what's actually happened, so you can understand it as a business owner if you've got those processes and systems in place, and you're not searching for bits and pieces of information everywhere.
[00:18:16] So you're starting to see the process here and the value again of these frameworks that I talk about so often. Now, if you don't have any of that and you think, oh gosh, we've just not spent time focusing on that, and we've just been rolling with it and, and you know, everything's been fine for now, it's gonna be really hard for you to be able to go back with any confidence to understand what's actually transpired from your end.
[00:18:41] That's problematic, that weakens your position. You're not in a strong position then because there's no evidence that you're able to gather. You're not really sure. You're trying to piecemeal it together as best you can, and that's not great. It's not a solid position to be in. So when you're doing this exercise so that you can go back and understand what's happened, it's really important that you've got processes there that you can rely on to feel supported in a situation like this.
[00:19:03] Because the next step for you is to go back to the client, usually in email by this point in writing, to propose a way forward. And it's really hard to do that when you don't have a solid foundation to rely on. So you can imagine the difference going back to a client saying, I've reviewed our engagement letter, I've reviewed our contract, I've reviewed the emails on X, Y, Z date.
[00:19:24] This is what was agreed. Sorry that you've been confused. I can see where that's happened. You know, that's got some credibility to it as opposed to, oh, I've spoken to the team, or I've reflected on it, and I don't think that happened, and I'm not sure. There's no credibility there and you're losing your leverage in terms of the documentation and the strong foundation that you want to be on to seek to resolve something.
[00:19:47] Anyway, we get to this point solid or otherwise, we get to this point where you've spoken to the client, you've understood their position, they feel heard. You've made inquiries. You now need to think about a way forward, and you need to put that to the [00:20:00] client. Now, relationship management and communication is key up to this point because if you want to avoid litigation and a formal dispute, say mediation or an arbitration, even then you need to be able to propose a resolution, and this is the point, this is the sticking point. This is the point where business owners find themselves saying things like, it's not about the money, it's about the principle. And I'm not writing off that invoice because of this, and this person was difficult. And we went above and beyond and we did all the things. That's driven by emotion. You can hear it, can't you? As opposed to, this is our position. That's your position. I understand. For the sake of moving forward, I propose this. They're very different positions and in my experience, the position of, we've done so much and you've done this and you've been difficult and oh my goodness, and I shouldn't have to.
[00:20:51] That will very rarely yield a positive resolution, so I don't see the value in it. Because we're dealing with commercial risk now. We're in a dispute. We're going to have to make some concessions at this point because the ultimate objective that I have here in sharing all of this with you is to keep the business out of court.
[00:21:10] To keep the business away from litigation, but also to do what we can to try to resolve the issue without severing the relationship with the client so we can move on and complete. That's my end in mind here. If you have a client that y ou don't wanna work with anymore, if you've gotten to this point and you think, my goodness gracious me, I do not want to continue to work with this client, it's very clear we're not going to be able to meet their expectations ever.
[00:21:36] This is not aligned. It's best for the business to part ways. Different end in mind. There is a way to do that. I've spoken about parting ways with clients on previous podcast episodes. There's a way to do that as well. But nonetheless, the steps up to this point are unchanged. But if you get to this point, and that's your end in mind, different approach from here.
[00:21:59] As I said at the [00:22:00] beginning, the objective I have in sharing in this episode is to maintain that client relationship so that you have an opportunity to smooth things over and continue forward. So once you get to this point where you've spoken to the client and you've investigated and you've reflected and you've thought about a way forward, that's when, in my view, it's time to set out your position in a non combative email, because that then becomes a written record of your position in the unfortunate event that you haven't been able to diffuse the situation, you have ended up in legal proceedings. So this is the point where the rubber hits the road because you're now putting something back to the client and you're proposing a way forward.
[00:22:38] But there needs to be a concession because the most important thing here is to resolve this. So you can see none of what I'm talking about is driven by, I want justice, this is about the principle. I want my day in court. That won't yield a positive outcome for a small business because that costs time, money, and energy, and it can take 12 months longer even to resolve it.
[00:23:04] And whilst you are there seeking justice and your day in court and you know, seeking declarations about the principle whilst you're there, you're not engaging in revenue generation in the business. You're not engaging in growth activity. Your eye is off the ball. So there's a significant cost to the business that goes well beyond the immediate dollar value of this particular client's grievance, unpaid invoice, or scope creep, or unhappy with services.
