Has Your Small Business Stopped Growing?

Has your small business stopped growing? I might know why.

And more importantly, if it turns out the textbook answer I give is right, the answer suggests concrete steps you can take to restart your growth.

One caution up front though. We need to use a bit of math in the discussion that follows. However, don’t worry. We are not going into the weeds on this one. The following discussion is light reading.

Small Businesses Often Grow Linearly

To start, let me propose that small businesses grow “linearly.” Or we might also say “arithmetically.”

But all that means is, you and I gain customers or clients one at a time.

Further, this arithmetic growth makes sense.

If you think about just one common element of marketing your business—your sign—it may be that every week, a hundred people drive by your business and see your sign.

Then maybe ten of those people call you. And then a subset of those callers sign on and become your customers.

Over the course of a year, this linear or arithmetic growth means you grow your business by, say, 100 customers.

Probably most of the other growth in your small business works the same way.

Web traffic and web advertising grow your business one click at a time. Cold calls you or a salesperson makes grow your business one successful sales call at a time. Conferences and trade shows, well, you get the gist of this.

Small Businesses Shrink Exponentially

Now consider this: Probably you lose customers or clients at some percentage rate. Or we might say probably you lose customers or clients “exponentially.”

Note: You’ve heard of exponential growth. What we’re talking about here is exponential decay.

In other words, if you or I have 100 clients or customers, we might lose ten of these folks. But really, the best way to express that attrition, that “exponential decay,” is as a percentage like 10 percent attrition. Or 10 percent decay.

The percentage by the way reflects the reality that attrition connects to the size of the business.

A business with 100 customers might lose ten people, and that means 10% attrition or decay.

But a similar business with 1,000 customers doesn’t lose just ten people. Probably it too loses some percentage like 10%.

This is all pretty basic. No earth-shattering insight here. No mind-numbing math, thankfully.

All we’ve really talked about is gaining customers or clients at some rate that can expressed best as a steady arithmetic increment (like 100 new customers a year). And then also we’ve talked about losing customers or clients at a steady percentage rate like 10%.

Growth and Decay Eventually Balance

And now we get to the textbook reason some small businesses stop growing.

At the point where the linear growth balances out with the exponential decay, growth stops.

The precise formula? Your or my business stops growing at the point equal to the arithmetic growth divided by the decay rate:

Maximum Customers = Arithmetic Growth / Exponential Decay

With arithmetic growth of 10 clients or customers and an attrition or decay rate of 10 percent, for example, the maximum size of the business equals 100 clients or customers (calculated as 10/.1)

With arithmetic growth of 100 clients or customers and an attrition or decay rate of 10 percent, the maximum equals 1,000 clients or customers (calculated as 100/.1)

Calculating the Theoretical Maximum Revenue

By the way, if you can express your arithmetic growth in dollars, you can use this same formula to calculate the maximum revenue potential of your business.

If your business arithmetically grows by $125,000 a year and your attrition equals 8%, the maximum equals $1,000,000 of revenue (calculated as $125,000/.08).

Key Takeaways from the Calculus of Growth

I promised this blog post would be short and sweet. So let me just throw out a handful of final comments.

First, the clean math described in the preceding paragraphs simplifies stuff a lot. The reality will be more complicated.

Second, the formula described earlier suggests that our company growth will slow over time and even stop eventually. Why? Because if we just keep growing the same way: with signage X people see a day, a website that attracts Y visitors a week, a sales guy making Z sales calls every month, eventually growth and decay balance.

Third, you and I do have a way to continue growing—and that is to grow the way we grow. In other words, more signage, more website traffic, and more sales calls.

Other Resources You Might Find Interesting

If you are interested in other resources for growing your small business, contact us today!  Our experienced consultants and business development specialists can streamline a plan to grow your business.  We offer free consultations both online and in person!

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What to do when Ex-Employees Damage Your Reputation

As a business owner, you try to hire good people. You screen them, train them, encourage them, and do whatever you can to help them succeed and become an integral part of your business.

