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June 27, 2011 at 4:42 am #974021Up::0
Hi all – I’m back from my honeymoon and back at the desk. I’ve just been having a chat with an affiliate of mine who is struggling a little with cashflow, mainly due to many start-up businesses needing her services, but being tight on cashflow themselves.
She’s a web designer and had asked me if there was any merit in offering start-up businesses a 12-24 month direct debit payment plan to help them buy good quality websites, rather than having to settle with the very basics because that’s all they could afford at the time.
Part of the cost could also include the content being written by a professional copywriter (me!) to help maximise the efficacy of the site with consistent SEO built into the site and the copy (and with design & content dealt with at the outset, the client would only pay for what they actually need, rather than pages they ‘might’ need, or copy to fill up existing but unnecessary pages).
Because we’re both interested in offering our clients the best result for their money, I thought I’d post her question here… where there are many start-up businesses.
What are your thoughts? Would you pay more for a high-quality site if you didn’t have to pay for it all up-front? Are there any concerns you see with this kind of set-up?
I really appreciate your feedback.
Cheers,
AnnaJune 27, 2011 at 6:29 am #1065648Up::0i think it’s a great idea. i have so many business ideas that require a website that i would love to get off the ground in the near future but the prospect of having to pay $5000 or so within a month has always prevented me from doing so. i’m sure there are a number of others in the same boat.
June 27, 2011 at 6:43 am #1065649Up::0Hi Anna,
that idea may bring you more clients, but I think that you should take in considerations significant risks: it’s sad but true that many start-up businesses don’t survive for 2 years. I saw the number as high as 80% (maybe somebody can refer better stats), so the risk is really huge.
June 27, 2011 at 7:25 am #1065650Up::0Altima has it right – sad but true, start ups do fall over at an alarming rate (they don’t always fail but the reality of owning a business is sometime a huge shock for those that go into business not really understanding what a business is and they go back to paid employment) and credit terms to these businesses is a risk – however many start ups do go on and thrive and the difference is usually preperation & planning. It could work if you have your own credit policy in place and only extend terms to those start ups that have clear examples of preperation & planning. Most start ups under estimate the capital required and the time from starting until profitable and those are the ones to avoid. After all a sale is not a sale until the money is in the bank.
June 27, 2011 at 8:19 am #1065651Up::0Thanks for your response so far and some interesting comments. I’ve certainly seen my fair share of posts on this forum from people who think all they need to start a business is a good name and a product (if that!). It’s no wonder some of them can’t get things to work the way they should.
However, I can’t help but wonder if part of the reason some new businesses fail is because there’s such a huge investment with starting up which means they don’t spend what they should on marketing (including a professional web presence), which means they don’t attract the business they could, and ultimately they don’t make the profit they need to keep operating. That whole “vicious circle” thing.
Of course, it would be a big risk for us to consider, but we’re trying to come up with ways to make it easier for small businesses to get off the ground and stay afloat.
I’m sure there will be someone who will suggest starting with a basic site and adding upgrades, but I believe the problem with that is you still need to build a backend which can handle the more complex end product and ultimately that isn’t so basic (this is my understanding – but I’m no web designer, so I welcome any professional comments here).
I think yourvirtualboard might be on to something when it comes to sitting down with the potential client and checking their overall business plan. If they have sound strategies and contingency plans in place, they may be worth the risk.
Hmmmmm – will need a lot more thought.
June 27, 2011 at 10:00 am #1065652Up::0The Copy Chick, post: 81410 wrote:I think yourvirtualboard might be on to something when it comes to sitting down with the potential client and checking their overall business plan. If they have sound strategies and contingency plans in place, they may be worth the risk.Hmmmmm – will need a lot more thought.
If you start to assess client business plans you become a kind of bank or venture capitalist. Take in account that these guys have professional analysts in staff to do this job and put huge premium or keep collateral when they invest in start-ups or lend them money.
Anyway, that’s your game and all above are just my thoughts.
June 27, 2011 at 12:54 pm #1065653Up::0Hi Anna,
In my humble opinion the risks involved are too high and I speak from experience, many years ago through one of the busines’s I owned I offered a similar payment plan to our clients and found the default rate just simply outweighed any profit or client acquisition.As has been stated many small/start up Businesses fail, there are many reasons why and just one of them is payment defaulters and not putting in place systems to deal with the afore mentioned, so take a tip from some one who has tested the water, unless you have many resources and much time to evaluate the business plans etc of each and every client that wants to evail Themselves of your payment plan only to have a large percentage default then come up with another idea to attract clients.
