Are you a sign company or a bank…?
About now you are probably wondering, what in the world is this guy talking about?! I have a sign business or course, not a bank… what a moron…
OK, now that you have that out of your system (and, no, I’m not offended) we can take a nice hard look at whether or not you ARE a bank. Here is the question that is the most obvious, What is the primary purpose of a bank? If you think that the bank’s primary purpose is to protect your money in a savings account then (buzzz) – wrong. If you think that the bank exists so you can have an ATM card, process credit cards or write checks… you’re getting warmer.
Believe it or not, the money that you have in the bank is actually a liability to that bank. From a purely business standpoint, they have to protect that savings account, maintain it and insure it.
All of that activity requires money and resources from the bank in addition to the “interest” they pay you. So, think about it, is that savings (or checking) account a benefit to you or is it really a means to get you “in the door”? No matter what your banker tells you, the bank is in business to make money. What is one way the bank makes money? Well, they loan it out and collect compound interest on it for long periods of time (business loans, personal loans, mortgages etc.). Without going into the nitty gritty numbers let me tell you that the power of compound interest, in the hands of the lender, is very large indeed.
So, if the bank is in business to loan money in order to make money… why are you loaning money and not making a cent? OK, OK, you’ve figured it out, the whole question was a trick but by now you should be thinking hard about where you could possibly be loaning out money.
How times have you let a sign leave your shop without collecting your money?
How many times have you agreed to 30, 60 or 90 day terms in order to get the sale?
Heck, how many times have you offered terms to a client just assuming that it was necessary or “the cost of doing business”?
Look, bluntly put, every time you allow your goods and services to leave the shop without collecting your payment… you are lending YOUR money to the customer. With your generous contribution they are now reaping the benefit of your sign, your vehicle wrap or your logo design and they don’t even have to pay you for 60 days. SO, in essence, their business grows and makes money with the great new look while you finance it… what a great deal for them! To add insult to injury, not only are you financing their purchase for 60 days but you aren’t even collecting interest on the money (even the bank will pay you 3% to let your money sit with them).
If you want to take steps to regain control of your sign company’s profits and future then you might want to consider taking these steps…
- Insist on 50% deposits for new orders: Getting a deposit on an order does more than just improve your cashflow. Among other things, getting money up front also provides incentive for the client to participate and communicate in a timely fashion & encourages them to pick up the sign quickly when it’s done.
- Collect the “balance upon completion”: Make sure your clients know that your sign does not get installed, delivered, or picked up unless the amount due is paid for. Sometimes it is good to remind a fussy customer that they can’t get their car fixed, buy groceries, purchase a new TV or pick up their laundry without paying. Why should their sign be any different?
- IF terms are a necessity then negotiate for the bare minimum: Forget 30 / 60 / 90 days… The longest line of credit extended at my shop is 7 days. That’s just enough time to get my money into the next check run and everything keeps moving along just fine.
Remember, you already paid for the materials, the labor, rent, utilities etc. so get your money now. You deserve it.