Authors: Inc The Staff of Entrepreneur Media

Start Your Own Business (49 page)

BOOK: Start Your Own Business

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Mail labelers quickly affix mailing labels with the use of a hand-held dispenser, desktop model or heavy-duty floor model, depending on the need for speed and the use of other attachments, such as a tabber, folder or inserter. They can attach labels to many different types of mail pieces, including postcards, envelopes, catalogs, brochures, sales fliers and other marketing pieces. Additional features may include the option to use folded label sheets (approximately 30 labels per page) or continuous-feed single label rolls, counters and different label sizes. If attaching labels using a hand dispenser, the speed will depend on the individual using the device; however, automated labelers can stick on as many as 15,000 labels an hour.

Lease or Buy?

Most of the mailing equipment in this chapter can be rented, leased or purchased outright. You may prefer to lease to conserve working capital, then upgrade equipment as your business grows. Renting is the easiest method, because if you need to cut costs at any time, you simply hand the equipment back and walk away. If you are leasing, you are obligated to make all the payments specified in the lease. However, leasing offers advantages, including lower rates than renting and the ability to roll the lease over for upgraded equipment.

e-FYI

Not sure where to start when you need to send a package or overnight letter?
iShip.com
will provide you with quick and easy shipping solutions without ever picking up the phone. You can compare rates, print labels, order supplies, monitor tracking logs, edit address books, and manage reports conveniently—all from your computer.

If a mailing equipment salesperson sells you on leased equipment that ends up being too sophisticated for your needs, some suppliers will purchase the competitor’s lease and give you their own equipment. When shopping around for equipment, ask if there are any special promotions available before you sign.

Basic machines lease from about $25 to $35 per month, more sophisticated machines for $60 and up. Anything more expensive than that is usually best suited to large corporations. The average lease is for three to five years and can include maintenance and free postage refills; the average rental agreement is for one year.

CHANGE OF ADDRESS

S
ick of standing in line at the post office? Visit the post office online instead. At the USPS’ website (
usps.com
), you’ll find dozens of timeand money-saving services, including the popular Shipping Assistant software that can be downloaded to your computer. This easy-to-use desktop application puts all the USPS online tools at your fingertips so you can quickly access shipping information, including rate calculations and delivery information, as well as print out shipping labels (with or without postage) and create an online address book.

Click on the ZIP codes icon from the home page, and you can look up ZIP codes for addresses nationwide. Or keep tabs on packages by using the site’s Track & Confirm feature.

There’s also a “rate calculator” that helps you find the most cost-effective method of mailing letters and packages. Just enter the article’s weight plus ZIP codes of the origin and destination, and up pops the price for shipping it by various methods.

Want shipping supplies sent to your door? Click on “Business Center,” then “Order Supplies” to order Express or Priority Mail envelopes, labels, boxes and tags after registering your business information.

Print online postage by going to USPS Click-n-Ship, or use another authorized provider, such as
Stamps.com
or
Endicia.com
. You can even order stamps at
usps.com
with your credit card (a shipping and handling charge applies). Click “Buy Stamps & Shop” to reach the Postal Store.

Carefully read the contracts you are offered, and, if renting, make sure there is no mention of the word “lease.” Also, always ask what options you have if you need to get out of a lease.

Make sure the company is postal-certified with the USPS. Salespeople should be knowledgeable about their industry and about the latest USPS regulations and rates. They should also ask you questions about your mailing process—how many boxes, how frequently you ship—so the equipment they recommend fits both your business and budget.

When shopping for mailing equipment, allow the salespeople enough time to make their pitch. The right mailing equipment can save you money, but only if you give the salesperson enough time to analyze your needs.

chapter 21

CHARGING AHEAD

Offering Your Customers Credit

G
etting paid for your products or services is what business is all about. These days, there are more options than ever for accepting payment. Whether you are in a B2B or consumer-oriented industry, your choices can include extending credit, taking checks, and accepting credit or debit cards.

With so many options, it’s easy for a new business owner to get caught up in the excitement of making sales and to forget the necessity of a well-thought-out credit policy. Deciding what forms of payment you will accept, how you will handle them and what collection methods you’ll use to ensure debts are paid is essential to any small business’ success.

Establishing a Credit Policy

Credit can make or break a small business. A toolenient credit policy can set the stage for collection and cash-flow problems later, while a creatively and carefully designed policy can attract customers and boost your business’s cash flow.

Many small businesses are reluctant to establish a firm credit policy for fear of losing their customers. What they do not realize is that a consistent credit policy not only strengthens your company, but also creates a more professional image in your customers’ eyes.

A well-thought-out credit policy accomplishes four things:

1. Avoids both bad debts and hard feelings

2. Standardizes credit procedures, providing employees with clear and consistent directions

3. Demonstrates to employees and customers that the company is serious about managing credit

4. Helps the business owner define how credit fits into the overall sales and marketing plan

WARNING

Even the best customers can suddenly become deadbeats. Watch for these warning signs that a customer may be in financial trouble:
• Changes in personnel, especially buyers or management
• Changes in buying patterns, such as purchasing much larger amounts than usual or buying significant amounts off-season
• Failure to return calls with the usual promptness

To establish a smart credit policy, start by investigating the way your competition handles credit. Your goal is to make it easy to buy your products. If your competition offers better terms, they have an advantage. You must meet your competitors’ credit terms to attract customers.

At the same time, be cautious not to go too far with your credit policy. Novice entrepreneurs are often tempted to offer lower prices and longer payment terms to take business away from competitors. Credit is a double-edged sword. You want to attract customers with your credit policy, but you do not want to attract customers who are not credit-worthy. Be aware that some troubled companies routinely switch from supplier to supplier whenever they reach their credit limit with one. Others are outright con artists that take advantage of new and naive entrepreneurs.

How to protect yourself? One good way to start is to write a short, simple statement that sums up the intent and spirit of your company’s credit policy. For example, a liberal policy might read: “Our credit policy is to make every reasonable effort to extend credit to all customers recommended by sales management, provided a suitable credit basis can be developed.”

A conservative policy might say: “Our company has a strict credit policy, and credit lines will be extended only to the most credit-worthy accounts. New customers who fail to meet our credit criteria will need to purchase using cash-on-delivery terms until they establish their ability and willingness to pay on our terms.”

TIP

When dealing with a new client, it’s a good idea to protect yourself by asking for part of your payment upfront. This is an especially good policy if the client is a new or fledgling business.

Base your policy selection—conservative or liberal—on your industry, the size and experience of your staff, the dollar amount of your transactions, your profit margins and your tolerance for risk. Also consider the industry to which you’re selling. If your customers are in “soft” industries such as construction or computers, for example, you would do well to use a conservative policy.

If you adopt a liberal credit policy for your business, make sure you are prepared to handle the collection calls. Liberal policies will require you to be aggressive when customers do not pay on time.

Give ’Em Credit

The simplest customer credit policy has two basic points: 1) limiting credit risk and 2) diligently investigating each company’s credit-worthiness.

No matter how credit-worthy a customer is, never extend credit beyond your profit margin. This policy ensures that if you aren’t paid, at least your expenses will be paid. For example, if you mark up your product or service 100 percent, you can then safely risk that amount without jeopardizing your company’s cash flow. To gauge a company’s credit-worthiness, draft a comprehensive credit application that contains the following: