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Taking Fiscal Responsibility of Your Sign Business
By Mark Roberts
Noted investor Warren Buffett said there are two rules regarding money. Rule number one is to never lose money. Rule number two is to never forget rule number one.
There are no cash flow problems here at the start of this new year—or are there? How are you handling your payment arrangements in your own sign business? My company accepts Visa®, MasterCard®, and Discover® card for all sign purchases, as well as good old American cash. Almost everyone interested in purchasing a custom-made sign product can furnish a credit card or write a check upon order, right?
So why are some clients still asking for thirty-day payment terms?
I often visit with a few of my sign friends in the Houston area, and two of them have yearly sales in the seven-figure range. While recently speaking to one of these friends, he told me that he was “fairly nervous” because his company has shipped over $70,000 worth of signs to a job site without any money down whatsoever by the client. I couldn’t believe my ears. I actually asked him to repeat what he’d just said. After hearing it again, I still couldn’t believe it. Not wanting to attack one of my best friends, I simply said, “I surely hope you get paid!”
Now think of any sign supply company, equipment manufacturer, landlord, or mortgage company who’d let us hold $70,000 of their money. Did you assemble your list? I didn’t think so.
If you want to buy a new full-color digital printer, at the very least, you’re asked to place a deposit on the machine. In fact, just about everything a professional sign company wants to purchase requires a substantial down payment. I never aspired to be a financier, and chances are you didn’t either. We’re in the sign business and not the financing business.
There are those rare occasions though where we must finance a sign project. For instance, some governmental agencies, large companies, school districts, and assorted other businesses simply refuse to pay upon delivery or (even worse) place a deposit. If you’re faced with this dilemma, you simply need to make a judgment call that works for you and your sign business.
The first question you should ask yourself: Can you afford to carry the note until they pay for the sign? If you can carry the note, how much interest will you add onto the price of the sign to make it feasible for you to act as a financial institution?
Next: How long will you allow the client to use your money? I’d never agree to anything longer than thirty days. I don’t care who the client is, but if I can’t be paid within thirty days of delivery, then I’m not interested in making their signs. If you can’t convince your buyer to pay within thirty days, then your buyer is self-centered and really doesn’t care about you or your business. Oh they’ll tell you many stories to coerce you into bending your rules, but you must stand firm and refuse any terms that exceed thirty days.
Talk to your client. Tell them that you can’t finance their signs. Tell them you aren’t in the financing business. If they still turn a deaf ear to your terms, simply walk away.
I refuse to deal with those individuals who aren’t looking for a mutually beneficial relationship. It’s not all about the client. It must be a fair arrangement where all parties benefit.
Once again, we’re not bankers—we’re sign professionals. A lack of funds on the part of our customers and clients always results in a lack of funds for us and our families.
Perhaps you have a few million dollars in the bank. Would you cheerfully loan $10,000 to a client for thirty or sixty days without any interest? Absolutely not! In fact, the more money you have, the more you realize the worth of those liquid assets.
So what’s the secret to both parties winning the “pay later” game? The secret is additional compensation in the form of interest. If you have the resources to finance a $50,000 sign for 90 days, you must be compensated with a fair return on your investment. Check the local bank rates to see what it would cost you to borrow that amount for that given time.
Immediately add that interest expense—plus an origination fee, a documentation fee, and an insurance fee—to cover the debt should the debtor default on their payment. Check with your accountant to verify the legalities and regulations for the fees charged for borrowing your money. If you’re acting in the capacity of a banking institution, then you should make the profits of a banking institution.
What if the client challenges your fee schedule and payment terms? Ask yourself: Are your clients calling the shots, or are you making the decisions to provide for yourself and your family? Clients come and clients go, but you must realize that you only have one future, so plan now to make it an enjoyable and comfortable one.
Trust your skills. Trust your marketability. Trust your products and services. Chances are that the clients who see your value, appreciate your value, and desire your high-quality sign products will know that you’re successful in business.
Never show a weakness when it comes to asking for your money. You exchange creativity, skills, materials, knowledge, craftsmanship, and branding for a fair compensation that any worthy client would be willing to pay for.
Great clients are out there, and you deserve to have them. Impress them with your presentations, your samples, your Web site, and your portfolio. When they see what they’ll be receiving for your time and effort, they should cheerfully pay for those products and skills you’ll use to build and promote their business.
Mark Roberts is a thirty-year sign industry veteran, and the owner of theintersigngroup.com in Houston, Texas. To view his variety of sign industry educational products for your profitability and enjoyment, visit www.signprice.com.
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