When I started my company, one of the core tenets I kept in mind was to always work ethically and treat people with respect. And I have always tried to partner with other businesses that believed the same. Most of our clients are local, so I get to meet them in person, and make a (sometimes misguided) judgment as to whether or not we'd be a great fit for each other.
Unfortunately, we don't always live up to best intentions. Here's the story of our business relationship with a criminal, how it came to pass, and what we, as small business owners, can all learn from the experience.
The Best New Clients Come from a Referral... Usually.
It's a long-revered business truth that, "your best sales come from referrals." And that's usually true, for both customers and business owners. Customer put their faith in a business because of a recommendation they get from someone they trust. For business owners, it works in reverse: a lead coming with a recommendation from an existing client inspires more trust than if the prospective lead came in cold.
In December of 2014, I was fresh off of completing a website for a client that was a pleasure to work with (they are still a client to this day). Some time after we wrapped things up, someone they had a business relationship with needing assistance with online marketing, and the client referred their professional acquaintance to us.
This individual, Brad Peters, had just purchased a national women's race series called "LoziLu." This was a great opportunity for us to manage a website, SEO, social media and marketing for a proven, national client. The race had been held for several years, and had an overall positive reputation. I was excited for the opportunity to stretch our wings and show that working with Creative California could be a great experience for everyone involved! This was a great chance for us to show that we could deliver top-tier service to clients who operated on a national level.
We held our breath while we were going through negotiations with Brad. But finally, the contract was signed. There was a ton to do, so we immediately rolled up our sleeves and got to work updating the website, building advertising campaigns, setting up proper analytics, and so much more. We even had to hire a new employee to manage the account, as it was a lot of work in a short amount of time, and LoziLu was more than covering the costs. At the time, it seemed like a dream.
That Feeling You Get in Your Gut? Don't Ignore It.
The signs were there early on. From the odd way Brad dodged questions when I needed full contact info for the contract and billing, to the way he treated our new employee--we enjoy having casual working relationships with our clients, but this was a bit too much--I started to suspect that we might run into some issues with Brad down the road. But I gritted my teeth and pushed my feelings aside. After all, the checks were showing up and the bank was cashing them. And Brad was one heck of a smooth-talker. Just as my doubts would start to really get to me, he would show up at just the right moment and smooth things over.
So I did my best to put my misgivings in check, brushing them off as the typical discomforts of an overwhelmed small business owner dealing with stress and growing pains. There was no time for doubts. There were races to plan and tickets to sell, and we were under a time crunch to ensure that the first race was profitable.
And we sold tickets. A lot of them. We overcame Brad's business organizational problems, his lack of tact with my employee, and our very short time-frame, and sold a good amount of registrations for the first LoziLu race in Los Angeles, held at the end of February 2015. We assembled an advertising campaign comprised of Facebook ads, email marketing , Google AdWords, and more that was successful enough to generate the sales needed to turn a profit on the first race.
This was a big deal. Normally preparation for races like LoziLu's starts about a year ahead of time. We'd had less than three months before the first race.
Then Things Started Falling Apart... Customer Service Being the First Major Sign.
After the race, we immediately started receiving countless emails and Facebook messages from runners who didn't receive race medals, or who didn't receive the right race medals. Those who had been lucky enough to get a medal at all discovered that the medals were from the previous year's race. Those who weren't even that lucky were simply told by race staff that LoziLu had run out, and were directed to contact customer service and submit a request for a corrected medal.
Brad told me that it was the manufacturer's fault--they had printed the wrong medals. According to him, staff didn't know there was a problem "until they opened the box when it was time to start giving out the medals." This prompted a serious conversation between he and I about how good customer service relies upon catching mistakes before they create a problem. It's critically important to make sure well ahead of time that you have everything ready for your customers. When you're running an event like a mud run, you HAVE to provide your customers with what they were promised when they purchased their tickets. Runners love their swag.
And many of the runners were very unhappy. We had a front row seat for this, as we were running all of LoziLu's customer service (hence the need for an additional employee). We were, naturally, the ones best suited to do so since we managed all of the social media accounts, website and email. Why go to all of the trouble of painstakingly forwarding each and every communication when we could just handle it ourselves?
We also ended up entering and managing the data for all races using a third-party race management company, Active.com.
It was this direct access to LoziLu's customer base, as well as our management of the race's data, that would eventually start to make it clear that Brad wasn't telling us the whole story.
This is Where I Found Myself Really Beginning to Screw Up
One of the things that gives me a lot of pride in Creative California and what we do is the fact that we will go the extra mile to make sure our customers succeed. I never turn down the opportunity to help a client, whether it's repairing a busted hard drive or spending a day moving office furniture (I still have a missing toenail from when we helped our awesome friends at Toeppen & Grevious rearrange their office).
With LoziLu, going 'above and beyond the call of duty' took the form of us running a significant amount of their business from our end. While we couldn't control physical, in-person operations like repairing and setting up the obstacles, negotiating contracts with venues, or controlling the budget, we did pretty much everything else. This was not in our initial agreement, and the time we spent on them began to dominate our schedule and seriously impact our morale. The employee we had hired specifically to manage the account became increasingly overwhelmed, and I overlooked many of the signs.
As small business owners know, we often have to fight and claw our way to land great accounts that are stable and long-term. So, since I was getting paid by LoziLu, and paid well, I justified all of the pain that came with it. I did a poor job of managing the client, of caring for my staff, and of making sure that I kept to my original ideals. Our bills were getting paid, so I would figure out the rest from there.
Then our new employee quit suddenly. It was too much for her. But I still didn't see the problem. Or I didn't want to.