So it’s extremely frustrating when one of them posts disparaging comments online after he or she has left your company. It can take years for you to establish a reputation for having excellent products and services, but a single disgruntled employee can ruin that in a matter of seconds.

On one hand, people who read your ex-employee’s online comments may form inaccurate opinions about your business, which could damage your reputation in the marketplace. On the other hand, an ex-employee who damages your reputation can ward off top talent from wanting to join your business in the future.  Top candidates will always do their homework during the recruiting process.

In a recent study conducted by Allegis Group a whopping 69 percent of respondents claimed that they wouldn’t accept a job from a company with a poor reputation, even if they were unemployed!  of those that already had jobs, 31 percent said that they wouldn’t be willing to leave their current company for one with a bad reputation.  That is powerful!

So though only 16 percent of employees say that they’ve posted negative comments about their employers online before, these disgruntled workers can leave a real stain on your reputation. What’s more, it can be difficult to recover from such a blow to your image. As such, you’ll need to be hyper-vigilant when it comes to ex-employees and the things that they say about your business online.

Look out for the different ways ex-employees can hurt your reputation

The rise of the “internet review era” has given disgruntled ex-employees a platform through which they can voice their grievances with your business and, ultimately, damage your reputation. When your former employees are looking to get their opinions across to the masses, there are several tactics that they can use to retaliate against your business. Watch for the keyboard warriors.  Here are a few common ones that you should look out for:

Giving poor LinkedIn references

Encompassing a member base of over 400 million individuals, LinkedIn has become the place for professionals looking to network with others—and the place where your ex-employees can share negative thoughts about your business. This platform makes it easy for prospective employees to find those who have worked for you in the past and ask them about their experiences at your business. These private exchanges allow your ex-employees to share their true thoughts and opinions, however negative they may be.

Leaving bad reviews on Glassdoor

Online company review site Glassdoor has become the bane of existence for many businesses, who often see their Glassdoor pages inundated with negative reviews and ratings from ex-employees. These individuals can use this platform to share what it was like to work for your business and highlight other grievances about you, your managerial staff, and even your business structure. And though Glassdoor requires its reviewers to create accounts before posting, your ex-employees’ comments will appear on your business’ page anonymously (Of course!). This makes it easy for disgruntled former employees to attack your business. Enough of these bad comments can do some real damage on your reputation.

Slamming you on social media

Social media sites like Facebook and Twitter are favorites among the community of ex-employees that are looking to badmouth their former employers. Using hashtags (think #hatemyboss, #bademployer, and #hatemyjob), your ex-staff members can get the word out to any other user that they aren’t happy with their experiences at your company. Bad comments spread more quickly than good ones, so social media can make a swift impact when it comes to your online reputation.

Posting other malicious reviews

Ex-employees can negatively impact your business’ reputation by sharing particularly malicious reviews on the leading online review platforms. You must remain vigilant when it comes to these comments, which can be much more harmful than those posted by consumers or even competitors. Your ex-employees leave your company with knowledge of inner company workings and other information that they can share with countless others online.

You can easily spot these malicious reviews by looking for several characteristics. If you see comments that feature industry vocabulary or other terms used at your business, then you’ll know that an ex-employee wrote that review. Also, angry former employees won’t usually be open to discussion when you respond to their negative reviews.

What should I do if this happens to my business?

When ex-employees start to damage your reputation, you’ll need to nip the situation in the bud before it makes a lasting impact on your business. Thankfully, there are a number of strategies that you can use to rectify the situation and turn your reputation around. Here are some suggestions:

Stay calm

The absolute worst thing you can do is to fly off the handle upon reading a disgruntled employee’s comments about you and your business. Responding with inflammatory or condescending prose, contacting the person directly, or filing a lawsuit will only serve to encourage the offender while simultaneously exacerbating the negative image of your company. It’s okay to be angry about the knock to your reputation—but it’s unwise to let your emotions get the best of you.  Easier said than done, I know.

