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

Learn how electronic parking brake actuators have replaced manual systems and now play a key role in advanced safety features like automatic emergency braking. This WIYB Training...
Not all fuel injectors are created equal. In this WIYB Training Series, we compare Standard® Fuel Injectors against OE, low-cost imports. See why precision engineering and rigorous...
Carrying active OEM subscriptions for all manufacturers is not possible for many shops. However, access to this software is required for certain modern vehicles and repairs, and...
Learn how to properly lubricate your AIRCAT air tools to keep them running at peak performance. Discover essential daily maintenance and storage techniques, along with the right...

Voice Your Opinion!

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