NOTE: Although the target of this article  are locksmiths, the message and intent of the article is applicable to any small business that provides services or merchandise to any other business or individuals that expect, or often demand, credit privileges. When I see a sign advertising “Going Out of Business!”  I wonder if their sign should read: “GOING OUT OF BUSINESS DUE TO BAD CREDIT!” Not the company’s bad credit but their customers’.

FREE LUNCHES AND NICKEL BEERS

I wouldn’t think there’s anyone who reads this who can remember nickel beers. But, in my granddaddy’s time (of course, he always told me how much better things were back then) not only could you get a beer for a nickel; many establishments offered free lunches as well! Yep! Walk into the local watering hole, plop down a nickel, pick up a large mug of draft beer; slide down the bar a bit and fix yourself a sandwich. On the house!

By the time I was old enough to patronize the neighborhood bistro, a small draft was a quarter and there might be some peanuts or pretzels (heavily salted, of course) in bowls along the bar. Today, I imagine a draft beer’s at least a buck-fifty and a small bag of peanuts or pretzels will add another buck to the tab. If the establishment you’re in happens to serve food; then a sandwich will probably cost you four or five dollars. The point?

‘THERE REALLY ARE NO FREE LUNCHES!”

Everything costs us money. When we go to the grocery store, we have to pay by cash, credit card or check. If we take our family out to dinner — ditto. If we go to the movies, McDonald’s or a meat market — we have to pay for the pleasure of doing business with those establishments we patronize. We have to pay for the tires on our service vehicles, the gas we put in the tanks, the licenses and insurance we carry and often a tax on the inventory we carry in those vehicles!

Since that’s the case, how come so many locksmiths feel it’s necessary for them to subsidize (The Free Lunch Syndrome) multi-million dollar enterprises with multiple outlets scattered throughout the country that won’t give that same locksmith a nickel’s worth of credit for fifty cents? Never mind a free lunch — I’m talking quid pro quo, tit-for-tat and like-for-like.

How about a small example?

Well, let’s say you get a call to rekey some locks for Mickey D’s or KFC. You go down, do the job and when you present your invoice, you find out that it “has to go to the main office for payment”. Oh….

Okay, now, walk into the same establishment, order some groceries and when the cashier says: “That’ll be six dollars and ninety-seven cents.” Then try telling her that the bill “has to go to the main office for payment!”  I’ll bet you don’t get lunch — free or otherwise — unless you come up with some cash or acceptable plastic.

In other words, your “customers” want to eat at your trough on credit, but you can’t eat at theirs unless you pay cash. Do you see anything wrong with this picture? Have you ever wondered why you have to extend credit terms (If you ain’t getting paid when the job’s done, you’re extending credit to the customer) to a bank with a zillion dollars in assets? A bank that won’t even let you open a checking account unless you deposit a minimum of twenty-five hundred bucks?

To my way of thinking that entire concept is a little one-sided. I’m realistic and practical enough to know that there’s a certain amount of business that you will do where you’ll have to “extend terms” (It’s still credit, no matter what euphemism you use). There are situations where you can’t demand payment on completion. I also know that each of us can reduce the risk of losing our shirts if we just keep one thing in mind:

“Never Extend More Credit Then You Can Afford To Lose!”                                                                                     —Jake Jakubuwski

In other words weigh the risks involved!

If Cheap Eddy of Cheap Eddy’s Pre-Owned Motor Cars calls you out of the blue and has six cars he just bought from the auction that he needs keys made for — you might want to think a minute before you rush down to the lot. Your first question (even before you agree to do the job) should be: “How do you intend to pay me for my services?”  If Eddy tells you “not to worry none ‘bout that, son “— worry! Because not only is he getting ready to have a free lunch at your expense, he’s gonna make you buy the beer!

Eddy might be talking a good show, but you have to recognize that he is, after all, a used car salesman! He’s programmed to tell you that doing “bidness” with you has been his life-long ambition and he’s always admired folks that can fix keys and stuff. He’s blowing smoke. He’s misdirecting your attention from the issue of billing and collecting. If you’ve ever been flimmed or flammed, you know Eddy’s blowing smoke and he’s the one looking for a free lunch — at your expense. So, naturally, your antenna should be vibrating.

On the other hand, if the local school board, hospital, or a Federal facility requests you do work and “bill” them — the chances are a whole lot better that you’ll get your money from any one of them faster and easier then you would get it from Cheap Eddy.

But how do you level the playing field? How do you know when to “hold ‘em or fold ‘em”? What criteria do you use to determine who you give “terms” to and who you don’t? One way is to pay attention to your instincts. If it don’t feel good — don’t do it! 

Another way is, as mentioned earlier, to weigh the risks. Weighing the risks might include running a credit check through a credit reporting service. It might also include sitting down with whoever’s in charge (or whoever’s asking you to do the work) and asking them to explain their company’s payment policy. Just make sure they never worked for Cheap Eddy

The most practical way for a small business person to figure out who to trust and who not to trust is to do a small job and see how well the company pays. Let Mickey D charge the rekey, get the paperwork signed and also get the name of the individual that’s responsible for paying bills for the restaurant. Then see how long it takes them to pay. Two things happen when you do this. One: they’re only into you for a relatively small amount of money. Two: if you do have to start collection procedures, you’ve got a starting point and a name to go with it.

If Phasion Phreaks calls you for a rekey and wants you to bill them; and you find that their billing department is two major rivers, one mountain range and one International boarder away from you — decline the job or insist on payment on completion of the job. Or, accept the job if they can produce a current company credit card in lieu of cash.

Remember: Just because a company has an outlet in your area and several hundred scattered around the country; they are not necessarily credit-worthy. They pay their rent on time because if they didn’t they’d lose their location. They pay their primary suppliers on time because if they didn’t they’d have no inventory to sell. They pay their employees on time because if they didn’t, they’d run afoul of Federal, State and local guidelines.

With vendors like us and a myriad of small service and maintenance vendors they may take their time or not pay at all. Don’t think so?

ust read the financial news and see how many gold-plated businesses were only operating on brass-bound gall and crashed with the clank of tin cans being dumped in a landfill.

Using a favorite ploy, the folks controlling the purse strings may not hesitate to tell you that “the store manager did not have the authority to obligate us for any service work not approved by our facilities management department”, and you wind up buying another free lunch!

So, what’s best for you? You decide! That’s not a cop out but you are going to have to determine who, when, where and for how much you’re willing to extend credit to the dozens of folks that want to feed at your trough.

The decision will not always be easy. Just keep this in mind: more small businesses get sunk every year because of out-of-control receivables than for any other reason aside from being grossly undercapitalized and mismanaged.

That means your decisions regarding credit-worthy (or unworthy) customers can easily be hazardous to your financial health and well-being. As I mentioned earlier; whatever you decide, don’t extend more credit then you can afford to loose!

Otherwise, you won’t have enough loose change in your pocket to afford a nickel beer and you definitely won’t find anyone willing to give you a free lunch!

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Want to find out how other locksmiths handle their “credit problems” or keep credit from becoming a problem? Check out http://www.clearstar.com/ It always helps to network with others in the craft to find your way through the mine fields of the small business world.

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