Offer Credit to Increase Profits

One option when you are trying to increase your sales, is to offer credit to your customers. If you already offer credit, then you might consider lengthening your terms. If people used to have 30 days to pay, if you then offer them 45 days, will they buy more.

This is the trade-off, if you can get people to buy something right now because they can pay for it later then you have a chance to increase sales and profits. But if you attract a bunch of people who don’t have any money then you don’t get paid for the sales, you have made your situation worse.

The Story

Ramon had always resisted letting people pay him later. He liked to finish a job and get paid right then. In fact, he often liked to get paid before he started the work. However, he had attracted the attention of a couple of general contractors.

The work was profitable, and these were longer jobs so he knew he would have work for months at a time. The only catch was the payments. He would not be paid anything for the first month. The general contractor paid in arrears, and he would always be one month behind. Ramon is trying to decide if he should offer credit in order to get this contractor as a client?

Offer Credit Carefully