Transitioning from consumer to business owner is an interesting path. There are so many things you don’t think about when you first start out as an Entrepreneur. One of those things for me was debt collection.
Debt Collection – the Flip Side of Debt for Business Owners
I knew about debt from a personal perspective -from the consumer’s perspective. I lived through the pain of being deep in credit card debt and I know just how long it took me to climb out of that hole.
What I hadn’t thought of, until today, was that one day soon – when I start selling more digital products, when I create a membership site, I may have customers owing me money – who can’t afford to pay.
As a business owner, debt collection can become a thing.
Debt Collection Assistance
This post was sponsored by Pacific Collection Group, specialists in managing and collecting debt for businesses. Their goal is to simplify the financial settlement process in order to improve financial stability for both the business and the consumer.
Keeping it Simple – Cash Upfront
I’ve always loved the idea of simple transactions in business.
I started out in business as an Aromatherapist. My clients were wealthy – most of them could afford to have a treatment once or twice a week.
My payment plan was super simple. Clients paid me upfront for 8 treatments in order to get a discount.
It was a win-win. They got a great deal and I got assured monthly income.
Cash upfront vs Accounts
The first time I discovered how damaging it can be to move away from the cash upfront model was a few years later when I was Head of Network Marketing.
The company had started out purely as a Network Marketing company but at this stage of their business journey, they had chosen two routes to market their nutritional supplements.
One was through Network Marketing (my division).
This was a pure cash upfront model and marketing was free because it was by word-of-mouth.
The other was through Retail. The Retail division sold products to Wholesalers, who in turn sold into Pharmacies and Health Shops, who in turn sold to customers.
Margins were small and income was slow because the wholesalers insisted on paying in 30, 60 or 90 days.
Reaching the end consumer became an expensive exercise because most of it was above-the-line advertising – TV, Radio and Print Media. What made matters worse was that it took months before we knew the results of these marketing efforts.
If there was little to no pull-through in the pharmacies, some of the stock would come back months later from the wholesalers, in damaged containers, close to expiry.
Moving over to Retail was one of the main reasons this company went into liquidation. The cash side of the business couldn’t cover all the costs of maintaining the retail side of the business.
Big lessons learned in this business and not an experience I would ever want to go through again.
Debt Collection in My Online Business
Back to the present and my business as a Digital Entrepreneur.
As I plan out my strategy for my online business, I am mindful of these important business lessons.
So far, debt collection in my business has been straightforward. I’ve mostly sold freelance services (sponsored posts and content writing) and been paid per job as I complete it.
There’s been the odd slow payer here and there and one customer who requested a refund on Paypal (a story for another day) but mostly payments have been almost instant or on-time.
The huge benefit of a digital business is that there are no physical products and therefore no returns and no consumable goods that can expire.
The problem with this model? I’m still being paid by the hour. There’s no passive income.
Which is why this year, I’m focusing more on Affiliate Marketing (write one post or create one video that goes viral, get paid for life). I don’t handle the debt collection in this model, the Affiliate Marketing company pays me once they know their payment is secure.
I’m also trying my hand at Dropshipping (eek, physical products!) but again, the Dropshipping company handles the debt collection and returns (not me – yay!).
And planning to develop and sell my own digital products – online courses, virtual summits and ebooks. This is where I may need to some debt collection savvy.
How can I keep things simple?
Can I stick to either cash or upfront payments?
Is there a way to generate guaranteed monthly income as I did in my Aromatherapy business? Is a membership site the answer?
Do I have a 30-day refund policy? And if so, how can I keep refunds to a minimum?
These are the questions I will keep top of mind this year.
How do you handle debt collection in your business?
Thanks to Pacific Collection Group for requesting this sponsored post and inspiring me to think all this through.
*Writing and publishing sponsored posts is one of the ways I earn income online. All opinions are my own.