Weiss Advice Issue: 184, January, 2019
I was working with the owner of a small training firm who told me that he had to take his bankers to his safety deposit box and show them the masters of his proprietary educational materials, in order to convince them that he had the collateral necessary for a loan to expand his business. Apparently, the bankers looked the material over, mumbled something about “off-balance-sheet assets,” and granted him the loan.
All businesses have such assets, ranging from good will to repute, from location to positioning. But perhaps the strongest such “off-balance-sheet asset” is also the simplest: the guarantee of your word.
A few years ago, I leased some equipment from a local store. I prefer to work with local people, even if the expense is greater than the internet and large “super stores,” because the attention is better and the responsiveness is usually faster. In this case, both a salesman and the sales manager, Sam, came to see me, gave me a great deal, were pleasant to work with, and I signed on for a year’s lease.
About a month after the equipment arrived, I was called by the store with a special offer to purchase supplies. I explained that the supplies were included in my lease arrangements, but the representative told me that the lease didn’t have any such indication. She connected me with the store owner. The owner told me that the sales person and sales manager who dealt with me were both on vacation, but that it was unlikely they had made such a deal. I asked if he thought I were lying or trying to pull a fast one. “Even if they made that deal, I’m not sure I’d support it. We’d be giving away too much,” he said, and, in any case, we’d have to wait a week for their return. And, maybe I was a liar.
The sales manager returned and promptly set things straight. His word was good, the lease was drawn incorrectly, and he told his boss that he could either back this up or that he, Sam, would arrange to have supplies shipped for free in some other fashion. The boss relented.
Sam left for a better job a year or so later, and when my lease was up, despite the pleadings of the new sales manager and letters from the owner, I abandoned that place as it if were on fire. I don’t mind high prices in return for quality, and I don’t mind mistakes honestly made. But I’m incensed when people don’t back up an agreement, and don’t treat the promises of their honest people as if they were their own.
My dry cleaner never questions me when I have to return a shirt that was stained by her equipment or pressed incorrectly. She makes good immediately. In return, I realize that mistakes can happen, patronize her solely, and don’t even know if her prices are high or not. If I tell my printer that a color is off or some text mis-registered, he prints the piece again. He might not make a profit on that occasion, but he’s had me as a customer for nearly 20 years. Both the cleaner and the printer also know that I pay promptly every time, and I gladly refer others to them.
Nothing encourages repeat business and referrals as much as basic trust, and trust is engendered best when the owner or principal can deal directly with the public, which is impossible in huge operations. To throw this wonderful asset away by not standing behind your word is no different from allowing your inventory to become outdated, ruined, and worthless. To exploit this asset:
- Hire good people and support them. A promise from them should be the same as a promise from you.
- Stress that an oral agreement is as good as a written one. “Did you get that in writing?” is an insulting question which implies that your customer is a liar.
- Err on the side of giving too much. You’re in this for long-term, repeat business and referrals. Don’t be blinded by a short-term reduction in your margin.
- Don’t give promises freely, as if they were bargaining chips. When you say something will be ready Tuesday, or replaced without question, or delivered at the customer’s convenience, deliver on that promise. Promises are meant to be kept. Just like customers.
Your word is an off-balance sheet asset. Don’t lose it.