My Thoughts now are this; If the client hasn’t allowed and planned for setup costs of a website then they will not have the capital nor cashflow to meet the requirements of a payment plan and as such would not be suitable or desirable clients.
June 27, 2011 at 2:12 pm #1065654Up::0Hi,
If you were willing to take on a bit of risk you could offer payment plans + an upfront cost.
You may seek $75 per hour for services, but only require $25 per hour to live. Calculate this requirement into percentage of job cost and get it up front and offer a payment plan for the remainder.
Not ideal, but it’s an option.
June 27, 2011 at 11:55 pm #1065655Up::0Your thoughts have really helped clarify some things and also given some great food for thought.
We see so many start-up businesses that go for a really basic site then write all the content themselves, only to see it do miserably. Most people figure they’ll “just get something up then upgrade later”, but that never seems to happen. We just really wanted to help give people the best possible start, but it’s a really difficult situation.
Again – some really helpful and insightful comments. Thank you all.
June 28, 2011 at 12:14 am #1065656Up::0Is there a way to combine a payment plan with securing the payment?
I haven’t seen it in Australia but it’s very common overseas where you use instalments to pay for pretty much everything and it is done through the credit card companies (with 0 interest)
When you pay with credit card the merchant just asks you how many instalments you want 3-12 and than it is charged to your monthly credit card account. (and you can see payment 3 of 10 etc)
I am not sure who bears the cost of interest, probably the merchant, and it depends on the amount purchased (i.e. more than $500 3 payments, more than 1000 6 payments etc)
Come to think of it, there is no interest
Not sure why this is not common in Australia, but that would make it easier for you to offer easy payments to your customers.
June 28, 2011 at 2:09 am #1065657Up::0I think it’s a great idea… in theory but, as has already been said, I would worry about businesses going broke and owing you $$$s.
What about offering a shorter plan – say three or four months? It would still help them out but would ensure you get your money back within a shorter timeframe, so there’s less likelihood of never seeing it again…
June 28, 2011 at 2:15 am #1065658Up::0Or have a staged web development program. Basic first, add another element after x months and another later again. This way they can at least get online.
Certainly spending several thousand dollars on a website for a new venture in itself needs to be thought about carefully. A lot can be done with a basic site that is added to rather than revamped, as proof of concept.
June 28, 2011 at 2:52 am #1065659Up::0nominal, post: 81487 wrote:Is there a way to combine a payment plan with securing the payment?I haven’t seen it in Australia but it’s very common overseas where you use instalments to pay for pretty much everything and it is done through the credit card companies (with 0 interest)
Thanks Nominal – I had a chat with my little buddy this morning and this was actually one of the ideas we bandied about. We’re going to meet with one of the banks to discuss it further.
@Bridie – I guess even with standard billing practices (ie. bill ‘X’ amount up-front and the remainder on completion) you still run the risk of the client not paying. We figured if you had a few clients on a payment plan it would provide a steady cashflow and it would be unlikely for them all to default at once. If you did end up with the odd customer folding, the other customers would probably help lessen the impact.Which, I suppose is probably great in theory, but there’s still that risk of putting it into practice.
@King – very valid points. Still, to get a basic site complete with professionally written copy would still be more than a basic CMS site where the client is left to supply all their own copy. It’s this complete package we’ve been considering payment plans for, although if clients only wanted a very basic site they could work that out with the web designer.Obviously this isn’t a solution for everyone, but I’m hoping it will be feasible on some level.
June 28, 2011 at 7:51 am #1065660Up::0Yes but a CMS and site design and even professionally worded copy should be quite reasonably priced. Then if they want to add an ecommerce site later, or forum, blog etc, that effectively ‘plugs-in’ as required.
June 28, 2011 at 11:06 am #1065661Up::0I offered payment plans previously and it was the worst idea ever. The clients who chose this option were always late with their payments and sometimes didn’t bother to pay at all – the longer it drags out the more they tend to change their mind or the relationship gets strained. Have a few happen in the one hit and its a huge impact. Its my biggest regret in my business because a lot of money (and valuable time) has been lost.
Coming from someone in the same industry – I would advise her to stay away from payment plans and to ensure that the front up fee is enough to cover any time spent just in case things turn pear shape.
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