Prevent it before it happens

You can prevent ex-employees from lashing out against your business and ruining its reputation well before they even become ex-employees. To protect your own interests, you should have a “prevention plan” in place that will ensure that no employee leaves the company feeling slighted.

This plan should start when you are onboarding new employees. Give all new hires documentation that clearly outlines their role and responsibilities in the business—and tells them what actions you’ll take if they don’t meet expectations. This plan should also involve regular employee evaluations, which will provide a benchmark for any improvements that they need to make. If they fail to amend their shortcomings, then it’ll come as no surprise when you let them go.

Even so, you should handle any employee severances with great care to prevent them from retaliating against your business. Never let an employee go without warning—this can incite them to air their grievances online and/or seek legal action. The way you approach this situation can shape the image that your ex-employees have of your business and prevent them from tarnishing your reputation.

Flag negative reviews for removal

Many review sites, like Google+ or Glassdoor, have mechanisms that allow employers to identify reviews which they feel may be inaccurate. Usually, this is a link next to the review labeled “Flag as inappropriate” or “Problem with this review?” Selecting this link is an easy way to demonstrate to the cyberworld that the reviewer is disgruntled. Just don’t make a habit of flagging every negative review about your company—otherwise, you’ll be “flagged” by the review site itself.

When flagging isn’t enough to remove these negative reviews, you can also submit a written request to the website where your ex-employees posted them. In your letter, you should explain why you want the materials removed, mention any site policies the review has violated, and disclose what you have already done to petition for the removal of the content.

If the allegations being issued by the disgruntled employee are patently and objectively false, you do have some legal remedies. You can seek out legal advice about filing a libel lawsuit, notify the review sites involved to report the deceptive information, and possibly even contact the Federal Trade Commission about the review site publishing fraudulent reviews.

Respond to the ex-employee’s comments

Taking the high road is always the best option when responding to disgruntled employees. Start by thanking them for taking the time to write a review, whether you agree with what they said or not. In the remainder of your response, you should use calm, neutral language, express concern for the former employee’s plight, formally state the relevant policy regarding the topic in question, and point out that privacy laws prohibit you from discussing internal company matters. Finally, don’t get into a back-and-forth response war with the reviewer; that can only make you look bad. Keeping a level head and addressing the situation with maturity can go a long way towards repairing your reputation.

Increase your positive reviews

Another tried-and-true strategy for dealing with negative reviews is to drown them out. In other words, find ways to solicit positive reviews about your business from customers, peers, clients, or even other employees. The more glowing reviews you receive, the more that the disgruntled ex-employee’s remarks will appear isolated and irrelevant.

Make your own adjustments

Sometimes, a disgruntled employee is just a jerk. But often, there may be a legitimate root cause of the person’s ire. Though you don’t have to acknowledge that the ex-employee is right, it would behoove you to take a closer look at the issue(s) that he or she brought up in the negative review. That way, you stand a better chance of avoiding future bad reviews by angry former employees. It may be a matter of clarifying a certain policy or improving communication within your workplace.

Monitor your online reputation

Monitoring the internet for negative reviews is the best thing that you can do to protect your reputation from the wrath of former employees. You should regularly check all of the most visited company review sites, including Glassdoor, Indeed, and Jobitorial.

Formal reviews aren’t the only method that ex-employees can use to vilify your business, however. It’s crucial that you also monitor news and blog posts about you—former employees can make disparaging comments on posts such as these. Try using online monitoring tools to keep track of what’s being said about your business online. Google Alerts, TrackUr, and SocialMention are a few that’ll help you stay in the loop.

The bottom line

No business owner likes to have his or her reputation take a hit—especially from a former worker. But keeping a level head and addressing negative comments and reviews promptly can go a long way toward repairing any damage your business’s reputation may incur.

If you need help fixing a reputation that an ex-employee ruined, why not let MCDA help? Schedule a free consultation and get the personalized advice you need to take back your reputation.

 

 

Growing? Here are 3 Ways to Help Upgrade Your Supply Chain

A quick growth in your business can be super exciting.  But if you don’t know how your supply chain management strategy will evolve with your company you might limit your growth.

