I've been doing this for two years now and learning to spot problematic clients early. Had a prospect this week who wanted me to guarantee minimum savings amounts, accept payment only after 12 months of verified savings, and provide $1M liability insurance. Duke Energy Progress territory, mid-size manufacturing. What are your biggest red flags that make you walk away from a potential engagement?
LOA red flags - what makes you walk away?
Steve, that client sounds like a nightmare! My biggest red flags: 1) Wanting guarantees on savings amounts, 2) Asking for work to start before LOA is signed, 3) Previous bad experiences with utility auditors, 4) Unrealistic timelines, 5) Wanting to negotiate contingency rates below 20%. FirstEnergy territory here, and I've learned that clients who nickle-and-dime you upfront will be problems throughout the engagement.
Bob nailed most of my red flags. I'll add a few more: clients who won't provide utility login credentials, want you to work on contingency with no retainer, or have unrealistic expectations about timeline. MLGW territory has some unique rate structures, so I also walk away from clients who think they know more about their tariffs than I do and aren't willing to listen to professional advice.
Randy and Bob covered most of mine. I'll add: clients who want to modify standard LOA language extensively, especially liability and indemnification clauses. Also red flag when they ask about your "success rate" or want references from competitors' former clients. Shows they're shopping around trying to pit auditors against each other. Avista territory.
Huge red flag for me: clients who want you to sign their vendor agreements instead of using your LOA. These are usually corporations with legal departments who think they can dictate terms. I've seen agreements that make you liable for utility penalties, require you to carry specific insurance, or cap your fees at unrealistic levels. PG&E territory. Walk away every time.
Marc makes a great point about vendor agreements. Montana-Dakota Utilities territory here, and I've seen some doozies. One client wanted me to guarantee that utility wouldn't raise rates for two years after my corrections! Another wanted me to pay them back if they weren't satisfied with my work, regardless of actual savings achieved.
Tim, that rate guarantee request is insane! Edison territory here. My red flags include clients who want to dictate which tariff schedules I can recommend, or who have had "bad experiences" with multiple previous auditors. Also watch out for clients who immediately ask about your fee structure before discussing their actual utility situation.
Jesse's right about multiple bad auditor experiences - usually means the problem is the client, not the auditors. CenterPoint Energy territory. I also walk away from clients who want itemized invoices breaking down hours spent on different tasks. We're paid on results, not time, and clients who don't understand that are trouble.
Another red flag: clients who want to cap your contingency fees at a specific dollar amount. Had one Duke Energy Ohio client who wanted to pay 25% contingency but capped at $10K total. Turned out their potential savings were over $80K annually. That's not a partnership, that's them trying to get professional services at discount rates.
Cecilia brings up a good point about fee caps. Idaho Power territory here. I also avoid clients who want to withhold final payment until they see a full year of savings. Our job is to identify and correct errors, not to guarantee utility performance or rate stability. Payment should be tied to corrections implemented, not long-term outcomes.
Warren's point about payment timing is crucial. TVA territory. Had a client who wanted to escrow contingency fees until 18 months of savings were verified. That's basically an interest-free loan to the client while they benefit from reduced bills. I need cash flow to run my business, not extended payment terms that favor only the client.
Thanks everyone for the great responses! Sounds like my instincts about that Duke Energy Progress client were right. They wanted guaranteed minimum savings, 18-month payment delay, and liability caps that would have made me responsible for their entire electric bill if something went wrong. Definitely walking away from that one.
Steve, you made the right call. Better to walk away from bad clients than spend months fighting over payment terms and scope creep. There are plenty of reasonable clients out there who understand the value of professional utility audit services and are willing to pay fair contingency rates for results. Focus your energy on finding those clients instead.