It’s tempting to take on any new client, especially in an uncertain economy. Work’s work, right? Not necessarily. Right now, consultants and contractors need to be more vigilant than ever. A new client might take months to pay you, or even worse — might not pay you at all. Nor do you want to end up stuck in an unpleasant working environment. That’s why I recommend checking out a client before you leap aboard just in time to go down with the ship.

Note: This post first published in TechRepublic’s Five Tips blog, which has been renamed the Five Apps blog.

1: Ask other contractors

Most of us have a network of contractors and consultants we work with. Don’t be afraid to ask for information within this group. Learning whether someone paid their invoices in a timely manner isn’t the only thing you’ll want to know. Did the client respond well to problems? Were they supportive in general? Would the contractor work for them again? (That’s probably the most important thing you can ask.) Just remember that the information is personal and therefore subjective. Listen carefully and apply what you learn objectively.

2: Go to the source

If you’re lucky, you’ll know someone who works for the company, but employees are probably the least trustworthy source. They’re not liars; they’re biased. Asking them if they like working for the company might be all you need to do, if you have the time to chat. Don’t be afraid to ask specific questions about customer satisfaction, employee retention, current contracts, and so on. As with other contractors, the information you get is subjective. Remain objective.

3: Search the Internet

I’m loathe to mention this one — it just seems so obvious. You might turn up an article on the company’s VP, who was recently indicted for embezzlement or learn the client has been awarded a huge government contract. With today’s Internet, sleuthing has never been easier.

4: Check out the client’s financial history

If you’ve tried the first three strategies and you’re still uncertain, check the client’s credit history. You can use an inexpensive, online service:

  • Better Business Bureau: This should be your first stop. It’s free and reliable. Enter the company’s name to review any complaints and the company’s response. Don’t assume that no complaint means a good rating — it doesn’t work that way. It simply means that no one has lodged a complaint. What’s more informative is how the business responded to complaints. Did it do so in a timely and responsible manner? You won’t get a financial report, but via the complaints, you might learn about unpaid invoices, unresolved customer service issues, and so on.
  • During a free 72-hour trial, you can get a company’s credit rating, sales, bankruptcy filings, tax liens, and so on. I don’t advocate abusing the free trial, but it’s a good way to see whether the service is a good fit for you.
  • DNB (Dun & Bradstreet): This is comprehensive but more expensive. Its $59.99 eValuator report should provide more than enough information on payment trends and any negative filings, such as collections, bankruptcy, and liens.

You can bet they’re checking you out!

5: Look for recent layoffs

Layoffs aren’t an immediate indication of trouble, but you shouldn’t ignore them either. A small layoff can be a positive move. A large one is a different matter; you’ll be working with frightened, demoralized, and probably overworked employees. The following sites will provide information about recent layoffs:

  • You can search Hallway by company, but be as specific as possible. A search on “Lexmark” turned up nothing, but adding the “Inc.” turned up plenty. If you’re lucky, you’ll find comments from actual employees. Keep in mind that most are carrying some emotional baggage, but a batch of similar comments is usually more than just sour grapes — it’s an indication of a real problem.
  • The United States Bureau of Labor Statics maintains a database of layoffs of 50 or more in a five-week period (based on unemployment claims). Enter the company’s name in the Search MLS control and click Go.

Other steps?

What other approaches do you use to reveal critical information about potential clients? Have you ever overlooked a clue and gotten mired in a messy situation with a deadbeat client?