In last week’s post Three Steps to Surviving and Thriving in a Crisis I said step one is to survive the crisis and economic gridlock that will be with us for a few weeks. In part one of two in my survival series, I’ll share some specifics of how you can shore up revenue now, specifically:
- Collecting money owed you
- Keeping current clients active
- Closing deals that have stalled
I’m going to avoid offering guidance on broader finance and personnel management issues, like right-sizing your firm. That is the domain of other experts like David C. Baker (and in our latest 2Bobs podcast I interviewed David on when and how to right-size your firm):
I’ll begin this topic by focusing on the money that’s closest to you in time and then move further out.
These are Guidelines, Not Scripts (Use Your Discretion)
With each area of advice below, discretion is required. Your variables will be different from those of the next person reading this. And each client is different so don’t apply any of this advice universally without thinking it through first and making sure you’re comfortable that it applies.
The Past: Collecting Money Owed to You
A pyramid effect is happening in which ethically run businesses have to decide which bills to pay and which to sit on. When your client doesn’t pay you, you have to decide whom you don’t pay, and your suppliers are faced with the same difficult decisions. It’s an unfortunate but unavoidable situation right now.
For collecting past-due receivables I advocate a direct but polite approach in which you neither beat around the bush nor do you get agitated. Owners of small agencies sometimes go out of their way to hide the size of their business (“We’re only 8 people onsite but our total virtual team is closer to 30.”) but this is no time to shy away from the fact that yours is a small business in need of the money it is owed.
“We are a small business that works with only a handful of clients. I know you understand that cashflow is important to us in the best of times and I don’t need to say that it’s vital right now. There were a couple of past due invoices before this crisis hit. I’m looking for your help in seeing if you can get these paid today.”
Be direct but not unkind—many of your clients are feeling the same pressure you are, but everyone’s cash position is different. At the very least you want your client to prioritize paying you over paying a larger company that has better resources to withstand the crisis.
Present: Managing Current Relationships with Good Clients
Strategic Coach founder Dan Sullivan has a Success Manual for Scary Times in which one of his points is to “prioritize the relationship over the revenue.” With your clients who are getting hit hard, your first priority is helping.
A friend told me about a consulting engagement he was about to close on that was put on hold because of the crisis. It’s with a long-time client who has spent in excess of 10 times the engagement amount with him over the years. He said to his client, “Let’s just go ahead with the engagement and not worry about the money. If you have the ability to pay it in the future, great.” The client replied, “I might not.” My friend’s response was “We’ve been through a lot together. I’m okay with that risk. Let’s keep moving forward.”
This is a good time to invest in your relationships with your good clients. Consider pay-what-you-can or pay-when-you-can pricing.
If you have clients that are in good shape, there’s no shame in asking if they can help you by looking for projects they can send you now. It’s in everybody’s interest for you to be able to keep your team together.
Near Future: Use Payment Terms to Close Deals
I wrote about this in the original post. Payment terms are an underutilized tool for closing deals when the issue is affordability instead of value, as it often is. I wouldn’t offer pay-when-you-like terms to anybody but a good current client, but extending favorable terms for a set project or period of time is a good way to close a nervous late-stage prospect. You can suggest specific terms yourself, or you can ask the client what would work for them.
Near Future: Offer Discounts for Paying in Advance
For any late-stage opportunities with current clients and prospects alike, consider offering a discount for full payment in advance. Some companies have policies that require them to take advantage of such discounts if they meet certain criteria. In normal circumstances 10% would suffice, but you might decide that 15% is merited in certain situations.
You’re using options in your pricing, right? Make sure your payment terms are communicated in each option, with your cheaper prices requiring payment upfront.
There you have it: a toolkit of options. Be flexible, and just as you price the client — not the job, offer the right options and terms for your clients and prospects alike.
Later this week, in part two of our survival series, we’ll answer the question: is it ethical to sell in these times? And spoiler alert, there are rays of light in the clouds above.