Wednesday, July 23, 2014

Partial payments

     Free daily tips, information and advice for people in small business
     from personal experience founding and growing businesses--been there, done that.

     Some small businesses can increase sales by offering partial payments. It can be for products or services. Partial payments can be attractive to individual buyers as well as big companies. 

     Example: If your small business sells to big corporations, it is important to know the approvals structure in your customer's company. Frank runs a printing business and he uses the partial payments concept. His customers include banks, insurance companies, and large manufacturers. On different jobs, he might be dealing with with managers, vice presidents or senior officials. All of them have different levels of approval authority. In the case of lower level managers, they might be able to approve up to $500. As you move up the ladder, senior officials might be able to commit the company to a $50,000 order on their own signature. Frank works with his clients so that they can fit his invoices into their budget and approval authority. Sometimes this means splitting jobs into several pieces and billing them separately. Don't misunderstand--nobody's hiding anything here. It's simply working with existing responsibilities and authorities of clients. It's a way to put the partial payments concept to good use--to the benefit of buyer and seller. 

     A variation on the partial payments concept can be used by others--consultants for example. Here, the consultant and the client agree on a relationship, placing milestones on the work to be done. At the end of each milestone, work accomplished to that point is billed. Partial payments again work to the advantage of both parties.

     More examples: Layaway plans were once used extensively by retail stores--large and small. The layaway concept declined in use over the years, but recently it has enjoyed a resurgence in popularity. (1) A small furniture store offers customers layaway plans. Some customers like the discipline of breaking up the price of an $800 chair into four monthly payments--taking delivery when the total is paid. (2) Small jewelry stores can miss sales when they do not offer layaway, common at large jewelry stores and department stores these days. (3) Electricians, plumbers and other tradespeople can realize a better bottom line by quoting the overall job in pieces--breaking up a big job into components, each billed as it is completed. 
(4) Frank used progress payments in his printing operation (see main example above). Many large jobs were quoted in thirds--1/3 upfront when the job was defined and placed, 1/3 when a certain milestone was met, and 1/3 on delivery of the finished product. 

     Look for ways to put the partial payments concept--and its variations--to work in your business. Start by looking at your customers/clients and their problems.

     Frequently, partial payments can help them. Pleasing them by helping them solve their own problems brings them back to you--and it can generate referrals.

     All this helps you with your cash flow. And we know the importance of cash flow. 

     My lifetime of experience includes starting up and operating small businesses as well as counseling thousands of small business owners with their problems. This includes hands-on coaching at several Small Business Development Centers and running the Business Owners Institute in New Jersey. Free answers to your questions--email me at Put BLOG as the first word in the subject line so I don't delete along with all those trying to sell me something. I never give out your email address, and your privacy is always respected. 

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