Archive for May 2009
A prospect may be reluctant to commit to a consulting project if they’ve never worked with you. If you offer a service that is time intensive consider alternative ways to deliver the information. Make it easy for your prospects to buy and become your client.
Implement a multi-tiered pricing model:
- Low end: create a do-it-yourself kit that might be accompanied by an hour of free consulting.
- Mid-range: create a webinar or teleclass based boot camp where over a set time period you coach the participants on doing the work themselves. It’s helpful to have the kit already developed as this can be the content part of the boot camp.
- High-end: some of the participants purchasing the kit or the boot camp will eventually decide it’s worth paying for you to do the project. In the meantime you’ve given them an idea of what it’s like to work with you.
The objective is to make the prospect comfortable in purchasing. With the downtime consultants are experiencing, now is a perfect time to develop a multi-tiered pricing model and position yourself to sign on clients once the recession ends.
Those business owners with increasingly old accounts receivable probably don’t want to read about their customers paying too quickly, but even today it happens. It is how you manage any change that’s most important.
My first client as a part-time CFO was a boutique healthcare consulting firm. Generally they had an even, predictable cashflow. One of their hospital clients had many projects with my client all running simultaneously. Their monthly invoices in total I could count on to cover the monthly payroll. In the odd month when payment was late it wasn’t by more than a few days and my client had a line of credit that we would use. Then one month the hospital paid two weeks later than had been the norm and the same thing happened the following month.
The hospital had been so regular in their payment cycle I got curious and called down to the accounts payable department. I was referred to the controller who informed me that they determined they were paying my client too quickly given the volume of work. And while they slowed their payments to my client they were never late, just on the late end of 30 days.
Often I have clients where the bookkeeper pays all the bills outstanding each time checks are run. Admirable you might say but poor cash flow planning. It suggests a very short view that can have a disastrous result. What do you do if two weeks later you’re hit with a surprise repair and the contractor only accepts cash for new customers? Ultimately there may be enough cash but today you can’t always be sure. Every business experiences high and low cash points during the month and to manage effectively someone needs to do cashflow planning.
Many small business owners make the mistake of not getting to know their bankers until they need to borrow. Granted today’s economic climate makes borrowing difficult but you further complicate matters if your banker doesn’t know who you are.
Five tips for building a relationship with your banker:
- Find out who the lenders are and where they work, branch or main office.
- Introduce yourself at chamber and other networking events.
- Invite your banker to events either at your company or as your guest.
- Put your banker on the list to receive your newsletter and updates about your business.
- Send articles and other relevant information to help your banker stay informed.
It’s important to know not just your banker but their associates. Given the consolidation in the financial services industry your banker might be gone with no notice.
