Forums: Discussions for entrepreneurs and small business.

Is "getting paid" a bad term? Is validating a customer`s ability to pay a breach of some kind of etiquette? Is a business person different from the rest of the world only in that the rest of the world believes everything "just happens" and should be free?

I read through an interesting debate as a sub-thread about home staging. The initial question was how to get paid for a service rendered prior to selling a house. Some people wouldn`t make the payment after the house sold.

What`s the judgement call; the point where you focus the potential customer on money, payment, lawsuits, and threats, versus trying to make a friendly, attractive buying experience? How much to you worry that word of mouth from a disgruntled deadbeat will negatively impact your business?

I`ve been seeing an increasing number (annoyingly so) of eBay auctions where before even getting a description of the item there`s a lonnnnnng list of announcements about payment. The sellers are so involved with yelling at me about how if I don`t pay them, they`re not gonna ship! Why? (I don`t even bother to try to buy those items.)

Obviously, when you deliver a thing to someone and they transfer the money at that moment, it`s fairly simple. But many people offer ongoing services, with incremental payments, partial up-front payments, balance due on delivery, and so forth.

I suppose it comes down to how trustworthy do you feel customers are in your line of business?

People said shareware was a hare-brained idea, that nobody would ever pay on the "honor system" for a product they already were using for free. Yet it turned into a multi-billion-dollar business market. On the other hand, look at all the hollering about having to pay for intellectual property, digital rights management (DRM), and free music.

Which is more important: Enticing the customer with something they want, or collecting from a percentage of unpaying customers? One member indicated that 3-5% uncollectables is a sort of average. I`ll take that as face value, not being a business statistics person. Is that about right?

If you`re getting a very noticeable number of people who aren`t paying, is that a flaw in your business process, or is it an external market problem? What do you do about it: analyze yourself, or avail yourself of the law?

I`m just curious, as getting paid is obviously the reason most of us are in business! In America, people have said that we`re perfectly willing to talk about sex, disease, mental instability, child abuse, and all manner of taboos. But when it comes to money, nobody wants to even mention the topic in "polite" conversation. Is that true?

Craig -

The short answer here, at least in my mind, is no.  It`s not a no-no to talk about getting paid.

Taking it a step further, if you`re not getting paid, then you`re selling to the wrong people.  If those are the only people who want your services, then find a new line of work...

Guess I`m feeling a bit blunt today!!!

R-


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Quaerite Primum Regnum

"There's a fine line between genius and insanity. I have erased this line."
~ Oscar Levant ~

Twitter: @rossb

I offer a service, as you do, and understand your concern about getting stiffed after delivering on your end of the deal.  Talking about getting paid is absolutely NOT off-limits; it`s the reason you`re running a  business and not providing your service for free, right? For new clients that I know nothing about, I require a retainer to start and my terms are balance due upon project completion.  If a prospect balks at that, I figure I`m better off without them as a client.  Some of the projects I work on are pretty long, and for those projects, I require either periodic (bi-monthly) or milestone-based payments, terms net 10.  When I`m closing a big project, especially one where I`m going to have to pay someone else, I do a credit check with Dun and Bradstreet.  It`s not cheap to do, but I`ve actually bowed out of a couple of deals after running a credit check, so it`s been worth it to me.

BTW - I recently attended a small business seminar where the speaker asserted that the revenue-optimizing level of bad debt is 3%  -- anything higher means your credit terms are too easy, lower means terms are too tight, according to the speaker.  I haven`t validated the assertion, but I do trust the source: a business school prof at Wayne State University who also runs a small business incubator. 

Hope this helps!

Lynn

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Lynn Herrick
Managing Member
The L`innovation Group

L`innovation - helping small businesses turn problems into profits.   

Some would say blunt, I`d call it straightforward. :-) Blunt works for me too, though.

I`m not wondering, "Gee...should we talk money someday?" I`m bringing this topic to the table because of that subthread in the house-staging topic. I do much the same as others, where if it`s a new client, I charge at least 50% up front. Previous clients, I`ll trust their past and invoice them when I`m done.

