For a small business, one of the most difficult tasks is to collect on receivables: invoices.  Small business owners work very hard on building a strong relationship with each customer.  Many even become personal friends with clients.  Therefore, it can become very difficult to collect money when it’s due, and it gets harder and and more uncomfortable with each over-due minute.   But cash is cash and is the life-blood of our businesses.  So what’s the solution?

My advice is to have a very aggressive, disciplined cash collections process, as such:

1. Get your invoices out on time.  In fact, I say get them out early.  I used to send invoices to builders even before we were finished with our work, knowing that they typically pay 45-60 days out.
2. Be firm on your invoice.  Make the due date clear and consistent.  If you need to be a bank and offer terms, then getting this invoice out on time (i.e. early) is even more important.  Be sure to include a little nudge, like “please remit payment immediately.”
3. Give them a small grace period after the due date, but once they hit that date, send them a ‘nasty-gram’ immediately.  Politely inform them that payment is past-due and that you expect payment in full immediately.  This letter can be gracious and firm.  And because it’s a letter, it is impersonal enough that it shouldn’t get in the way of your relationship.
4. If the customer still hasn’t paid, then it’s time for a phone call: “Hey [name], can I stop by and pick up that check?”  Friendly, but with a firm expectation of payment.

You can come up with your own formula.  The point is to have some firmness and some discipline.  That sends a message to your customers that you expect payment, and they will start to put you at the front of the line when they write checks.  This will also help you maintain that great relationship because there won’t be any hard or uncomfortable feelings that go along with a long-outstanding invoice.

I saw a truck the other day that was wrapped bumper to bumper in bright yellow and red, for a painting company. It was quite a change from the typical paint-drip decorated white pickup with ladders you normally see a painter driving. What stuck out to me most was the marketing effort, again rarely seen in the painting business. It made me think that this business was a marketing business whose product is painting houses.

That led me to think about some past seminars I’ve given and blogs I’ve written about “What business are you in?” That question was answered in a short list of types of businesses, identified by the ‘need’ they fulfill for their customers. For example, the need for physical health can be met at a gym. This painter’s truck made me start to reconsider that angle. While I’m not ready to change my ideas completely, I am ready to start considering that we all need to be in one of three types of business:

1. I’m in the Customer Service Business! I’ve always said that Southwest Airlines is in the Customer Service Business. Their focus is on the passenger. I’ve even contended that if you were to take away their airplanes and give them, say, running shoes, they would continue on without a hitch, because they are in the customer service business and simply use their products to deliver that special experience. One of my favorite lines is, “We don’t want to tell YOU we have great customer service, we want YOU to tell OTHERS!” Know where that came from?

2. I’m in the Sales Business. Again, this business is not about the products, but is about building relationships with its customers. The focus is on creating a finely tuned sales machine that increases that top line each month and each year. When product is considered, it is designed with the sales process in mind. I might put Amazon.com in this category. They have built a great sales machine. They keep adding new products without a hitch because their sales system works so well.

3. I’m in the Marketing Business. Proctor and Gamble is in the marketing business. They know how to create products driven by their market, get it positioned right in front of them, and get the word out so that their customers flock to purchase thier products. They are not about the ‘best widget available!’ They are about marketing.

So, am I recommending that you become a Sales, Marketing or Customer Service Business? Yes! However, I’m not asking you to abandon your core strength, which is creating products that satisfy your customers’ needs. I’m simply recommending that you make one of the three methods central to your business. That way, you’ll get a steady flow of the customers you need.

In his comment below, Renato brings up the notion of the ‘up sell’ you normally get when ordering dinner.  This is the sales lesson I mentioned in the end.  Great point, Renato!

The lesson here is the Top-Down Sale.  There are three places this is very common.  Think about the last time you purchased one of the following:

• A car.  After you told the sales person what you were looking for, did they take you right to the most expensive version of that?
• A home.  Did your Realtor start your search at the top, meaning the highest priced homes?
• The Stereo Store.  Ouch.  These guys are the best (or worst)  at this.  Ever say you’re looking for a TV and get taken straight to the home theater displays?

The last example is the dinner table at a restaurant.  Whenever I try a new place to eat, I always ask the server what he or she recommends.  I like to know if they’re going to recommend the surf-n-turf, $54 plate.  One look at me, and they know right away I can handle such a plate!  I’m always surprised when the response is, “I like the pasta plate!”  First of all, I have never ordered pasta, but that’s beside the point.  The point is the server missed a great opportunity to sell me the granddaddy plate and, therefore, increase his/her own tip.  There is a local restaurant that is great at this.  I rarely leave there without some sea creature’s tail next to my steak.

‘Did you save room for dessert?’  How many times are you on the fence when it comes to dessert?  You are really too full to indulge, but you also know this place makes the best cheesecake outside of Manhattan.  All it takes is a little nudge from the server and cheesecake it is!

In thinking about your business, are you offering your clients the best you have to offer (the lobster and fillet)?  Are you making sure they’re getting the whole of your services (dessert)?

This one, simple concept of the Top-Down Sale can have a significant effect on your top line: revenue.  By simply offering your customers the best possible option, you will see an immediate increase in your sales revenues.  Now remember, we’re not out to steal from your customers.  Don’t push them to purchase the home theater when all they want is the extra TV for the guest bedroom.

Next time you’re out for dinner, put your entrepreneur cap on and check out the customer service and sales job your server does.  There might be a great model to use for your own business!

While watching some incredible footage on the Discovery Channel, I kept seeing some of nature’s most amazing marketers. Spiders, plants, birds, and other animals have each become experts in the 4 P’s of Marketing, namely Product, Place, Promotions, and Price.

Let’s look at Place first. In order for your market to buy your products or services, you must Place these products where your customers can get them — and easily. You’ve heard the expression the three most important things to a retail store: location, location, and location. Well, there’s a creature out there who has mastered ‘location’: the spider!

The late, great Peter Drucker said, “…the aim of marketing is to make sales superfluous.” In other words, if you are able to put the 4 P’s of Marketing together properly, you won’t have to go out and sell your products/services, your market will come to you. You’ll notice the spider picks a location, sets up shop, and simply waits for her meal to deliver itself into her web. She does not need to do a dance, send out a call, or fill the area with an aroma. She simply waits.

If you imagined capturing your market with a web, where would you build it? Think about location, time, and activites. Once you figure out where and when your market is moving, you will be able to capture their attention and their business.

Provide your market what they want and need.  It’s a simple statement that implies SO much.  It requires an intimate understanding of your market and how your products fit their desires.  This is a life-time, ongoing exercise for any business, large or small.  In order to grow your sales, increase customer satisfaction, and keep tabs on quality, you must have your finger on the pulse of your market.

This all comes to mind because of something I stumbed upon on in cyberspace.  The square watermelon.

How’s that for listening to your market? The problem with a big, round watermelon is that it’s hard to store and hard to slice (as it rolls around the counter, slipping out of your watered fingers!). Turns out this Japanese farmer is an expert marketer. Read more on the BBC.