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Question: Sale Closing

Discussion in 'General Entrepreneur Discussion' started by Seth Goodluck, Nov 14, 2018.

  1. Seth Goodluck
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    Seth Goodluck Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I'll be hitting the phones starting next week and I wanted to know the mechanical process for getting paid on a sale closure. There's a lot of info and I'm curious what has worked for you and what pitfalls to avoid

    Say I'm selling widget X as the manufacturer to Customer Y.

    Customer Y is ready to buy.

    Do you take card info over the phone?
    Send them an invoice? Wait for a purchase order?

    Once the initial paperwork is done, when do you actually request payment? Is it net 30 days? Immediately?

    Background:
    My biz manufactures products and sells them to businesses that resell them at a markup.

    What is the typical or ideal process (The mechanics) to move from ''yes let's do business" to product to the customer and money in your account?
     
    Jello likes this.
  2. CareCPA
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    CareCPA Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    You can set your own terms.

    I would not give them payment terms (i.e. net 30) until you have an established relationship with them, or if you can pull credit history through something like Dun and Bradstreet.
    You can ask for a deposit, they may not want to give one. That's up to you to negotiate
    You should invoice at the time of shipment if you can't get paid in advance.

    Don't let strict payment terms keep you from closing a big deal, but at the same time, protect yourself that someone doesn't end up with thousands of dollars worth of product and no intention of paying you.
     
  3. RazorCut
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    RazorCut Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Be careful offering credit to anyone. We had an order from a prestigious British motorcycle manufacturer who have been in business for over 120 years. They wanted some custom products with their logo on to sell on to their customers. We made them and sent them off with an invoice. It took 3 months and several phone calls to get the money out of them. The second order took closer to 4 months despite their promise of payment within 30 days.

    Fool me once, shame on you; fool me twice, shame on me.

    On their 3rd order they called us a couple of weeks after placing it asking where their delivery was. We informed them that it was still pending payment as all credit terms had been rescinded due to poor payment history. They got the hump but phoned back a week later with a credit card number. All orders were paid for in advance from then on.

    Prior to that I had Universal Pictures contact me to purchase a large quantity of product for a new film promotion. It came to something like $15-20k at the time.

    They wanted it urgently and I was the only company they knew who could get it for them.

    I told them I wanted payment in advance and they gave me the 'This is Universal Pictures, Do you not know who we are?' spiel.

    We agreed 50% up front with 50% within 30 days of delivery in the end. The goods were costing me less than 50% so worst case scenario I still wouldn't be out of pocket. They paid quite quickly if I remember correctly.

    Had Fox ring up with a similar request years later but it was not a lot of money so I did give them 30 days and they paid without problem. But you never know.

    A lot of companies went under during the last (current) recession and we noticed some of our suppliers getting twitchy and reducing our credit limits so they were less exposed just in case.

    So that is another thing to think about. Offering credit to companies you have built a relationship with but setting limits as to how much credit you will offer.

    The other option of course is to use a company that will guarantee the payment for a fee if you have to give credit terms for a big player who won't play ball otherwise. You just incorporate that fee into your price.


    -
     
  4. Andy Black
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    Andy Black Any colour, as long as it's red. Staff Member Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Great line I heard: “Money can’t be in two places at once.” (Blaise Brosnan)

    If it’s in their account then it’s not in yours. Seems obvious right? Except it’s tempting to believe we’ve been paid when we’ve sent the invoice.

    I now don’t call someone a client till they’ve paid. They can have agreed, agreed to pay the invoice, and have been sent the invoice. All that’s for nothing if they then don’t pay.

    I’ve been burnt a few times so now treat it that “the first purchase is a test” ... and I’ve restructured so I get paid in advance.

    For me, the invoice is the last step in the filtering process.
     
  5. GoGetter24
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    GoGetter24 Silver Contributor Speedway Pass

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    No "terms: 30 days". That's for the big boys. You should always take some percentage of money upfront before you do anything, in your case 100%, just like if you bought a laptop from a store.

    Send them an e-invoice (e.g. Paypal or Stripe invoice) for immediate payment.

    Well over half of alleged "customers" are leeches and time wasters. Like Andy said, the initial payment is the final step of screening them out.
     
    Seth Goodluck likes this.
  6. RazorCut
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    RazorCut Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    It's not quite as simple as that. Put yourself in a legitimate company's shoes. Would you pay for services up front from a new business you have no history with and it has little to no track record?

    Sometimes you have to find middle ground where you both are comfortable with the risk.

    This is what happened with my dealings with Universal Pictures. We had had no previous relationship so we had to find a compromise where we both felt comfortable with the risk.

    If you are finding that "Well over half of alleged "customers" are leeches and time wasters." then maybe you are in the wrong business? In my experience it is less than 5%.
     
  7. Seth Goodluck
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    Seth Goodluck Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Sounds like you've been through the ringer a couple of times - I appreciate the wisdom share
     
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  8. RazorCut
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    RazorCut Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I wouldn't say that. I would say I've experienced most of the things that entrepreneurs face when they have had multiple businesses over multiple decades. I would call them learning points and irritations. No more than that.

    The great thing about this forum and the internet in general is that you can gain the wisdom of these learning points without actually having to go through them.
     
    Bekit, Seth Goodluck and Andy Black like this.
  9. GoGetter24
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    GoGetter24 Silver Contributor Speedway Pass

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    He said he was selling widgets (products) not services. For services you usually have to split it up, such as the common 50-50 deposit-completion split, depending on your reputation.
    Starting work as a small guy without some money upfront is just masochism.
     
  10. RazorCut
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    RazorCut Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I agree. In day to day running of all my various businesses over the years I was paid upfront 99% of the time. However these were not huge transactions for either player.

    When the sums increased as per my example then some negotiation was inevitable so that both parties felt confident that the transaction would go smoothly.

    I agreed to do a job for a customer last month. We had never met before. I asked for 50% upfront and the rest on completion. The job was worth 4k. At the end I submitted my final invoice which he paid half of (25% of the total job) as a sign of good faith but he was concerned about one small detail and something I had overlooked. I had no issue with that, or with sorting out his issues (less than an hours work).

    I sorted them out, got paid the remaining 25% and have received a wonderful written recommendation, more work offers from him and several referrals if I need them.
     
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  11. Seth Goodluck
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    Seth Goodluck Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Haha fair.
    I am selling widgets and not services, it's true.
    That means up front COGs for me.

    I think I'll go with payment up front and push for leading them through my online cart based on everyone's feedback here.

    ~

    In terms of services, my favorite contract style (I used to work as a technical consultant for my company before going to engineer) was T&M (Time and Materials).

    We'd generate a contract for say.... $30 000 USD with a 3 month timeline. It was an upper bound limit. Then we would charge hourly and strive to hit like 75%~80% estimated cost on project completion.

    This let us have some padding because clients are... sometimes unruly. Forced us to carefully define scope. And at the end when we closed out and said "hey and we were X thousand dollars under budget" made the client a lot happier and boosted our returning clients.
     
  12. GoGetter24
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    GoGetter24 Silver Contributor Speedway Pass

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    So if you go over that price, you have to eat the cost; but if you go under that price, they get to keep the cost savings? Heads you win, tails I lose?

    Not sure why anybody would feel the desire to leave their job to operate such a business, unless they were billing some epic hourly rate. Sounds like masochism.
     
  13. Seth Goodluck
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    Seth Goodluck Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Part of why I switched roles ;)
    We did bill at $250/hr though.
     

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