Revise contracts after each sale

Aug. 22, 2012
Avoid a cash flow crisis by renegotiating customer contracts after each sale.

You need to re-negotiate the contract every time you sell a customer with a balance of more tools.

Say a customer with a $25 weekly payment and three weeks left buys a new $100 screwdriver set. He can't just go on paying $25, or he's stretching your turn to eight weeks. You need to work to get him to $200 outstanding over, say five weeks, so now he owes $40 a week – or more if he offer to pay more.

If you don't renegotiate you could end up with a cash flow crisis. Over time a five-week turn can become a 10-week turn and you will find it hard to meet your tool payments.

Cornwell preaches a five-week turn, says Cornwell Tools Training Manager, Mike Boyhan. That is, if you sell a tool today, you should negotiate to collect all your money back on that tool by week five.

The best dealers get their first payment the first day they sell a tool. You're basically saying to your customer: "You've got the tool today, you make your first payment today."

This makes the best use of your money, says Boyhan. In fact, if you can make this work, you can sell tools by rarely putting any of your own money out there.

Here's how: Say you sell a $100 wrench with a 40 percent margin. If you collect day-one on a five day turn you get $20 a week for five weeks, At the end of the third week, your customer has paid the $60 you owe your supplier. If you have 15-day terms, your customer has financed the purchase with no cash out of your pocket and you can pay your supplier. Then, the next two weeks you just collect your profit.

Have a sales strategy or helpful hint you'd like to share? Send your "30-second sales seminar" to [email protected], and see your suggestion featured here!

Sponsored Recommendations

ZEUS+: The Cutting-Edge Diagnostic Solution for Smart, Fast, and Efficient Auto Repairs

The new ZEUS+ simplifies your diagnostic process and guides you through the right repair, avoiding unnecessary steps along the way. It gives you the software coverage, processing...

Diagnostic Pre- and Post-scan Reports are Solid Gold for Profitability

The following article highlights the significance of pre-scans and post-scans, particularly with Snap-on scan tools, showcasing their efficiency in diagnosing issues and preventing...

Unlock Precision and Certainty: TRITON-D10 Webinar Training for Advanced Vehicle Diagnostics

The TRITON-D10 lets you dig deep into the systems of a vehicle and evaluate performance with comparative data, systematically eliminating the unnecessary to provide you with only...

APOLLO-D9: Trustworthy Diagnostics for Precision Repairs

The APOLLO-D9 provides the diagnostic information and resources you need to get the job done. No more hunting through forums or endlessly searching to find the right answers. ...

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!