Ever wonder what goes through a creditor’s mind when they decide whether or not to give you credit? Creditors, like suppliers, vendors, and bankers who extend credit to you, are a bit anxious and for good reason. They don’t know how you’ll behave when times are tough. They don’t know if you will be a “beg pay” or worse. On the other hand, they want to increase their business with you, so they hope you will succeed and buy more of their products and services. When you grow, they grow.
How can you turn this apparent dichotomy around? How can you put them at ease with your account to get better terms, extended credit, and get real cooperation in your mutual growth? By putting yourself in their shoes, you can discover how your basic attitude toward creditors affects your credit. Here then, is our second question to help you discover successful guiding business principles:
2. Would you extend credit to yourself? Would you extend credit to a customer who falls behind in their payments, and is difficult to reach? Or would you prefer one who sees you as a strategic business partner, keeps you up to date, shares challenges and opportunities, and understands that you have bills to pay too?
Here are 4 ways we extended our credit when we were behind in our payments:
Strategic Alliances. We identified the vendors, suppliers and services our business depended on. We looked for alliances with other small start-ups and market climbers that needed our business to grow as well. Many were willing to “make an investment” in our business with favorable terms to help us get started and grow. Of course, they wanted to see some seasoning and loyalty as well, but identifying those strategic allies was critical to our success.
Quarterly Meetings. We took the time to meet with our creditors quarterly, especially during the first few years, and allay their anxiety. We showed them our plans, and how and when we expected to see return on our investment. We showed them how we were making adjustments in the ever-changing marketplace. We told them our challenges and goals, and took them in as partners.
Advance Warnings. As soon as we knew we were going to be late on a payment, we called them. We told them that we realized that they too had bills to pay and we wanted to give them advance notice so they could make adjustments to save their credit. Then we gave them a payment plan based on our receivables that would bring our account up to date. Guess what? Several of them said they not only appreciated the advance notice and plan, but also extended our credit on the spot. They said we were the kind of customers they wanted!
Pop-Up Opportunities. Sometimes we would get an opportunity we didn’t have the funds to take advantage of. Suddenly a buyer wanted a big load that pushed our inventory and credit to the breaking point. That’s when we picked up the phone and laid out the scenario for our creditors, suppliers, and vendors. We asked them all for help. Depending on the deal, they often surprised us with cooperative teamwork to make it happen.
So wouldn’t you rather extend credit to a customer who is informative, transparent, and proactive? Your creditors would too, so adjust your business philosophy to be that kind of a customer.
As we continue to explore guiding principles, we will ask two additional questions: How would you like selling to yourself, and how would you like buying from yourself?
Who We Are.
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.
Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.
To make inquiries for keynote speaking, trainings or consulting, please contact email@example.com.