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Dealing With Friends in Business: How to Get
Paid
A reader of my weekly newsletter approached me
with a question which is common to many small businesses. Here was his
problem and how I thought he could tackle it.
“I am a one man business in the labour
consulting field, I have a small regular clientele who are more personnel
friends. However every month I struggle to get my payments from them. I
obviously do not want to get too heavy handed due to the risk of losing
their custom but on the other side the lack of payment or the late payments
is creating a cash flow problem for me. How do I get through this one?
Your suggestions or advice would be greatly
appreciated.”
Sound a familiar problem? Well, here is how I
think he and you could address this sort of commons issue.
You are dealing with an issue facing many start up
businesses – your first customers are sometimes friends or family and
therein lines a number of problems:
-
You
can feel that you should be eternally grateful for they help and support
in assisting your start up
-
You
can feel obliged to stretch that gratefulness to the point where it hurts
your business
As you are finding out the time has to come when you must
break away from the original terms of business and put dealings on a more
firmer, business-like arrangement. The trick of course is how to do this
without thinking you may lose not only their business but their friendship.
So the first step is to acknowledge the fear that you
have in the back of your mind about the potential loss of business. Having
acknowledged it, accept it as a possibility – welcome to the real world!
During your business life you are going to lose clients along the way – you
may as well test your reaction now instead of later!
This acceptance of the possible loss of business is an
important and essential first step. Without this what you have to do next
will never happen and the problem will remain.
Now to tackle the problem. You have to be open, honest
and transparent with your friends; this is the crux of what follows next.
Step One: Acknowledge how
their support has been invaluable in getting you started.
‘John, I’ve got something important I need to discuss
with you. Before I start I want to say how instrumental your support has
been in helping me get my business off the ground …’
Step Two: Outline the
present situation.
‘As you know as we have been friends we have both been
flexible where payment terms on invoices are concerned. I’ve been pleased to
do this because of your support.’
Step Three: Outline the
problem the present situation is causing.
‘As the business is growing my cash demands are becoming
bigger and so cash flow is getting harder to manage. The flexibility around
payment times is now getting more difficult to control.’
Step Four: Outline your
idea scenario.
‘Now that the business has become more established we
need to put some discipline around settlement terms and so ideally I like to
see any invoices settled as promptly as possible.’
Step Five: Outline the
action and final outcome which you feel is fair.
‘Can I suggest that from next month we agree to settle
within say 10 days of invoice of date and then 5 days the month after? This
will give you some time to make any adjustments on your side. How does that
sound?’
Can you see the progression here? We have outlined the
present situation; outlined the impact it’s having on you and the business;
come up with your ideal outcome; and finally come down from that to suggest
a phased approach over a few months.
In tackling problems many people go straight to Step
Five. The build up and setting the scene is vital. Once the problem is
understood by the other party the solution is easier to arrive at. It may be
a straight ‘yes’ or it will be a great place at which to negotiate a way
forward.
If your friend walks away, well do you really want to be
doing business with that type of person anyway? However, you may be
surprised to find them agreeing immediately. They may not taking advantage;
it’s just you’ve never pushed and so they become unknowingly relaxed. You
may get a ‘Stu, no problem. Why didn’t you tell me before?’
Who knows, in reality this problem may not be a problem
at all. You may be making it into a bigger issue than it actually is. Being
up front, honest and transparent will bring this to a head.
Below this problem though is a deeper problem, which I’m
sure you are aware of. Your fear of losing the business is because you have
no one else to fall back on. Your customer base is too narrow. This has to
be a wake up call to get out there and canvas new business … but that’s a
different question again!
Robert Warlow
© Small Business Success
http://www.smallbusinesssuccess.biz
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