Let’s go with a pretty simple analogy on this.  If you gain a bunch of weight you would buy bigger clothes or go lose some weight at the gym.  For now, we will use buying bigger clothes.  If you kept gaining weight would you keep wearing the same clothes?  No right.  Well Supply Chain Management works the same way.

After all, if your company is growing and your supply chain management doesn’t change to match its new size, things may eventually start to fall apart along the seams. And when that happens, your customers will definitely notice and give an earful to their friends and followers on social media—and your customer service representatives.

So if you’re looking for ways to upgrade your supply chain management as your company expands, you may want to try some of these strategies—because the right time to tighten your belt is not when your company is gaining market share.

1. Make sure you have alternate vendors.

You’re growing. Are your suppliers?

Hussein Suheimat is the CEO of SMMC a custom CNC manufacturing business in California.

“Being in manufacturing, supply chain monitoring and improvements are a vital part of our business,” Suheimat says.

But because his company uses a lot of varying metals (Steel, Aluminum, Titanium, etc.)  in its production, supply chain management can get complicated, he says.

“The price of materials is constantly fluctuating and so supply chains must be monitored on a nearly daily basis to ensure that we’re getting the best product at the best price,” Suheimat explains.

“Unfortunately,” he continues, “gone are the days when you could work with just one vendor and expect stability in your supply chain. It almost feels like old street markets out there—where you haggle and barter in real time to get the best price.”

2. Mitigate risk to help your supply chain management.

If you aren’t doing risk management when you’re updating and improving your supply chain, you haven’t really upgraded or improved much. Your supply chain may be bigger, but it may also be more vulnerable to potential problems than ever.  The best way to manage risk is to be proactive.  This means while you have a supplier who is performing well and meeting all of the key performance indicators, it is critical to have a risk plan on what you will do if that supplier suffers a catastrophic event, financial issues, loss of key personnel or some other event which put at risk your ability to get product.

Every time you make a big change to your supply chain without also implementing a backup plan if something goes wrong, you may be weakening your chain instead of strengthening it.

3. Continue to update how you analyze your data.

Are you running out of inventory?

Have you had production or technology problems?

Are the updates in your supply chain management system allowing you to know what’s going on in your supply chain at virtually every moment?

The problem may be in how you monitor, collect and analyze information.

Here’s a question every company should be asking: Are we using data to make decisions —or merely to justify our decisions?

Companies need to be looking for a software or data services solution that can provide the right data in real time, so their key performance indicators can alert them to potential problems long before it results in an inventory shortage or other serious situation.

Keeping up with data is crucial for supply chain management, whether it’s going through an update or not.

We have to use precise forecasting of our sales and projects, in order to really dig in on our supply chain needs and think five steps ahead.

A lot of this isn’t necessarily from crunching numbers, but rather having regular clients and talking to them.

If you don’t want the tables turned on you, consider looking for ways to upgrade your supply chain as your company expands.

The larger your company gets, the more you have to invest in your supply chain management to keep your executives, employees, suppliers and customers happy. And that can feel like a weight has been lifted off of you.

Things to Consider Before Buying Equipment for Your Small Business

Purchasing equipment for a new business is an important, yet often stressful part of getting ready to launch.  You may be the most confident entrepreneur out there but investing hard-earned capital into fixed assets before you even make your first sales can be a nail-biting experience.  To ensure you make the right purchases, it is essential to comparison shop and carefully assess the LTV (Long-term value) of each piece of equipment.

You have so much at stake when you consider the importance of the equipment you choose.  To help you simplify things, here are a few guidelines to help you in your buying process.  Our clients have seen great results using these 7 tips.  Some may seem simple but can really get you thinking.  If you need assistance please reach out as we would love to assist you.

1. Start with a List

Before you head out to the local supplier and start shopping, it is critical to create a list of your equipment needs and wants.  This list should be part of your business plan and something you continue to update and revise as your business grows and evolves.

