💸 Overcome onerous payment terms
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Enjoy the 105th Podup, with special thanks to Castmagic.
Today, we’ll dive into the best insights and ideas from 2Bobs Podcast.
Payment terms are shifting dramatically. Companies such as Keurig Dr Pepper are now setting their payment terms to an unprecedented 360 days. Blair Enns sheds light on how businesses can navigate these onerous terms without compromising their financial stability.
Push for a trial close
Before considering nonstandard payment terms, you need to assess your own financial situation. Is it going to put you in a negative cash position?
Before you offer new terms you should trial close. This is when you say 'If I could help with the affordability issue by extending more generous payment terms to you, would that be enough for us to agree on this proposal and move forward?'
This is a standard sales technique. If you make concessions without a trial close, you're effectively negotiating with yourself.
Blair Enns
Your trump cards
I see 3 levers you can use to push back on extended payment terms:
Play the small business card. You say 'There's no way we can work under those terms. We're a small business. We need to get paid in 30 days. What can you do for me on this?'
Play the diversity card. You say 'If you're trying to level the playing field for somebody who's underrepresented, then you can't say you're not going to pay us for 120 days.'
Play the cash neutrality card. You say 'We don't make money on the money. We pay everybody within 30 days, therefore you have to pay us within 30 days. It's 30 days or less for everyone.'
Blair Enns
Why it matters
It's crucial for companies, particularly smaller ones, to stand their ground on extended payment terms. By understanding your financial boundaries and utilizing Blair's negotiation techniques, you can prevent cashflow problems for your business.
Next steps
Evaluate your financial health. Before entering negotiations, have a clear understanding of your financial boundaries.
Develop a negotiation strategy. Craft a strategy that leverages your strengths, whether it's your status as a small business or your commitment to fair payment terms.
Utilize trial closes. Before making any concessions, use trial closes to gauge the potential for an agreement on more favorable terms.
Seek legal advice. If necessary, consult with a legal expert to understand your rights and potential avenues for negotiation.
Network with peers. Connect with peers in your industry to understand how they’re navigating changing payment terms.
Your thoughts?
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