The most important determining factor for any and all businesses to be successful is CASH FLOW – there surely isn’t a person on the earth that could disagree with that! Cash-flow is what makes or breaks a company.
The idea of accelerating your cash flow is achieved by asking people to prepay for services to be rendered or to pay in full versus making ongoing monthly payments or using any other deferral payment method. Surely you are familiar with this concept; insurance companies do it, some yellow page companies, etc. They offer a CASH discount – you see it all the time. Now let’s focus on implementing this idea in YOUR business – either initially or to a greater degree than you are currently using.
Think of it like this;
Credit cards charge you interest, they charge everybody interest, unless you pay your balance in full each and every month. The same idea can be applied to any type of business, especially if you also implement this idea in combination with the other methods we have discussed.
Start figuring -
For the most part, the larger the amount of the transaction, the larger the discount needed to give someone a need to or sense of urgency to invest more money now, versus later. You want to highlight the savings that they are receiving by investing in your Cash Method. In order to give people a compelling reason to “pay up front,” you treat it just like any other sales transaction you have developed for the benefit of the clients. You need to structure your product or service-pricing so that it makes sense to pre-pay.
Get out your calculator and start pushing buttons – figure out all the possibilities. You don’t need to offer that many, just a few different options. The thing to remember, if you don’t offer it, ask for it, try to get it, YOU WON’T GET IT! From now on, you will apply this method to your closing procedures in your sales process, “Yes, or Yes”, “Option A or Option B.” It should never be whether they want it or not, just which investment option makes the most sense.
Reassurance
Just the other day, one of my clients told me about this same concept in action. A branch manager for a small personal development service firm, when presenting their $18,000 Upgrade Program to a very tough attorney client who analyzes everything got this response, “He just told me, ‘I don’t care what it is monthly, let’s deal with the real money.’” Bottom-line, $18,000 isn’t that much, but it will accelerate the business’s cash flow by 10-25% in one month, versus being paid out over time at 300 or 400 dollars a month for 4 or 5 years. Of course, paying up front represents a savings to the client and PEOPLE WANT TO SAVE MONEY! You are simply trying to help them do so – it is truly a WIN – WIN.,,,,,
Think about it…
What could you do with, let’s say DOUBLE your current Gross Revenue, with the same expenses and no additional costs – a lot right. Pay off debt, expand the business, aggressively market to acquire new clients, invest, or just COUNT LOTS OF MONEY.
It is really that simple, don’t over-complicate it. Take your product or services and if you haven’t already, cash in the ongoing amounts of money that people typically pay over time and offer them the opportunity to pay up front at a CASH Discount! These discounts should be reasonable, however–the larger the purchase price, the larger the discount. It sells like this, “I’m sure you would, and we would too, rather you pay your credit card company 10-15 percent interest and pay them off over time, versus paying us over the same length of time at 20-30 percent interest. We’re just not in the financing or bill-collecting business; that’s why I can save you so much money if you pay it all now – you’re saving us a lot of trouble, too.” You get the idea – the discount should be enough, if spread out over a year or two, to save your client more than the interest they would pay on their credit cards – it’s got to make sense for them too if you want to make it work for you.
These examples should get you thinking –
Here are a few ideas,
An oil change shop that offers a one year service plan, pre-paid to save 20%, they will accelerate their cash flow by 4 times.
Something in the restaurant industry, where you can buy a meal card in advance, saving almost 50% – this has been a great way for new restaurants to get established.
Dentist or Chiropractors often have a “total package” plan that can also be prepaid with a great deal of savings – again, accelerating their cash flow, tremendously. And, quite frankly, the chance of a patient fulfilling their entire program is slim.
The cash discount isn’t new. However, it can be utilized and maximized to a greater degree than ever before. Here are three of the most compelling reasons:
Cash Flow, I think we’ve covered this one thoroughly
1) Building Client Value / Overcoming Client Attrition
This idea is very important and is usually described as, “leaving money on the table.” In any business, we know that client attrition is inevitable, now we certainly should and can have a great deal of impact in this one area – however, you will lose clients. Two very important statistics to track in your business are the Total Value of a Client, how much are they worth to your company over their life as a client. (And, you should know the Life of a Client, how long they are likely to continue doing business with you.)
2) Cash Discount Method
With at least a general understanding of this idea, you will appreciate the Cash Discount method. If the average client does business for six months and they prepay for a year, they will either last longer or be worth more; either way you are in a better position than you usually would have been. This idea works the same for product businesses that may spread out payments; you know that everyone pays on time every month forever, right – HARDLY – that’s why offering the Cash Discount to accelerate the payments is the most reliable way to get more money than you otherwise would have or will receive.
3) Ongoing repetitive purchasing
Also, I believe that when clients have already paid for a certain service or product in full and are not making ongoing payments – they are more apt to willingly and without hesitation invest more money, more often, again and again with your company. You see they don’t have to justify additional expenditure to your firm or compile the budget and feel unsure, uncomfortable, or even guilty about giving you too much of their money – they are able to consciously make it “okay” because they psychologically forget about or even ignore the fact that they made a previous purchase.
Remember, if you don’t ask, you won’t receive — and your cash flow will suffer.
Scott Manning
President, Manning Methods
317-407-3382
sj@manningmethods.com
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