If you are a small business you undoubtedly have had clients with Net45, Net60 and even Net120 payment terms. We all much prefer collecting the balance of our invoices upon delivery of the final product, but let’s be honest, sometimes that’s just not possible. If you want to do business with certain large companies, you have to do it “their way”. It’s the worst, and typically the bigger the company the worse the payment terms are. Essentially you are being asked to give your biggest, most well-off clients a loan while they sit back on their piles of money, laughing all the way to the REAL bank. Often times these clients are large corporations who bring in billions of dollars a year in revenue. It begs the question: Why should my small business be forced to front the expenses for your project when you’ve got plenty of liquid cash? As stated above, in the video production business we typically ask for 50% payment up-front and 50% when the client receives the final deliverables. Sounds fair,right? We do this because video production costs are typically quite high and require quite a bit of front end expense for gear, crew, locations, props, and wardrobe. The final payment is the only real leverage we have to collect. If you don’t pay, you don’t get your video. Simple as that. However, with clients who don’t play that way, you are often expected to take a major cashflow hit just for the privilege of working for them. So why do we do it? Why do we allow this to happen?
Typically, small businesses like mine, take on projects with large businesses and well-known brands because we want to build our portfolio, and if they are amenable, put their logo on our website and sales materials. It’s a potent legitimizing force and an accepted benchmark of skill and quality. If you work with the best, you must be the best. Large companies are all too aware of this factor. I should take this opportunity to point out that not ALL large companies do this…but I’d be lying if I said the ones who don’t aren’t a pretty rare exception. The attitude they have is typically “We are company X, and if you want to work with us, you will play by our rules”. This statement is often followed by something like “we want this project done at half the cost and in half the time.” So what do you do?
Unfortunately, many times you are forced to grab your ankles and take it because as business operators we have extreme FOMO (Fear of Missing Out). The opportunity to build a relationship with a global brand can have huge implications for the growth of your business. Plus, your competitors are surely waiting in the wings to jump on the opportunity the moment it passes you by. Nobody likes hearing about someone else scooping up a big client you had the chance to work with, even if you know they’re taking a bath on their pricing to get the job. We have all been there. So sometimes we have to weigh the benefits, sharpen our pencils and take the gig at a lower rate. We pay for all the front end costs because there is simply no way their Accounts Payable department can bend the rules and pay in a reasonable amount of time. The conventional wisdom here goes something like “sometimes that’s the price of earning a bluechip client”. Sad, but true.
But wait it gets worse! Some large clients make you go through a third party billing company. This third party billing company charges you a 5% fee on top of what you are billing the client! Not only are they making you wait 60 or more days to get the money that you essentially loaned them, but now you have to pay 5% to have the honor of actually getting paid for your services. Well, quite frankly,…f*ck that!
About six months ago my partners and I decided that these jobs and powerless situations they put us in were no longer worth it. We do world class video production, post production and animation work and if company “X” wants to work with us there is no reason we can’t both abide by reasonable rules that are fair for both parties. Why? Because WE ARE NOT A F*CKING BANK! We are a professional organization dedicated to delivering an awesome product and we are a great partner who always delivers on time and on budget. Beyond that, we’re probably one of the most responsive companies in the world. It’s not unusual for the partners to answer client questions at midnight or 4AM when we get up for a short bathroom break. We pride ourselves on never being the bottleneck when a project is in process. Our clients should feel like they are the only thing in the world that matters when they work with us – because when they spend the money to engage us that’s exactly what they deserve. Nothing less. Ever.
CHECK OUT OUR SHOWREEL
This decision has changed our business. The day we decided to start firing clients and start understanding our own value is the day our sales started increasing and our cash flow began to stabilize. We work with dozens of very large companies who respect us as great partners and know that the level of service we provide and the product we produce is second to none. Those clients will often push through payments for large projects because they want to ensure we are happy and are focused on their video production and not our cash flow. That’s what partnerships are about. It needs to be a win for both parties. If you are simply looking for a vendor then you’re likely better off going somewhere else. If you are looking for a partner, however, then we are your team.
Saying no and rejecting unsuitable terms will grow your business. If you provide great work and a great service you are the prize! Remember that. It takes plenty of hard work to get to the point where you can say “no” and absorb the hit, but the best business decisions are always made from a position of strength. Desperate choices lead to poor consequences. Value yourself. Value your time. Build the confidence to walk away from anyone who doesn’t value either.