I had dinner the other night with a business owner who was having trouble getting paid for his work. His company provides a service to other businesses and issues hundreds of small invoices of less than $200 each a month. The problem: At the end of each month, he looks down his list of receivables and typically sees 20 or more deadbeat customers that are more than 90 days late in paying. He then has to dispatch his bookkeeper to chase down his money.
I suggested he start processing customers' payments on a credit card instead, reasoning that the 2 percent merchant fee would be worth it given the time and energy his staff was investing in collections.
My friend agreed that moving to credit card payments would be better, but he feared the backlash from customers who may feel as though they were being individually accused of having bad credit.
Anyone who has been turned down for a loan or had a credit card refused at a restaurant knows that being questioned about creditworthiness can put a person on the defensive.
My suggestion was to start publishing his terms for all to see. In general, most people are willing to play by the rules, but too often we don't tell people what the rules are. We wait until someone is late paying a bill or asks for too many special requests before we put our foot down and explain the way we work. At that point, the customer has no choice but to take your rules as a personal affront.
Instead, if you publish your terms of service (on your website, brochure, sell sheet, whatever), then you are explaining in advance the rules of engagement. You're telling customers, "Hey, it's not personal. This is our way of doing business."
In my consulting company, we used Microsoft Word to develop a custom proposal for each opportunity and listed on it our payment terms. Because customers knew we had developed the document just for them, they often negotiated on price and terms.
A few years later, we stopped doing custom consulting and started offering a single subscription, and we published our price and payment terms in an uneditable PDF. Once we had published our price and corresponding terms with some level of finality, customer requests for discounts and special payment terms dropped dramatically. Seeing that we had a standard price list, customers assumed everyone was getting the same terms.
What sorts of "rules of engagement" do you include in your marketing materials?
- 4 Ugly Truths About Selling Your Business They Don't Teach You at Harvard
- How The Richest People In America Made Their Money
- Why You Need to Sell Less Stuff To More People
- Entrepreneurs: 3 Trends To Take Advantage of Now
John Warrillow is the author of Built to Sell: Turn Your Business into One You Can Sell. He has started and exited four companies and was named one of America's most influential marketers by BtoB Magazine in 2008. Think you can sell your business? Take the Sellability Index Quiz. Follow him on Twitter @JohnWarrillow Become a fan on Facebook