The list should be broken into two columns. The first includes a rundown of the essential pieces of equipment that you must have now for basic operations. The second is a “wish list” of items that could help your business but aren’t mandatory. Start by shopping for everything on your must-have list before investing in the extras that you can get once your business is up and rolling.

2. Identify What You Should Outsource

While it may be very convenient to have one of those fancy postal machines to stamp all of your outgoing mail, could you save money and just take items to the post office?  As part of your list of needs and wants, you’ll want to identify what makes sense to outsource for financial reasons and space limitations. You may be able to get by without the industrial coffee machine (just go with the Target or Walmart special), copier or other cumbersome piece of equipment in the near term to cut down on your initial capital investment and to avoid cluttering your workspace.

3. Make a Drawing

Whether you have a salon, restaurant, office or retail business, you need to have accurate measurements of your workspace to help you make smart choices when it comes to what you’ll be buying. That photocopier with all the bells and whistles might seem like a fantastic deal in the office supply store. However, if it’s too big for your office, it’s no bargain!

Carefully measure each area where equipment will be placed and note the ideal dimensions you’ll need. A space planning tool like SmartDraw can be particularly beneficial by enabling you to digitally design your space and drag and draw furniture and fixtures that you need. Having this plan in hand when you start your equipment shopping can help you narrow down your choices and prevent costly mistakes.

4. New or Used?

In a perfect world, you’d purchase all of your business equipment new. However, this isn’t typically possible when you’re working with a limited budget. Just as you listed tasks you could potentially outsource, it is worth your time to carefully assess what you need to buy new and what can be purchased “gently used.”

Keep in mind that you can expect to find savings of at least 25 to 50 percent on used equipment. Often, you can snap up higher quality items than you expected to purchase when you venture away from new equipment dealers and start searching for bargains on used items. Don’t be afraid to go to auctions, liquidation sales, garage sales and online sites to find deals. It can be a great way to slash those initial capital expenditures that can take a significant bite out of your first year’s profits.

5. Choose Quality over Price

Of course, a seemingly good deal on a piece of equipment is no deal at all if it frequently breaks down or doesn’t serve your operational needs. While price is important in deciding what to purchase, the greater focus should be on quality and value.

When it comes to buying equipment for your business, “caveat emptor!” Let the buyer beware. If you find an incredible deal on something you need, take the time to research the model online. Often, you can find reviews on sites like ConsumerReports.org or even retailer sites where customers can provide feedback. By carefully checking out an item before you buy it, you can save yourself a lot of potential headaches down the road.

Additional considerations? You will want to factor in whether or not there is a local provider who can work on the equipment if it needs service or repair. Also, find out if parts are locally available or if they’re being shipped from across the country or overseas.

6. Just Say No to Scrimping on Your Most Important Items

When you’re looking to save on equipment, it’s easy to just go for the lowest price model. In some cases, this strategy works. However, there are those critical items that are worth spending a little extra on to avoid many potential problems.

For those in the restaurant industry, knives, ranges and pots and pans need to be able to produce quality food while withstanding heavy use. Hair salons require top-notch client chairs, lighting and cutting tools. Offices that rely heavily on computers should stick to well-established brands and avoid lesser quality PCs, printers and monitors. And, you deserve to have a high-quality office chair that supports you when you’re tackling the administrative and marketing tasks that will require you to sit at a desk.

7. A Flexible Source of Capital

If you’re like most new business owners, you probably don’t have enough in the bank to cover the cost of all of your equipment needs. Yes, there are small business loans available, but typically, these are not given to new businesses that have yet to establish a track record of success. Credit cards are another option for paying for equipment, but it’s important to consider the interest rate and how long you’ll take to pay back the amount owed.

Another option is to reach out to MCDA’s line of credit options.  We have developed a working relationship with over 30 lenders who specialize in working with small business who are just starting out.  Reach out to us today for a free analysis and we can tell you within 24-48 hours if we can get you funded.  Loans up to 150K.

