ENABLING CUSTOMERS TO MAKE THE SALE

As a money counselor, I am aware of some businesses "enabling" their customers in ways they, perhaps, did not intend to be hurtful. It’s just good business for them. For instance, companies that strongly encourage credit purchase arrangements "with no down payment", even, may not really be doing well by their customers. Many of these businesses, such as car dealerships, are actually counting on gleaning a substantial part of their profit from the interest charged on such arrangements. For people who tend to have problems with debting, this kind of arrangement can be disastrous. It could enable them to get further into debt and that’s just what they don’t need!

So what does this all have to do with the business of selling crafts? I’ve been taking a look at creative ways craftspersons can use financing arrangements to help sell more costly high-end products, arrangements that can empower both the seller and the buyer. This could be a more positive approach to "enabling". For instance, Joe Brandom of Baker, Louisiana, has developed several different arrangements for selling his high-end metalwork such as figurative sculpture and vessels. For Joe, high-end means objects selling between $500-$15,000. He finds these arrangements useful in helping to close some of these direct retail sales, principally to regular, known customers.

He sometimes has a customer who really wants to purchase an object but they can’t quite come up with the whole price right on the spot. Some creative selling terms have enabled him to close the sale and enabled the customer to get exactly the piece they want in a way they can afford to buy. These techniques may be helpful in specific cases where an enthusiastic customer can’t quite pay for the item right away, regardless of the price, so don’t shut down thinking you don’t have any high-end products. Anything you produce could be just "out of reach" for some of your most faithful customers. So, read on!

The arrangements to use will vary depending on the customer and the circumstances. Let’s look at a few scenarios and possible solutions suggested by Joe and others.

THE TRUSTED REGULAR RETAIL CUSTOMER

In this case, you could be willing to deliver the piece to the customer and take only a down payment of 10-30% , agreeing to accept the balance in A FEW monthly payments. I say, a few monthly payments, because it isn’t going to be in your best interest to act like a bank. That would really cost you in time, mental energy and in the time value of money. I am assuming you would not want to charge such a client any interest, but would just spread the balance evenly over the agreed-upon number of monthly payments.

As I will say for each and every one of these arrangements, it is very important that you create a written contract clearly spelling out the terms you have agreed to.

A NEW CUSTOMER RECOMMENDED BY A TRUSTED REGULAR CUSTOMER

If the special piece is being commissioned , your agreement would require 10-15% down at the time of the order, perhaps one-half of the balance upon delivery, and then the 4-6 monthly payments for the rest. It is normal for the down payment to be non-refundable when a particular piece is being ordered. Of course, all aspects of this arrangement needs to be put in writing and signed at the time the down payment is accepted.

THE BRAND NEW UNTESTED CUSTOMER

If you are holding a unique piece for this particular customer while they are making the payments, you will want to specify that the customer will lose everything they have already paid if they stop making the payments or their payments are more than, say, two months overdue. Of course, you would be willing to "work with them" if they called you , explained their unexpected circumstances, and proposed a workable alternative to the agreement already signed. All these changes should be written up and signed by both parties as an addendum to the original contract.

CLASSIC LAY-A-WAY

HOW TO KEEP TRACK OF IT ALL - THE IRS AND THE CONTRACTS

If you do decide to charge interest on the installment payments, the interest would be considered business income, subject to the Self-employment Tax just like the sales are. This is different from interest you earn on your business savings account, which is not considered business income.

You will find a computer really helpful if you find these kind of arrangements useful. You could have your lawyer help you draw up standardized contracts that would cover your most common type of agreements. Once you have entered them in your word processor, then, you can just modify the basic format again and again to meet the specific terms you agree to with your customers. A spreadsheet would also be useful for tracking the payments. I suggest you set up a worksheet for each deal showing the amount and date of each expected payment and set up a place for you to record each payment as it is received. You expect your customer to keep up their payments. Your responsibility is to honestly and accurately keep track of the payments and make the delivery as agreed.

Joe Brandom says "It’s been a real positive experience for me. I’m just careful who I do it with." To help you be careful, I’d suggest you establish some guidelines ahead of time that will specify which kind of arrangements you would be willing to do with which kind of customers. If these are set up ahead of time, you’ll be better able to withstand undo pressure in the negotiating process.