It`s an increasingly litigious society we live in, with an increasing sense of either entitlement or victim mentality. It`s bad for business, as more and more people distrust anything. We can`t continue to grow new businesses if we lose the entire concept of 30-day invoicing, credit, and so forth.

What bothers me---and the subject of this topic---is what`s the underlying "sense" of a strong, entrepreneurial community like SuN? I`m hoping to derive a sort of general feeling from people who comment on this thread, as to whether startup business people still trust their customers to pay the bills or not.

I haven`t experienced no-pays, but I did have a publisher steal a lot of money and go bankrupt. It`s made me more cautious, but not a complete cynic. Others though, deal in larger sums of money at risk, with a lot of work prior to fulfilling a contract. I`d like this thread to compile various opinions as to how to protect one`s investment, while at the same time not create a hostile or adversarial environment for new, potential customers.

Bottom line.....you are in business for the money.  Don`t be afraid to ask for it or discuss it.

I provide a service to retailers who are used to getting their goods on terms.  When they ask me for terms I am quite upfront with them and explain that I get paid on completion of my service.  Period.  Since I am paid for my time and that time has been delivered, I can not come back later to retrieve merchandise to settle a past due account.

The one time I left a client without a check in hand it took me over 4 years to get paid.  Never again!

 

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Ignorance is bliss. No one told me it was impossible so I went ahead and did it anyway.

I have found that one of the biggest stumbling blocks I encounter when talking about money and payment with clients is that people take it very personally. People are often hesitant to talk about these things openly because they either feel it indicates a lack of trust, or they feel that somehow they don`t "deserve" the fees they`ve set.

If you can take the personal nature out of the equation, it becomes much easier. I generally require a deposit from even my oldest customers (I run a service business) except for rush jobs, and I am very clear that this is for cash flow reasons primarily. When they realize that I am merely running a business and the deposit is a business-related fee, they don`t jump to the conclusion that I think they might flake out on payments. It actually tends to get me more respect, because they realize I am serious about my business (which means I will be serious about theirs).

I think the key to any difficult or otherwise uncomfortable discussion in business relationships is to identify what is making people so uncomfortable (in this case, the implication of a lack of trust) and then address it by minimizing that discomfort (repositioning the required fees as an accounting matter as opposed to a "buy my trust" fee).

-Jess


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Roughstock Studios | Notes From the Rodeo | Newsletter
Strategic communications without the selling of souls.

Alright, so asking for a deposit without expanding might be a problem. But to ask for the deposit and explain that it`s a materials-handling or initial time-invested charge would be better. That`s a good idea.

I wonder too, if people who get nervous about talking money up front also are the people who end up causing trouble down the road with payment. Personally, I have no problem discussing fees and deposits, because I don`t take personally, business situations. But I think too many people run their lives and businesses on how they feel about things, and take everything personally...including costs of doing business.

I have always wondered the same thing. People tend to be a little hesitant about spending and even when they do come to a deal, they aren`t all that adement about mentioning what they owe or bringing it up themselves initially.

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www.EllayWestConcepts.net Ellay West Concepts (Freelance Commercial Writer)

For some time I was a self-pay because I didn`t want health insurance. I had the money. When I went to a doctor, my first question was how much is an office visit? Then, as I was being seen by the MD, I`d ask if he provides a discount for cash. In 99% of the cases, the answer was yes.

The result was that I began feeling much more comfortable asking about price, even in such supposedly taboo areas as physician care. It taught me that there`s nothing wrong with asking, "How much is this going to cost?" Oddly, I did have that reticence growing up though.

From there, it`s not at all strange that I would also have a similar discomfit when saying how much it`s going to cost MY client or customer. I`m getting over that, though. :-)

hey - just wanted to say thanks for this thread - we`re taping on MSNBC tomorrow and will have the opportunity to share some of the perspectives mentioned here.

rich


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Rich Sloan , Co-Founder, Chief Startupologist, StartupNation