Start to begin to think for yourself

I recently just facilitated a meeting for a client, it was a group brainstorming all of the factors needed to accomplish their purpose of building a stronger connection to the community.  I stood at the flip chart with one of those colorful SMELLY Sharpie flip chart markers listening and writing down so many of their thoughts and ideas.  The page was just about full and then the last statement…  “People must have their own thoughts and ideas.”  That statement had me very curious and it also needed a bit of clarity from the group.  I asked for an example of why people currently aren’t thinking for themselves. A member of the group spoke up, “When the negative voices in our business start to make noise it pulls us away from our purpose and each other… pretty soon people start believing what is the loudest rather than search for the facts.” This breakthrough led me to do some of my own research to discover an answer to the question, “How can we help people learn to think for themselves?”

My research led me to a study that was conducted a few years back by a group of University researchers.  The participants were asked to just sit in a room and think.  That sounds easy enough, right?  Researchers quickly found that the task of sitting alone to think wasn’t quite as simple as they all assumed.  The participants struggled to sit with their thoughts for a limited time of just 15 minutes.  Left in a room with nothing else but their thoughts, participants could sit quietly or choose to receive one stimulus, an electric shock. Astonishingly, 70% of the male participants and 25% of the female participants administered electric shocks to themselves, rather than taking a few minutes to think.

It appears from the research that we may be living in a world of non-thinkers. Ultimately, this deficiency leads to a population who cannot determine the difference between fact and opinion.

We all face day-to-day problems in our personal lives and in our businesses. These problems require us to think through a solution, whether it’s who to vote for, what job offer to accept, or how to deal with a negative business member.  These opportunities to make decisions should lead us to examine the facts, ask questions, seek counsel and take wise action.

If you’re someone who would rather receive an electric shock than think for yourself, then I invite you to consider these questions to start the process:

What are the facts? If someone is trying to convince you of something, then seek evidence to prove the facts being shared. Demand to be convinced and do some of your own research using reliable sources.

What do I value? (and Why?) You might be surprised to learn how many of your cultural values have been shaped by family, community, religion, schools, organizations, or employers. Write down a list of things you value as a member of those groups. Then decide whether you truly believe those values or not.

What are the opposing viewpoints? One good way to form your own opinion is to make sure you’re getting input from a lot of different viewpoints, not just one person’s opinion. Document the viewpoints, give yourself time to sort through it, and then make your own decision.

How can I resist peer pressure? If you have a lot of friends saying the same thing, resist making your decision based on peer pressure. Sometimes it’s best to not respond, because the more you do, the more others might try to convince you of their point of view.

How do my values align with this decision? Learning to think for yourself isn’t going to have much of an impact if you don’t act on what you value and believe. Once you’ve had time to think about things decide about how you’ll act and stick to it.

How do I track my progress? Keep a journal. Begin by describing a situation that is significant to you. Next, write in detail how you responded to the situation. Then, write how you will respond in the future.

If you’ve had a hard time thinking for yourself in the past, you might find that you’re swayed by other people the first few times you try. That’s okay! Changing habits of thoughts are some of the hardest habits to change. Give yourself time to learn how to resist other people’s opinions, seek out evidence and think for yourself!

Do I have you thinking now?

Build Up Trust to Build Up Your Business

Small- business owners frequently talk about and are looking for ways to build up their business.  Most often, thoughts are focused on having the right products and/or services at the right price and selling to the right target market.

I have to say, these are key elements in building a sustainable business but just as they are necessary they are not sufficient.  Without trust and reliability, those elements can make a one-time sale, and that’s about it.

So now the big question.  How do you build trust?  Trust is built by actions, words and deeds.  It cannot be bought!  As and owner you really can’t ever quantify the level of trust that a customer has for he business.

Trust starts from your internal values and principles.  Building trust is NOT in what you SAY but in what you DO.  Trust is built on having a solid product and providing ongoing fair and dependable service.  Building trust needs to go beyond just your business; you need to think about building trust in your industry.

Developing trust begins with your customers.  You also need to drill down a bit and think  about suppliers, other business owners and the financial backers.  You even need to think about the trust relationship between you as the business owner and family members.  For many of my clients I see that family members are a critical part of that small business.

