Every business benefits when it can receive payment for goods or services earlier rather than later. But how can we make this happen, especially when we need our customers more than they need us?
In part one of this post I explained that getting paid sooner is first and foremost about having serious business conversations. Don’t be afraid of “always selling.” Find out if they are just looking free advice or want to really buy something. And finally, see if negotiation is on their mind. What’s next?
Step 4: Ask to See the Money
Real estate professionals figured this out a long time ago. You can’t put an offer into a house without a pre-approval letter from a lender or from a bank. That ensures that only people who have the ability to buy can tie up people’s time. But they also do something else: require the payment of earnest money. This proves you are serious.
Lawyers do this too. But instead of earnest money, they call it a retainer. You pay up front into the retainer and the attorney bills that account at their usual hourly rate.
Likewise, people who rent equipment charge a deposit. Event planners sell advance tickets and charge more at the door. All of these are variations on the same theme, which is…
Step 5: Get Some Money Before You Do the Work
If your prospects want to become customers, they should be able to put cash on the table. Not just wave it in front of you, but actually pay you. Here’s what you can say:
“It sounds like you’re serious about working with someone on this project. If you’d like to reserve my time in the next week, let’s get a deposit payment so that we can focus our full attention.”
Doing so separates people who are serious from those who aren’t. People who are serious may want to know about contracts and whether the deposit is refundable. People who aren’t serious will say that they don’t make down payments. Which of course they do, they just aren’t ready to do so with you. (And if you’re feeling serious, remind them that they have done so when buying houses, renting apartments, opening checking accounts, establishing utilities, and so on.)
That means that they aren’t having a serious business conversation. And you can politely move on to the next opportunity to do the work you love for the price that you feel is fair.
Review: Five Steps in Action
Here’s an example of how to get paid sooner. Suppose you’re a plumber and you find yourself at a party with some friends. You’re talking to a new person and they ask you what you do. You might be tempted to say, “I’m a plumber.” Sure, that’s accurate. But remember the first step: Don’t be afraid of always selling. Instead, say:
“I repair leaks, install bath fixtures, and replace water heaters. I’m a plumber.”
There’s not much of a difference in these two statements at first glance. But the latter one is selling. If that person has a problem in their own home, they are probably going to say so. And if they have a need in the near future, they may well remember you.
Suppose they respond with, “It’s funny you mention that, because there’s a banging noise in my pipes. Any ideas?”
Again, the temptation might be to respond with some technical speculation. But recall the second step: confirm they are serious about paying. Instead, say:
“Oh yeah, I see that all the time. Could be any number of things. I only charge $75 for the first hour, and often that’s enough to solve the problem.”
By now you should be getting the hang of it. Instead of asking for an appointment or letting the conversation linger, confirm they are serious about negotiating. Another phrase to consider:
“Have you paid a plumber to work on this problem before?”
If the answer is yes, you can imply that your work is of higher quality which is represented by your up-front pricing. That’s negotiating, which proves they are serious. And if the answer is no, you can ask them if they think the quoted price would be worth paying to address their issue. That’s also negotiating, which again proves they are serious.
Now suppose it’s time to schedule the visit. You call to arrange a time, but as any business person knows, all appointments are tentative. Remember step four: ask to see the money. Add this to your phone call:
“Before we select a time and date let me go ahead and get your credit card information. That way if you get pulled away you can leave a key or have a neighbor open the door to address the issue.”
Now, you know that you’re going to get paid. In fact, there’s no way for the customer to avoid paying a bill and long invoice cycles. But there’s still a chance that you could encounter problems.
What happens if they decide they don’t need you after all?
To ensure that doesn’t happen, use Step 5: Get The Money Before You Do the Work.
I don’t mean that you should always charge them in advance. But rather, you should make it clear that a transaction is going to occur. Try adding this to your phone call:
“By the way, I just want to make sure that you know about our no show/cancellation policy. If you let us know 24 hours in advance, there is no additional charge. Otherwise we charge a $50 missed appointment fee. But I’m sure that won’t be an issue for you.”
Get paid sooner. The easiest way to improve your cashflow is to change the date when the money arrives. Use these steps to improve the relationship. Have serious conversations with serious customers and make more money.
And, good luck!