Credit Matters Blog

NO - Perhaps the Most Profitable Word in Business

Kim Radok 10 October 2014


In a business world which thrives on the YES word, understanding why, when and how to use NO, is often a lost business art in making money. We have seen one supreme example of how to make money in modern times by saying No. The example of course is the story of Bernie Madoff.

I can fully understand why many people are horrified by using Bernie Madoff as a positive business story. After all, running a Ponzi scheme is not a recommended business for long-term business success or for avoiding jail. However not to understand Bernie's sales approach, is also to miss out on learning how to use No as a positive word in making money.

The normal case of using No, is when we are approached by a new potential customer and find out during our due diligence investigations, they are less than reliable. Our usual response in this case is to say No Credit. Of course, a good business person having said No Credit would still try and see if they could create a sale without offering credit.

The key in selling to this type of customer is to find the right strategies to motivate the customer to buy without offering credit. The two obvious strategies are (i) offer to sell on cash with an upfront discount or (ii) in part-payments which are affordable to the customer.

Another strategy is to have a third party pay for the goods or services. For example, there is the story told by Tony Mannone, who was a truly good credit manager, friend and mentor.

Tony was approached by a builder who he had dealt with previously. The builder had a terrible payment record including being made bankrupt. The builder insisted this time, because his customer was undoubted, Tony would definitely be paid. Still Tony would not sell on credit to the builder.

Tony's answer to this situation so he could make another sale was to identify the builder's customer. Once identifies as a good credit risk, Tony with the builder's permission, he approached the customer. On hearing the situation, the builder's customer agreed to purchase the product as Tony was prepared to give that customer credit.

At the end of the day, Tony said No to the builder, but Yes to a party with a vested interest and a good credit history. Therefore Tony's business made another sale, the builder got the job, and the builder's customer, had their building.

In the aforementioned situations, No does not necessarily kill the sale.

Moving forward with our discussion on how saying No can lead to greater profits, means you also have to understand an unpaid invoice leads to a bad debt. A bad debt only causes a loss. Likewise, a slow paying or high maintenance customer, also often leads to a loss or at best, a minimal profit.

Finally, saying No to an existing customer is one method of attempting to turn an existing trading relationship from a loss to a profit. Not all customers will walk away when confronted with No. If you present your case properly, you can on occasions convince the customer, there is a better way of doing business.

In summing up, No is a word worthy of use in business. To use it in the right context to grow your profits is a completely legitimate business strategy to increase your profits