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Collection Problem? No. Sales Problem

“The sale isn’t complete until the last dollar is collected.”

 This wisdom is imparted to all new salespeople on Day One of their selling career. If you struggle to collect what you bill, you have a sales problem. The collection problem is merely a symptom, and a consequence, of the underlying sales problem.

When you don’t get paid, you’ve donated your service. If you can’t collect the full amount, your client has taken a discount that you didn’t agree to.

The collection problem is merely a symptom of the underlying sales problem...

Why doesn’t a client pay your bill, in full, on time?

Only Two Reasons for Non-Payment

There are only two reasons:

  • They can’t
  • They won’t

If they’re in serious financial distress, there may not be a lot you can do about it. This article isn’t about “can’t.”

Won’t Pay

The “won’t” condition is what collections are about. Why does a client with enough means decide not to pay your bill? There are countless explanations, but they all derive from the same root cause:

The client doesn’t perceive that he received enough value for the amount he’s being charged.

Many lawyers react to that statement defensively, dragging out detailed time sheets proving that they worked the number of hours billed. They’re missing the point entirely. The client rarely thinks that you’re inflating your hours. How much time you spent isn’t the issue. It’s what they got—or didn’t get—out of the time you spent.

Establish Value Up Front

Arguing value after the fact is extremely difficult and rarely successful. You must establish value up front. The important value isn’t your time; it’s the imputed economic value of the business outcome and impact you enable or deliver.

A Practical Example

Your daughter is trying to get into an Ivy League school. She has the grades, but so do lots of other applicants. You learn that the difference between getting in and not is how extracurricular activities are presented. (I don’t know this to be an actual criterion; it’s just an illustration.) A consultant with a track record of getting a much higher acceptance rate for his Ivy League applicants will help you raise your daughter’s odds of getting in, for which he’ll charge $5,000.

Right now, you’re thinking, “$5,000 is a lot of money. Is it worth it?”

Is it worth $5,000? Well, compared to what? Compared to something fuzzy and abstract, i.e., “raising the odds of acceptance,” maybe not. That’s hard to evaluate.

What if that same consultant were to elicit from you your reasons why it’s important to your daughter and you that she gain Ivy League admission. You might mention:

  • studies suggesting a 39% earnings differential (Ivy over others);
  • the name recognition that you believe moves Ivy resumes to the top of the hiring interview stack;
  • networking and other connections that you believe will open doors and pave the way for access denied non-Ivies;
  • the realization of a goal your daughter has worked toward since middle school, etc.

Selling Yourself on the Value

This conversation gets you selling yourself on the many specific forms of value of Ivy admission and, therefore, the value of the consultant’s service. (We’re assuming for this example that you’ve satisfied yourself that the consultant can deliver.) This is known as defining the Cost of Doing Nothing. In this case, it’s the cost of not retaining the consultant.

Remember, the cost of doing something has already been established at $5,000. What’s the cost of doing nothing?

If it’s low, that’s what you’ll do—nothing. Many sales are lost for this reason. You don’t lose to a competitor; you lose to doing nothing.

Expressed as Dollars

All this elicitation of impact factors is necessary, but not enough.

For the value comparison to work, both cost and benefit must be expressed in the same form—dollars.

The adept consultant will walk you through a simple conversational process that makes it easy for you to express the value of the desired outcome—Ivy League admission—in dollar terms. It’s rare for such expressions not to be many multiples of the cost of obtaining them, which results in the consultant’s fee representing a return on investment rather than a cost.

At that moment, the burden of justification shifts from the seller to the buyer.

Instead of the seller having to justify you buying, you’ve put yourself in the position of having to justify not buying in the face of all the value declarations you made.

I realize this is a facile example. However, the point is that unless you explore with the client the specific, practical ramifications of the problem you’re solving, and get the client to express that in dollars, you’re vulnerable to “buyer’s remorse.”

“At the time we began this lawsuit, it seemed worth it. I just couldn’t allow Company X to copy our product so closely. Now, we’ve stopped them. But how could it possibly have cost $90,000? There’s no way legal fees should have cost $90,000.”

After the fact, nobody remembers saying, “I don’t care if it costs me everything I own, I’m not letting them get away with this.” If the $90,000 cost remains the only hard number in the equation, you’ll definitely have a problem making the sale, and probably have a problem collecting your fee.

Make the sale in a disciplined way, achieve a benefit/cost equation with hard numbers on both sides, and collection problems based on “won’t” will disappear.

Mike O'Horo

Mike O'Horo is a serial innovator in the law business. His current venture, RainmakerVT, is the world's first interactive online rainmaking training for lawyers, by which lawyers learn how to attract the right kind of clients without leaving their desks. For 20 years, Mike has been known by lawyers everywhere as The Coach. He trained more than 7000 of them, generating $1.5 billion in new business. Mike can be reached at mikeohoro@rainmakervt.com

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About the Author: Mike O'Horo is a serial innovator in the law business. His current venture, RainmakerVT, is the world's first interactive online rainmaking training for lawyers, by which lawyers learn how to attract the right kind of clients without leaving their desks. For 20 years, Mike has been known by lawyers everywhere as The Coach. He trained more than 7000 of them, generating $1.5 billion in new business. Mike can be reached at mikeohoro@rainmakervt.com

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