Why Your Business Is Not a Free Bank - 2/15/2025

Two quiet knocks at the door. That must be Laura. We invited her over to celebrate our housewarming. Opening the door, I hear, "Thank you for the invitation! I brought you a gift." It was a beautiful woven basket. It felt sturdy with a warm caramel color. Laura said, "I have so many of these in my apartment...this is handcrafted, I chose this one because I believe it matches your decorating style." Laura studied art in college, but life and relationships had muddied the waters.

Over appetizers, Laura shared that she started selling her artisan baskets at street fairs. Her day job was doing patient billing reconciliation remotely for UnitedHealthcare but dreamed of being an artist. We knew she had a talent for crafts. Laura was enjoying making these artisan baskets. She exclaimed, “My apartment is overflowing with baskets! I find making them therapeutic, but at the street fairs, I’m lucky if I sell even one out of twenty. The silver lining is that I am taking on lots of requests to make custom designs to fit for a certain rooms, sizes, shapes and colors. It’s so rewarding to hand a custom basket to a happy customer. But after this next fair, I’ve decided it will be my last as I overwhelmed with a backlog of unpaid orders. People are busy, on vacation and we just can't connect "

"I started making these to sell to make some extra money, but between the supplies, materials, and my time, it takes weeks before I get paid. I love making baskets, but I can’t keep working for free. "You are an artist, Laura", I remind her, pointing at the basket, sitting to the side of the couch, adding warmth to the corner of the room, that was cold before her gift. I tell her, "The next time you get a custom order, be ready to decide if it will be on their terms or yours."

A month goes by, we see each other while walking our dogs. I ask her, "How are things? Laura says, "Business is better, I am still making baskets, mostly custom designs and I am enjoying myself. What changed is that I established an upfront financial agreement with my customers because I realized that I am making something that is truly one of kind—a combination of my skills and the wants and desires of my client. Once I started asking for a financial commitment upfront, things got better for both me and my customers. More importantly, it helps me understand that I am in the business of being an artist for hire—and a profitable one at that! I'll host the next get-together at my apartment. It's not storage anymore; it's my 'studio'!"

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In my book, Breaking Barriers: Overcoming the Top 5 Financial Myths that Keep You Broke - A Guide for the Small-Medium Sized Business Owner, I explain the opportunity cost of inadvertently extending credit, sometimes unknowingly, to win business. Taking a step back and seeing the big picture can bring out better cash flow and business growth. In my story, the names have changed, but my recommendations have not.

- Recommendation #1: High Cost of Long Net Terms: Avoid turning your business into an unintended lender with no controls and tying up crucial capital that could be used to grow the business or for emergencies.

- Recommendation #2: Proactive Receivable Management: Effective processes can help streamline cash flow predictability, ensuring you can pay your own bills own time and not risk late payments.

- Recommendation #3: Offering Flexible Payment Options (But Strategically): This option can improve your relationship with customers and increase sales without impacting cash flow with proper management instead of just extending terms.

Buy the book: https://a.co/d/a66ojDT

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