Posted on Tuesday, August 1st, 2017
Two of the persistent problems of the sign business are maintaining a steady cash flow and spending time collecting balances on completed projects. They both add stress and eat up valuable time that would be better spent selling and completing signs.
Debi and Chris Lovelady dealt with those for years at their shop, Vital Signs—then finally resolved it in a way that may surprise a lot of sign business owners. She explains their approach in 9 tips for a more successful sign business in the July/August issue of SignCraft.
They had tried getting 50% deposits, but that still meant collecting the balance once the sign was installed, which often meant waiting up to 30 days for the check. Or, calling the customer to pick up the sign that they said they were in such a hurry for, only to have it lean on the shop wall for three weeks before they picked it up and paid the balance.
Finally, about two years ago, Debi decided to start collecting the full purchase price in advance. She handles much of the sales and all the bookwork, and realized how much time she was spending collecting those balances.
That’s right: Full payment, up front.
“We started telling people that we required payment in full when they placed their order,” Debi says. “We said, with a humble attitude, ‘We’re a small company and we really have to watch our cash flow.’ I was really surprised at how understanding people were. If your shop is like ours, most of your customers are small businesses and they know what you’re up against.”
This approach is easier when you are well established, have a commercial location and a professional approach. The customer must trust that you’ll deliver what you promised, when you promised it. Be realistic in the delivery date you promise and communicate to the customer if there are any delays or changes.
“They need to know that you’re going to deliver the work on time and that you are service oriented. You have to gain their confidence, so a professional image is important. But it’s entirely possible. I’ve even received full payment up front from government agencies. After you’ve done it a little bit you’ll find your confidence goes way up, and that makes it easier.
“Most signs are custom made for specific customers’ needs. We can’t sell the sign to someone else if they decide not to pay. Nor can we afford the time it takes to follow up with someone who is taking too long to pay. It creates a cash flow crunch that is very uncomfortable for the sign shop owner. You’ve already paid for the materials, and you’ve already paid your staff for the time they spent on the project. Now you’re waiting three or four weeks to get paid, plus having to make awkward phone calls and send statements.”
Today, 90% of their work is paid for up front. The remaining work is done for a small group of corporate customers that they do a lot of work for. Debi says she understand their payment policies, and since they have a good relationship with these clients, there’s no concern.
Still reluctant? Why not try it for all signs under $500 or $1000? The profit margin on such work is usually too small to cover time spent trying to collect the balance. It’s a simple change that can make your business less stressful and save you time. Once you develop your skills at getting paid up front at this level, you may be ready to shoot for it on larger projects.
You’ll find more great tips and more photos of the Vital Signs shop in 9 tips for a more successful sign business in the July/August issue of SignCraft. Don’t miss out.