How to handle skips

I can't think of any businesses that do not incur some form of financial loss or shrinkage in one way or another. Mini marts have shoplifters, automotive repair shops often donate labor and parts in the name of customer satisfaction, and many other businesses incur losses with employee theft. There are too many examples of business losses to list. Notably, the mobile tool business certainly has its share in the form of skips.

Because of its unique business model of allowing a customer to walk off a truck with a $100 tool after putting only $20 down, and then continuing to pay $20 a week, distributors always have a considerable amount of money "on the street." Hence, the reason tool businesses are based not only on sales but more importantly, on completed sales. How to deal with skips has always been a matter of debate.

The do's and don'ts of managing skips

From my experience, skips equate to approximately 1 to 3 percent of gross completed sales. While that might not seem like much, it can add up to a double-digit loss for a successful dealer.

The don'ts 

Over the years, I've heard a wide range of opinions on how to deal with skips. They run the gamut from, just go out and sell more and don't dwell on it to this advice from a long-time veteran. 

He told me, "When a customer skips, I send him a collection letter for twice what they owe. If they're concerned, they'll contact me immediately because of the increased amount. If they don't contact me, I just take the increased amount off my taxes!"

Personal integrity is the most important attribute a dealer can have. I'd NEVER use the latter scenario nor would I ever endorse it, although it still makes me laugh. Instead, develop the habit of having all first-time customers sign a security agreement on their initial purchase.

The do's 

The answer to how to handle skips isn't a one-size-fits-all solution. Contacting the skip immediately is the first step in every situation. A polite text or call reminds the customer of their obligation to you. If you get ignored, that's the time to consider your options.

There's a part of the technician world that is nomadic. These folks always bounce from one shop to another. Even though they "skipped," chances are they'll show up on your route again. I've had it happen numerous times. Sometimes this group continues as "loyal" customers. Contact the other dealers in your area, let them know who you're looking for. Facebook and other social media are another great avenue. Along those lines, I always kept a lookout on Facebook Marketplace for the tools I sold that were up for resale. That's also the place where you'll find $10,000 toolboxes for pennies on the dollar. It's not uncommon for skips to sell items that they didn't pay for.

Using a collection agency

I have had decent success with collection agencies. I once had a car dealership call to pay off a skip's balance. Their car sale was held up by my collection agency. I had them call my agent, and they paid the collection in full so they could complete the sale. The debt will catch up with the customer who's reasonably responsible when their credit is checked in order to make a higher-end purchase elsewhere.

I went over five years on my last tour on a tool truck before I turned anyone over to collections. After I retired, though, I turned all my skips over to collections. I still occasionally receive a random check in the mail. I'm happy to pay the agency's fee for their hard work. It has gotten to the point where I couldn't care less how much I receive as long as the skip has to pay someone. On the flipside, there's also that group who have a track record of never paying and couldn't care less about their credit. I'll never understand that mindset.

Reducing your risk of skips

My advice is to reduce your exposure. I've watched so many dealers fail from financing big-ticket items on the truck. Just as concerning is allowing customers to carry balances that could never be paid in a five to 10-week turn. If your customer is turned down by your flag's credit department, there's usually a reason. Remember, a bad deal is worse than no deal. Don't fall into the trap of carrying a toolbox balance on the truck only because the customer was turned down by your flag's credit department. It makes more sense to have 10 customers owing $500 each as opposed to one customer owing you $5,000.

Create a foundation of mutual respect

The tool business is based heavily on rapport and relationships. For me, the loss of money was second to the feeling of betrayal from someone to whom you always provided the highest level of customer service. Like any relationship, there has to be mutual respect. When that respect is compromised, it's nearly impossible not to feel bitter. Keep in mind, the person who skips on paying you more than likely has a history of doing the same to everyone else. Don't let it poison you. It's easy to be consumed by the 2 percent of customers skipping out on payments. Instead, focus on the 98 percent of customers who always pay you.

I once had a customer track me down to give me two top toolboxes before he moved to the East Coast. He explained he didn't have the cash, but the two toolboxes were worth well over the amount he owed. He told me he couldn't leave the area without making sure I was taken care of. Although he owed money on another truck, he felt an obligation to take care of his debt with me first based on the respect I had always given him. "I will pay the other truck once I'm established with my new job," was the last thing he told me.

The best way to reduce skips? Treat every customer with respect and provide the same excellent customer service you'd expect to receive in a reversed role.