Part 1:
Refunds

No matter the specifics of a business, there is going to be a percentage of customers and clients that buy who ultimately turn out not to be the right fit.

This could be because your marketing and sales process targets a bit too broadly, overpromises in some area, or fails to properly disqualify people. 

It could also be because your sales team was hyper focused on hitting a revenue goal and sold someone even though they were an imperfect fit.

In most of these cases, you would have been better off never selling the client in the first place. 

Not only did it cost some team member(s) a chunk of time and energy, there likely are ancillary costs that the business has to eat in the process, like transaction fees or paying for the client’s a seat in some SaaS tool(s) in your tech stack.

Here are two simple ways to mitigate this risk and create a better experience for everyone involved:

(1) Compensate your sales and fulfillment teams based on deals they sell and support to completion. 

This can help give them added motivation to serve clients at the highest level and will incentivize them to go to further extents to save deals when they aren’t doing well or a refund has been requested.

(2) Give clients an active communication channel to someone on your team alongside regular opportunities to directly share questions or concerns.

In many cases, an unhappy client can be avoided by catching things when they are fresh (and often minor). Sadly small things often become big things when they go unresolved and begin to fester.

Part 2:
Payment Plans

Similar to guarantees, payment plans are a popular (and effective) technique in the marketing and sales process to help convert a higher percentage of interested prospects into paying customers. 

While they both help close more deals, they also do come with hidden costs.

One drawback is that they both can, consciously or subconsciously, reduce the level of commitment and investment someone makes emotionally, energetically, and financially. 

This lays the groundwork for a future refund request or non-completion of their full payment plan directly at the point of sale.

It is worth tracking this to discover what the breakdown is in your business, but a good rule of thumb we’ve seen with payment plans is that:

You will collect about 50% of the “accounts receivable” dollars on time and with no problems

You will collect about 25% if you are diligent about following up with people after they miss a payment.

And you will never collect about 25% of the “booked revenue.” 

For payment plans, not only are there additional costs associated with processing multiple transactions instead of one and added costs associated with accounting and follow up tasks… 

But also the dollars that do get collected will be worth less in the future than they are today due to inflation & interim opportunity costs. 

While each of these individual costs may feel trivial, they combine to nickel and dime their way to being a 5-10%+ overall tax on the revenue generated. 

If you can offer some discount or bonus to incentivize people to pay in full or charge a higher sum total across the payments to disincentivize people from the payment plan — it is likely worth doing when you consider all the factors at play.

Do that and you can help position your business to come out ahead no matter what payment option a client or customer chooses.

Part 3:
Offer Structures

Most businesses have tendencies to do things like:

– Add more features and components to offers but not remove any

– Add more available offers and services but not sunset any

– Say yes to opportunities if it feels right or the money is good

Nothing is wrong with any of these things in a vacuum, but as a business grows, these things can become silent killers. 

Too many features or components can confuse or overwhelm buyers who typically have one or two core things they want out of a solution. 

Too many offers can lead to the lower ticket or lower profit margin things you sell cannibalize sales from your best offers.

And if you are a small, entrepreneurial operation it becomes tempting to say yes to money when it is available even if it is an imperfect fit.

Short term cash needs overwhelm long term alignment and strategic decision making.

More often than not, these short term decisions come with hidden costs.

Doing things that are not in alignment just because they bring in revenue is a major hidden liability in your business. 

It is important to realize that not all revenue is created equal. 

Use this as a reminder to stay ruthlessly focused. Your future self will thank you.