While a lot of business owners can easily dismiss the option of extending credit and terms -- for fear of delayed or default payments from their customers -- there are those who opt to travel the opposite route.
Because you’re reading this article, I’m guessing that you’re probably at a crossroads right now.
Am I right?
Are you considering the option of extending a revolving line of credit to your customers but you're unsure if that’s a good decision?
Well, allow me to share the benefits associated with extending credit and terms to your business customers.
At this point, let's focus on the benefits that you can reap from extending credit and terms to your business customers.
Let’s hop right in.
1. Increase your CLV (customer lifetime value).
It costs 4-5 times as much to win new over a new customer compared to gaining repeat purchases from existing ones. The figure gives us a clear perspective as to why there is a need to nurture our relationships with our existing customers.
The thing is, most businesses are tunnel visioned about bringing in new customers that they forget to nurture their current relationships. Sadly, their existing customers end up leaving.
Don’t make the same mistake.
You’d be burning truckloads of money if you fall into the same mistake.
The good news is it isn't difficult to nurture your existing customer relationships. By simply extending them credit, you’re practically showing that you value them and that they are important to you.
Just by doing that one trick -- extending them credit -- you’d be able to increase your customer lifetime value.
2. Skyrocket your sales.
If you’re giving your customers a flexible payment option, you increase the chances of getting repeat orders.
I’m sure there were situations in the past where you would have bought more from a store if you had the resources to do so. Because you didn’t have enough money at that time, however, you end up buying less than planned.
Now imagine what would have happened if the store owner extended you credit. You likely would have ordered more and paid for them on or before the time that you both agreed upon, right? When scenarios like this occur, it results in a win-win situation. You get the necessary products, and the business owner gains a loyal customer.
At the end of the day, we need to realize that when we give our customers flexibility on when and how they pay, they’ll end up ordering more knowing they have more than enough time to pay for their orders.
3. Gain an unfair advantage over your competitors.
Here’s a question: If you extended credit to your customers and your competitors do not, who do you think your customers will choose to do business with?
The answer is pretty obvious.
Extending credit to your customers gives them payment flexibility. Business owners appreciate the availability of credit and terms with preferred vendors. It offers greater flexibility to grow their business and create lasting relationships.
4. Build long-term relationships with your customers.
When you’re offering credit to your customers, you convey all sorts of messages about your company.
You also build trust. After all, if you didn’t trust them, then there’s no way you’d extend them credit.
Trust, as we all know it, is a must-have component when building long-lasting relationships (may it be personal or professional). The fact that you’re showing customer trust by extending them credit can easily pave the way for a long-term business relationship proving to be profitable for both you and them.
Have you been extending credit to your customers? If you answered “yes,” how have you managed that process? Is it adding overhead, increasing risk and ruining cashflow? We are here to help!