As It is with Every Business, When You Treat Your Customers Poorly, The Money Runs Out
We saw a drop in registrations for the second run, and as the third was drawing near, it looked like it was going to do even worse. Meanwhile, Brad was apparently having difficulties securing locations for later races, despite having plenty of time to work out the details and contracts, and started relocating and rescheduling races at the last minute--a week before one race, it was pushed back by six months. This caused cancellations, confusion, and a huge drop-off in sales. Since there was no location set in stone, runners didn't want to commit to sign up.
By this point, I had brought on board another employee to replace the one who had left, but it was taking two employees to keep up with all of the customer service issues. And they were running into serious disagreements with Brad, because there were days when 10 or 20 people would cancel their registrations for a single race, due to the race being moved to a date or a location which simply didn't work for the registrants. This would cause Brad to freak out and demand that no more registrations be processed without his prior approval.
One of my employees started becoming increasingly convinced that LoziLu was in serious trouble. He used registration data to build a spreadsheet detailing the current registration counts and projections of what the final registration numbers would be for each race. Suffice it to say, the numbers didn't look good.
At this point, I was frustrated with Brad and all of the lack of organization, respect, and professionalism. He had affected me and my staff negatively. We were becoming more cynical and our work environment was deteriorating every time we had to do a last-minute project to 'save' a race. And my relationship with my employees was starting to suffer, because in some respects they had become Brad's de facto employees.
But, because I am stubborn and dense, it wasn't until our bills started going unpaid that I finally started to wake up. I absolutely hate that it took money (or the lack thereof) to wake me up and make me take action. I had increasingly compromised the central tenet of my business out of the belief that it was the only way to make sure that everyone got paid. I was party to an organization that was treating its customers poorly, and I should have shut things down long before I did.
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The Failure of LoziLu and Why it Took So Long to Fall Apart
My overwhelming desire to see a business succeed (otherwise known as my obscenely obsessive stubbornness) didn't allow me to cut off ties completely. Runners were still signing up for these races, and I was determined not to see them taken advantage of. While we had scaled back our work for Brad and LoziLu, and had begun preparing for the possibility that we'd have to recoup what LoziLu owed us using the legal system, I didn't want to burn that bridge and risk never seeing a penny of the increasingly large debt that we were owed. Brad wasn't doing anything illegal (that I knew of, at the time), and I attributed everything up to that point to the fact that he was just a (very) poor businessman.
By the end of April, the first official cancellation of a LoziLu race happened, a race that was supposed to take place in Des Moines. Up to this point, races were either taking place as scheduled, or being pushed back.
But Brad was struggling to nail down locations and racking up debts, to the point where his equipment was being held by a contractor that wouldn't release it until he was paid. In addition, his support staff was beginning to quit left and right (we had finally had our fill of doing customer service). It was a mess.
Even the little things were proving to be too much for Brad. Runners weren't getting the t-shirts they had paid for, being overcharged for parking, discovering that advertised obstacles were missing from courses, and getting to the finish line only to discover that post-run bands and entertainment were nowhere to be found. There was one race where customers complained about the obstacles being dangerous and that the mud pit was just "some dirt and a guy spraying us with a hose."
The last time that we made a change to LoziLu's Facebook page was April 23rd, and by that time we had essentially stopped working with Brad and his organization. We allowed the website to stay up, since the hosting was paid for in our initial scope of work, but we were no longer actively promoting LoziLu. We could no longer risk actively helping to sell tickets to events that stood a strong chance of not actually happening.
Bud Brad managed to keep things going by taking advantage of the ignorance of others. He found more contractors to update his social media, create graphics, promote his races and sell tickets. He started a cycle of hiring new people, getting work done, not paying them, having them quit, and then moving onto a new group of employees and contractors to victimize.
This continued until August 4th, 2015, when LoziLu's Facebook account announced that all races had been cancelled. "The jig was up," as they say. Between April and the announcement, Brad desperately tried to convince me that things would be okay and that we would get paid. But he was unable to manage the internet marketing on his own or through other contractors and his sales were seriously suffering.
During that time, he often would aggressively try to get my company to make changes on his website, claiming that he had already paid us and that we were breaching our contract. This wasn't true, as ongoing work was not part of the one contract that he had signed with us. He would threaten to get his lawyer involved, and at times, I seriously wrestled with the idea that I may be breaching agreements or causing harm--or at the very least, risking being being hit with serious legal costs that vastly outweighed the time investment of making a small change to the website.
But I stuck to my guns. I couldn't stand the idea of helping him take advantage of others. I had messed up for so long, and should have cut ties with LoziLu as soon as my gut told me. The only instances we did any work were to make factual changes to details about the locations or dates of races listed on the website. I didn't want LoziLu's paying customers (or rather, its victims) to show up for races that weren't happening.
The signs were there, but I didn't listen for so long. When you are running your business, it's so hard to look beyond the dollars and cents of sales and income, and see the potential downfalls in partnering with a questionable client. In the end, my company suffered for it greatly: unpaid bills, time wasted that could have been spent developing new relationships, and employee morale. I seriously risked the reputation of my company as well, having been tied to such a large failure and helping to promote a shady business.
When bringing on a new client, as a service business, consider all of these long-term factors. Look beyond the check in front of you to the full costs that you wouldn't normally consider: reputation, relationships, and happiness.
But The Story Isn't Over. Things Got Criminal... And We Got Justice.
While the story could have ended right there, with a small business learning hard lessons, things took a very interesting and unexpected turn, and I stumbled across a long history of criminal activity. How did I find out the whole story when nobody else had, and what happened from there? Stay tuned for the next story: How Dumb Luck and Some Google-Fu Uncovered a Con Artist.
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