[BC] Sales practices

[mark at shander.com]

Hi Barry,

Excellent topic.

This is about the value of money, and the value of money over time.

Imagine you're a small business brokering printing, with a 40% profit
margin on most products.  Your customers are receiving product right away,
you're paying suppliers for it, and in many cases, you're selling your
receivables now because companies are taking 90 days or more to pay, if
they pay at all.

If you're selling receivables, you're losing 20-25% or more of the value
of your sale with every transaction, but you're keeping cash flow active.

Many businesses charge 1.5% - 5% to carry bills past 30 days, but that's
not much, and doesn't apply here.  Normally it does.

Normally I'd recommend that a business offer up to 10% off of an order for
customers that pay up front, and in this economy, 15% is not uncommon and
seems to work.  It's 5-10% less than selling a receivable, and keeps cash
flowing without involving a 3rd party.

In the case of AB advertising sales, the challenge is in accepting these ads.

If a station or network accepts these ads, they're setting precedence, and
letting other customers know that it's okay to change the way you pay us
too.  Imagine what would happen if all companies stopped paying for ads
for 4 months.  It's not reasonable to expect your supplier to carry you
for 4 months consistently without charging for it.

If you're having an issue and you need to work something special out with
a particular supplier and you're negotiating a specific deal, you can work
through that.  Otherwise, it's very dangerous to accept this deal.  From a
sales perspective, it has very far reaching implications for the industry
as a whole.

Regards,

Mark Shander
http://www.shander.com

> There has been some "chat" about Anheiser-Busch's new "policy" of
> paying in 120 (or more) days.
>
> Other advertisers are *taking* discounts after negotiating spot rates.
>
> I do recall turning down an owner who wanted to pay for emergency
> engineering time "like the agencies do - 120 days."
>
> So, let me ask those of you in sales: is this Anheiser-Busch deal
> new, or is it business as usual?
>
> And ... how do you/(can you) deal with it?
>
> thanks