Small-business owners also must remember that they need to build trust in their local communities.  Building community trust is an important factor in terms of potential customers as well as in the terms or referrals and general community support.  I have seen business get great community support via Facebook Community pages, Instagram, etc.

Here are some specific ways to build trust:

  • Do what you promise
  • Meet, or beat, the deadlines you set
  • Acknowledge a mistake and correct it
  • Be authentic in your communications (verbal, email, etc)
  • Be transparent in your actions.
  • Be visible and active in your community

Trust is important in building a business. Companies seen as trustworthy are usually the most successful.

 

Successful Debt Collection Tips

Debt collections happen in just about every operating business that I know.  They are just part of doing business, unfortunately.  With today’s tough economy, the end of the year issues, customers may be having more trouble than normal paying their debts.  When invoices aren’t getting paid, it may be time to hire a collection agency to help get the debts paid.  As in every industry there are good and bad ways to perform debt collections.  I have found that a few of these ways will increase your success.

I think on of the most important things is to be prepared.  Before you make the initial contact, make sure that you know everything you can about the customer.  Make copies of all invoices, and any other information that will help you speak to what you are trying to collect.  It makes it much more professional and personal for the customer.

Document everything!  Let me say it again, DOCUMENT EVERYTHING!  While talking to the customer about the debt, take notes about everything that was discussed, including the customers comments in case there is a future debt dispute.  Over time, continue to add any relevant notes to the file to keep it up to date.

Don’t ever assume anything.  While making that initial debt collection call, quickly make sure that the debt has in fact not been paid.  Do not alienate the customer.  Keep in mind that there may be potential future business with the customer.  The debt in question could be a mistake and not a collection problem at all.  Be careful with your tone of voice and your words.  Wait and listen, give the customer the chance to say something and be sure to document the interaction.

Be Pleasant and Control Yourself. The tone you take with your voice can impact how successful the conversation will be. If you start off the conversation with a friendly, non-confrontational tone, the customer may respond more positively. Once you have confirmed that you are speaking to the correct person about the unpaid invoice, ask if you can do anything to help. Ask if they need any additional information. If you act like you care or can understand the debtor’s side of the story, you may be able to prevent the person from becoming defensive. However, remain detached from the situation. Your job is ultimately to collect the debt in full as soon as possible.

Avoid Confrontation and Manipulation. Attempt to find out if the debtor’s excuse for not paying is legitimate. For example, if the person blames the non-payment on someone else, confirm this is true or false by contacting the other person. Listen carefully to what the person is telling you, and get a sense of whether the person is being honest with you. Often, your gut feeling will be right on.

Put a Stop to Anger or Harassment. Always try to stay calm even if the debtor becomes abusive during the contact. If this happens, you might suggest calling back later. No matter what, always listen carefully to what the customer tells you and try to keep the dialogue constructive as much as you can. It’s important to let the debtor feel he is making progress.

Give Options. If a customer is having trouble paying off debt, it might be possible for him to make payments over time. Try to work out a plan that will work for both the customer and your client. The goal is to get the customer to pay the entire debt as quickly as possible. Listen carefully and offer options until something workable is defined.

Recap the Terms. Once a payment plan has been agreed to, verbally summarize the plan for the debtor. This summary should include specifics of when the debtor will send each payment, and what form of payment will be used. Then document it in writing via email, fax or letter. Ask the debtor to call or e-mail you once a payment has been sent.

Keep Communicating. Even if the debtor can’t pay right away, it is always important to keep communications going. He may be able to pay in the future, and by talking to the debtor and really listening to what he has to say, you may be able to help him figure out a way to start paying sooner. While the older a debt becomes, the harder it is to collect, sometimes circumstances change and payment may become possible.

Debt collections are common, especially in difficult economic times. Using these collection techniques should increase your odds of success. But, if all this effort doesn’t result in getting paid, you may want to use the services of a reputable collection agency.  If you get to that point contact us for help or some referrals to some great companies.