[00:23:28] So thinking outside the square here is really important because we need to find a middle ground if we're to move forward smoothly without severing this relationship, we need to find a middle ground. So you can see the importance of all of these steps that I've talked about, and I share this based on years and years of experience, both in acting in the litigation matters, but also in supporting clients to avoid the litigation.
[00:23:53] And if all else fails and you're not able to resolve things swiftly in the way that I've stepped through, then mediation really [00:24:00] needs to be the next proposal, the next proposition, because that's a much better way to spend time and energy and to ventilate issues and explore possible resolutions than ending up in court.
[00:24:12] So this is the framework I talk clients through when they reach out, when they're trying to diffuse a situation or understand how to approach somebody who's causing issues or who's disgruntled. This is the process I talk them through and it's tried and tested.
[00:24:26] The taking the time to remove the emotion for you, taking the time to have the conversation are the most effective ways to diffuse a situation and to take the sting out of a situation. And remember, you are the business owner. So you have an obligation and a duty to your team, to your business, and to your client to take steps to resolve this issue, to take steps to bring the matter to a resolution that all parties can live with.
[00:24:52] Notice I didn't say where all parties are happy. I said that all parties can live with. There's a difference. And when you do that, when you invest this time and energy as the business owner to support the business in some cases, the team achieve a resolution with this client. You're gaining valuable insight into the holes you have in your processes and systems in your business, and you're gaining valuable insight in what it is that you need to do in terms of your internal business infrastructure to avoid ending up here again.
[00:25:22] Often the answer lies in the documents, the contracts, the proposals and quotes, but the processes and systems for issue delivery, invoicing, all the things. Now, I know that there's going to be so many different scenarios that you might be thinking through and thinking, oh gosh, well, you know, if I had this particular matter, that might not work. Or what about this, and there's about a thousand different tangents we could go down, but I just wanted to talk through the overarching principles that I know can be the most valuable when executed well, and that's them. So the first one is think about your delegation and don't delegate to somebody inexperienced or without sufficient expertise to [00:26:00] be able to handle this issue with your client, this disgruntled client. So think about the delegation and if there's nobody that meets that criteria in the business, then as the business owner, it should be you. That's the first thing. The second thing is remove the emotion. And I know it's hard. But it's so powerful, which is why I spent time talking it through.
[00:26:19] The third is to pick up the phone, have a conversation. Understand and allow the client the opportunity to feel heard, then reflect and think about a way forward, possible solutions. Then go to email. Write it out in a non-combative way. Open the floor for discussion, open it up to the client. This is what I propose, and then meaningfully engage from there to seek to resolve.
[00:26:46] Like I said, I'm not telling you you have to keep the client. I'm not telling you, you have to work on the relationship. If you wanna exit the relationship, there is a way to do that too. I'm talking about long-term vision, maintaining the relationship, not severing it so that you can complete the services, meet the client's expectations, and avoid that negativity that comes and that businesses experience when clients leave disgruntled.
[00:27:12] So that's the process I talk clients through. If anything's come up from that, that you'd like to talk through, feel free to reach out. I appreciate that it's very high level what I've shared, but trust me when I say that seemingly simple process can be so powerful and when you are engaging in that process, and it means that you are not ending up in court, tribunal, litigation, legal proceedings, when you're not ending up there, that is priceless because as business owners, we wanna be focused on our business. We wanna be focused on growth, revenue generation, beautiful client relationships. We don't wanna be focused on protracted disputes, disgruntled clients where we spend time, energy, and money dealing with that, and we [00:28:00] don't then have our eye on the ball when it comes to running the business.
[00:28:04] I really hope that's been helpful. Please feel free to reach out if there's anything here that you'd like to dive deeper into, or if there's anything here that you'd like to explore that relates to your particular business and you've got some issues that are floating around that you need resolved. Or if this has triggered something for you and you are wondering whether your infrastructure and your documents and your processes and systems really are set, setting your business up for success, please reach out and let's have the conversation.
[00:28:29] I'm so passionate about this, as you can tell, and those conversations are what I'm here for. As always, thanks so much for listening. I'll catch you next week.
Join Me on Social:
Rate, Review and Follow me on Apple Podcasts
If you are loved this episode, please consider rating and reviewing my show! This supports me in helping to empower more coaches, creatives and consultants - just like you - protect what they're building, and move forward with confidence in their business. It's quick and easy - click here, scroll down to the bottom, tap to rate with 5 stars and select 'write a review'. As always, I'd love to know what you think, and what you loved most about this episode. Also, don't forget to follow the podcast to stay up to date with the latest episodes.