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The 3 Lessons I Learned After My Clients Refused to Pay Out 5-Figure Contracts These three tips can help your business get back on track after a major setback.

By Naomi Nakashima

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

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I don't think anyone has ever gone into business thinking it was going to be smooth sailing all the way to the top. But we also have a tendency to believe that if we work hard and we do all the right things, we will eventually make it there — that with our tenacity, courage and a bit of persistence, we will reach a day when we reach our goals.

Unfortunately, one thing we fail to recognize until it's too late is that tenacity, courage and persistence aren't always enough.

As Captain Jean-Luc Picard said in an episode of Star Trek: The Next Generation, "It is possible to commit no mistakes and still lose." I was 13 years old when I saw this episode, yet those words have stuck with me ever since. They represent a truth we sometimes forget about — sometimes, you can do everything right and still suffer a major setback.

Back in 2015, I had two clients who, back to back, decided to skip out and disappear without paying their entire five-figure invoices. I had signed contracts, I had their deposits, I had emails from them complimenting my progress on their projects, but when it came time for them to accept the final work and pay their final invoice, they disappeared. So I did what any scrappy freelance writer with a lawyer and a signed contract would do: I went after them.

Months later, I had drained our savings, missed several payments on other bills and even though the court agreed with my stance and those clients were not allowed to publish or profit off those works, I still had no money. There was still no way to force them to pay me the money they owed me for the months of work I had put into their books. I held onto those clients for far longer than was safe, to the point of not doing other work because I kept chasing those unpaid invoices. Which, in turn, meant I had no money coming in even while I was cruising through our savings to try to recover these funds.

It's easy to get caught up in our principles and stand by what's right. And money tends to bring out our emotions much more than we would like to admit — especially when we need that money to pay for our living expenses, like our rent or our food. But what I learned was that hanging on too tightly to that principle cost me much more than the lost revenue did. Those emotional states are not the right place from which to be making business decisions.

People ask me all the time: What should they do if a client ever disappears on them without paying? And looking into legal action is still on the list. If a client disappears on me now, I will still contact my lawyer with all my contracts and be ready to go after them. However, one thing I learned after that disappointing year is that it is far more important to be ready to bounce back than it is to go after those unpaid invoices.

So, here are three tips for getting your business back on track after a major setback.

Related: 5 Strategies for Dealing With Business Setbacks

1. Reevaluate your mission and your goals.

First and foremost, you need to evaluate just how much of a setback this "major" setback actually was. How far off track did it really knock you from your goals, and did it endanger your ability to carry out your mission? This is an important step because it will help you frame the setback into actual value and set up the first steps you'll need to recover from it.

When something happens that's beyond your control, such as a client failing to pay an invoice, it's easy to dig in your heels and start passing blame, keeping your focus squarely on that incident. Doing so, however, robs you of the opportunity to see a path forward. When those two clients disappeared without paying me, I was so focused on the amounts of money they owed me, the hurt that they decided not to pay me and the guilt of feeling I should have seen it coming, I failed to realize the real impact of those lost funds on my business. I chased after them with a lawyer, which cost me money and time. I showed up in courts, and I took time to write up affidavits and statements — all of which was time I could have been better spent finding new clients.

Of course, hindsight is 20/20. If I knew then what I know now, I would have paused and seen that while, yes, both unpaid invoices were five-figures, which is a lot of money, it also would have taken just two new clients to catch back up — maybe a third and some hustle at worst.

Other ways to catch up might have included reevaluating my service rates, adding new services to my offerings or even putting together another offer or product, such as a template, that new clients could benefit from. But because I never took the time to analyze the loss in revenue or what that meant for my goals, it seemed immeasurable, and even when friends and colleagues mentioned some of these potential solutions, I dismissed them as not being enough.

2. Learn from the setback but don't dwell on it.

This might seem like a no-brainer, but at some point in time, you have to turn away from the setback. There's value in analyzing what happened and seeing what you can learn from it, of course. As I said earlier, you need to evaluate just how far off track this setback has placed your business from your goals.

But that's where it should end.

When I finally paused to look at the situation I was in, I knew I never wanted to be in that place again. So, I did what any of us would do: I implemented changes in my workflow and policies to help protect myself in the future. And that's where it should have ended. Instead, nearly every business decision I made for the next two years was rooted in fear, going all the way back to these two clients. I thought:

  • What if this client turns down my pitch? I better send out more than usual.
  • What if this client changes their mind partway through the contract? I better shorten my delivery estimate and finish faster.
  • What if this client does accept my pitch but then doesn't pay? I better take on another client.
  • What if both clients hire me and then don't pay? I better take on a couple more just in case.

At one point in time, I was working on four books that all had deadlines of only 6 weeks, plus a few other side projects and blog posts. And if you're thinking that this was a fast track to burnout, you're right — it didn't take long at all, which led to a whole new set of problems.

Fear is not a good space from which to make rational, day-to-day business decisions. The fact of the matter is, I can't control whether or not a client pays me. The best thing I can do is to have appropriate insurance and a plan, not to try to stop what is unavoidable.

Related: Why True Entrepreneurs View Setbacks As Opportunities

3. Manage your self-talk.

Setbacks often cause self-doubt, especially when you think you should have seen it coming or that you could have done something to prevent it from happening. While it's important to recognize how much of a role you had in the setback, it's also important to remind yourself that your role in the setback was limited.

After my clients disappeared on me, I went through every negative position my mind could muster, from blaming myself for not seeing the signs to doubting whether or not I was even cut out to continue running a business. And every mistake I made after they disappeared on me only seemed to feed into that negative self-talk. As you can probably guess, it was that negative self-talk that helped fuel some of those bad decisions I was making that led to burnout.

Here's the really great thing about running your own business: You only start from scratch once. Even if the biggest catastrophe in the history of the world comes and wipes you out, you are never really back at square one. You have colleagues, ideas and experience all under your belt to help you rebuild and to do it better. And as you already know from the first time you built your business, self-talk is a crucial factor in your success.

There are a couple of things you can do to help manage your self-talk:

  • Revisit your client testimonials praising the impact you've had on their lives and in their businesses.
  • Review your mission and the value you're bringing to your industry.
  • Read through your favorite motivational quotes, stories or books.
  • Rekindle your passion for your business by going back to the moment that started it all: Why did you go into business in the first place?

You can never be guaranteed that you won't come across hardships and setbacks in your business — we all know that. And we do our best to prepare and plan for as many of those setbacks as we can before they happen. But the best thing you can do for yourself and for your business is to plan for how you will recover from those setbacks.

Naomi Nakashima

Freelance B2B Ghostwriter and Author

Naomi D. Nakashima is the founder of the Freelance Writing Success Summit, an annual event that helps thousands of freelance writers launch and grow their careers. As a ghostwriter, Nakashima has helped dozens of business owners write and publish their first books on business and marketing.

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