Home October 2019 Why I don’t offer store credit

Why I don’t offer store credit

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Why I don’t offer store credit

I started my career in this industry as a deck builder. Like a lot of folks who get into construction, I came from a modest upbringing. My parents didn’t have a lot of money and they taught me early on that credit wasn’t always a good way to do business. The more I’ve grown my company, the more I’ve let my personal values guide the business decisions that I make.

One of the reasons I first founded The Deck Store years ago is because local lumberyards wanted me to use their in-house credit lines, and I preferred not to. I had an established relationship with my credit card company and I preferred to use the card and manage my own rewards while paying it off monthly. This also allowed me to take my credit card to other businesses when needed and didn’t hold me down to one store’s line of credit. As my business grew, the benefits of using a credit card and paying it regularly grew as well.

I know I’m aging myself by saying this, but back before I owned my own lumberyard, I had to encourage the lumberyards in my area to accept credit cards, and explain to them why it was valuable. Ultimately, the forced use of company lines of credit is what pushed me to open my own lumberyard.

Of course, not every deck builder can obtain their own credit card, so I did relent in the early days and offer a couple of people store credit. I learned quickly to never do it again. They had to be constantly reminded to pay their bill, and when they did pay it, they eventually ended up using a credit card or a bank line of credit to pay it. Well, why didn’t they just do that in the first place? It would have saved us both a lot of hassle. In the end, I came away with a new appreciation for cash flow, and a solid understanding of lien rights.

Since that time, companies have come in and offered us third-party contractor financing, and I’ve looked into it, but I’ve found that some of my customers didn’t qualify for the program. Again, that tells me that the best bet for my business is to recommend customers use credit cards. The fees really aren’t that bad, I get paid instantly, and they’re in charge of earning and managing their credit card rewards programs.

At the end of the day, we’re just trying to exchange building materials for money. The easiest, least time-consuming manner that I have found to do that is through credit cards.

Educate your customers on credit

Here’s the one single thing I’ve found that will get a builder to purchase more of your products without you having to risk extending them a line of credit to do so. Frankly, I don’t want to sell products to someone who really shouldn’t be buying them, or is in danger of not being able to pay for them. I deal primarily with decks, which are a luxury item to most people, yet I’m still surprised at the amount of contractors and homeowners who are willing to go into debt to make the decks happen.

What I’ve learned is that instead of just saying that I won’t offer credit and let a customer walk out, I give them other options. As my Office Manager Lisha Mathews says, I really try to be a mentor to younger deck builders. Together, she and I explain to them how they can make a purchase on a credit card and then work with them on how they can sell a deck project, and obtain payment on that project in 25% increments. By doing so, they should be able to take the money from the down payment and use that to pay for materials when they’re delivered. By teaching them how to sell a deck in increments that allows them to afford to pay their suppliers, they learn how to stay ahead of the game and by the time the 25% comes due at the end of the project, that becomes clear and free profit. It’s the most basic of business plans that I think any good contractor should know or keep a copy of in the glove box of his truck