The Margin Manifesto, Part I

5 thoughts on “The Margin Manifesto, Part I”

  1. Net-30 is a common practice which is used by corporate and government (at least here in israel), it means that the customer who buy a service/product pays you 30 days after delivery.
    Usually it is a Net-30 or a Net-60, with governement it is a Net-120 usually and sometimes i heard stories about Net-120 becoming Net-365.
    It usually put you out of business and it is really harmful for your business to keep track of these business, one question remain, what happens if the business you delivered a product to cannot pay you?

    Anyway a nice anecdote, here in israel everyone use this Net-60 practice, the only one business who doesnt allow Net-60 are coca cola who works with business, they not only takes check the very same day they deliver the products to your stores but if you had problem paying in the past, they will allow you to pay only using cash if not you wont be able to get from them any product.

    That’s called monopoly and it works great for them.

    thats classy story for what timothy tried to explain, the customer wants coca cola, which is why a restaurant cannot afford to not have coca cola and they know this which is why they dictate their terms, Net-0

    hope that cleared it for you vineet.}

  2. Adam, thank you very much for helping out. Interestingly enough, the only “company” that always paid me on-time, even early (and they do require terms) was the US government and military!

    As a side note, the volume that some distributors can offer is seductive, but be careful. QVC or Walmart may be able to move 20,000 units in one day, but they are also able to order 20,000 units on net-120 and then return them all for a refund.

    Cheers,

    Tim}

  3. As a startup you definitely cannot run your business with such terms.
    i’ve taken an advice from some wise man who told me that from day one you should focus on getting revenue for your startup.
    We started 7 months ago with a huge idea for a startup, 4 months later we began doing individual projects who basically give us enough “air” for the next 6 months. That gives me enough time and peace to find the right angels or VCs to invest in us, my dream is to develop everything inhouse and maybe take money just to scale it and market it.
    That will be done at my terms and usually when im not stressed.
    By the way, since our clients works only with net-60, i usually impose them to pay a 40% upfront and the rest of the money Net-30, i tell them that’s our company policy which happened to be written by me.}

  4. I’m not sure you can make blanket statements about payment terms, however appealing the theory of net zero may be. For example, one of my other business interests is a magazine (yup, good old-fashioned print). We’ve been successful at capturing a large number of national / international brands, almost all through their media buying agencies. We hold firm on the ad rates, but like it or not there is no room to negotiate payment terms. Almost without exception they pay after printing, and only then when their clients have paid them. If we were to mandate net zero, we’d get, well, $0…

    It also depends what you’re giving up. Let’s say you’re offering the customer more convenience and a better price, then mandating net zero may work just fine. But you have to be careful if you’re already asking them to change other behaviors, particularly if you’re selling to cautious business customers. Too many paradigm shifts and they simply won’t buy}

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