What if you sold a job and arranged financing for your customer, and what if through that financing the customer had the ability to pay the deposit and the balance upon completion? But what if he told you that he wanted you to wait for payment for 30 to 60 days after the job was completed? Would you do it?
Probably not, since he would be asking you to pay for the custom-made product as well as the labor and to wait while he held on to money that should be paid to you. That business model makes no sense, does it?
THINK AGAIN But what if you agreed to those terms and your customer didn't pay you? What if some customers never paid you? What if because you decided to take that risk, you charged a higher price to cover the risk of loss?
What if you had two pricing structures, one that required a deposit to pay for material and that required payment in full upon completion, and another that required you to wait 30 to 60 days after you did everything you promised to do to get paid? Which one would you charge more for? The answer is obvious.
Waiting to be paid makes you your customer's banker. It also makes no sense. Why then do we ask our suppliers to do business with us this way? A better question might be, Why do they do it? It could be for a variety of reasons. But one thing is certain: like your customer, you're paying for those credit terms and for the possibility of loss.
COLD WIND Some companies have been forced out of business by market changes. A bad business plan, or none at all, leaves a company exposed to the winds of change.
It can also produce a positive impact on your future because it exposes weaknesses in your organization that you must now remedy. You may find that credit terms with your current suppliers will be dramatically altered, and that credit may be nonexistent from new suppliers. COD or prepay may become the new business model, and what if that turned out to be a good thing for everyone?
—Chuck Anton is a sales and marketing consultant who specializes in the home improvement industry; www.chuckanton.com.