In January 2017 I implemented some changes to the way I was operating my business, particularly how money was to be handled.
Partly out of necessity, partly to optimize, and partly as an experiment. I had been doing business the same way for the previous 13 years and I was in a rut. Time for a shake up.
After nearly 2 years I can now look back and see if those changes stuck and how they affected my business.
The first financial change I implemented was...
0I stopped taking large deposits.
This was a HUGE shift for me and it required about 6 months of trying to change some deeply ingrained paradigms. For example...How can I risk using my money to buy paint for prospects who have not fully committed to me for their project? How can I run a business without healthy cash flow? How can I assume all the financial risk, when I was used to sharing the risk equally with my clients? How can I run a schedule with multiple clients, projects and workers, when clients could change their mind at any time?
The answer to most of those concerns was to simply Let Go. I had to stop viewing deposits as security and start viewing them as a liability. I could limit my exposure in different ways, without needing to lock down large retainers.
This single adjustment affected my business in several ways:
1. It brought my business practices into compliance with our provincial consumer protection regulations, which stipulate that a business without a retail store front cannot obtain a deposit greater than $100.
2. It surprisingly reduced my stress. Having several large deposits used to help me feel secure that there was work guaranteed for the short term and that cash was flowing. But eventually all those deposits represented a selling off of my freedom and flexibility. It also weighed on me as a debt that I was solely responsible to unload.
3. It removed a false sense of security. If a customer raises a big enough stink they can almost force you to return their deposit, for any reason they choose, using a variety of tactics. This can affect your stress, your reputation, your sleep, your thoughts, etc. The best security is a balanced relationship with the flexibility to walk away if necessary without owing anyone anything. Life happens. Keep it light enough to travel.
4. It freed me from the risk and time associated with consulting on colours and purchasing paint for customers. (More on that in a coming blog post...)
5. It helped me to transition into a faster cash flow situation. (More to come...)
6. It helped me to reduce risk exposure for my clients and for my business.
The transition was challenging at first, especially as I implemented it in the dead of winter. I had to make other changes at the same time to make this one work. (I'll discuss those in future articles).
It is amazing how one change can have a ripple effect and gradually lead to a whole new way of doing things. Change can be disorienting, so most of us try to avoid it when it is not necessary. But if change becomes necessary, we can view it as an opportunity rather than a threat. It can be a good thought exercise for your business to ask yourself, What would happen if I did this differently? Or the opposite of how I do it now?
So I now only charge a deposit for jobs worth over $1000, if I think I can get to them within a month. Beyond that range, or for smaller jobs, I do not accept deposits. The flexibility has been refreshing.