Monday, October 1, 2007

Setting Your Terms

Setting terms is an important element of wholesale business. Whether you do wholesale shows or not, you still need to have terms...and stick to them! There really are two facets to this issue. Deciding what your terms are, and then how you live them. This part can applies to far more than how we run our business...I will explain more later.

Let's start with the definitions. What are terms? How do you decide what they should be? Terms are the conditions under which you do business. They cover things like minimum order size, payment, returns, and delivery schedule. There are norms of one sort or another that can serve as a guideline. But in the end, it is your decision what your terms will be. Let's look at them one at a time.

1. Minimums. Why do you need a minium? First off, it can serve as a screen. It filters out the person who likes your work and has a resale certificate, and hopes to get a bargain. You want to make sure you are dealing with a retailer who is buying your work because they like it and think it will sell well in their place of business. Minimums can be based on a dollar amount, or a quantity.....or both. I started out with a minimum of $100 and/or six items. Since a few items I sell wholesale for more than $100 it was important to have the quantity minimum too. A grouping or collection of work is more likely to generate interest in your work and adequately represent your work. Over time I have raised my minimum to $250, and/or twelve items. This is still low by some artists standards, and a few shops will not buy from me because it is too high for them.

Why have a low or high minimum? Part of it is how much risk there might be seen in carrying your work. A low minimum might encourage someone to try out your work when you are relatively new to wholesale. But a low minimum can mean more work for you. More orders, more paperwork, and packages for the same amount of sales. It is one of those balances that you need to check in with from time to time to figure out if you need to make any adjustments.

2. Payment terms. This is where the "greek" comes in for those new to wholesale and with little or no business background. Net 30 is the term you are most likely to hear thrown about. What in the world is Net 30?

Net 30 means that the buyer has 30 days to pay their invoice, with no interest or penalty. As a general rule, do not extend these terms to a buyer without first getting credit references. And when they supply those them! Really. Call. Tell them you are working with XYZ Gallery, and they provided their name as a credit reference. Usually they will tell you they are a great company to work with, and have never had any problem getting paid. But it has happened that people call the references and don't hear that. Don't assume just because they provided the names and numbers it is all rosy.

One other form of payment, which I do not accept is C.O.D. I do not accept it because I have heard too many horror stories about artists paying to ship something C.O.D., which is more expensive, and the buyer refusing the shipment on the other end. So the artist then has to pay for the return shipment as well. They have work which they spent time and money creating, they paid extra to ship it, and then no sale. If someone cannot pay by check or credit card, then they are not someone I care to do business with.

What are my payment terms? Prepay on the first order by check or credit card, and Net 30 after that with references. Most people pay by credit card on the first order, and on all the following orders. I have occassionally given someone Net 30 on a first order when I have plenty of time to get and check references before the order ships. I have not had a problem with slow payments. I had one case where someone honestly thought she had already paid by credit card, and when I called the check was in the mail that day. People do make mistakes and slip up. It is when there is a pattern of this that you need to watch out for.

On there is a place where member artists can report your experiences with a buyer, and likewise check a buyer. It is a great way to make sure something has not changed with a buyer. A negative report does not mean bad news all the time. I have seen a buyer have one negative and five positive reports. The negative in context was not a problem. But if the negative was recent, and the buyer was difficult to reach and work with....that could be a warning flag.

Setting and sticking to payment terms can be a tough issue for many artists. We don't want to have to deal with this. But we have to. It is essential that we protect the interests of our business. Do your suppliers give you terms? Or do you have to pay for everything up front? Figure out terms that work for you and your business.

3. Returns and exchanges. Do you take returns? Or, will you exchange your work? Again, this is a decision you need to make based on what feels right for you. I take returns for full credit within two weeks. I figure if they get something, and then decide they made a mistake, that it was not going to work for them, they can ship it right back. No big deal. It has never happened. But it does give people a degree of comfort to know they have that option. I will exchange work for up to 6 months. At least my terms specify this time period. But I find this is one issue that needs to be decided on a case by case basis. If someone has a few pieces that just are not moving, I would rather take them back and send them new work that will sell better. And, they will usually order new work along with the exchange. Otherwise, each time they look at that work it is a reminder that it is not selling well. Is that what you want someone thinking each time they see your work in their store? On the other hand, you do not want someone to send you back shop worn merchandise a year or two later, and expect a full refund in return. Some may try. It does not mean you have to agree.

4. Delivery. When will you deliver the product to the customer? This is usually a bit of a negotiation between when you can deliver, and when they want to receive the work. Many buyers will want to get your work in their hands as soon as possible, but sometimes, they want to postpone delivery. I always make sure and clarify this issue at the time I receive an order.

5. You. Yes, you. Can you set your terms and enforce them? Too many artists have let themselves be bullied or intimidated by the occasional buyer who knows, or thinks, they can get away with it. I have read far too many sad stories on forums. Set your terms, and stick to them. Or if you vary, don't do it without fully weighing the consequences of a possible bad outcome.

As I considered this issue this morning, I realized how this extends far beyond how we run our businesses. Do you set the terms and conditions in your life? Or do you react to everyone else's demands? Life requires compromise and negotiation, but if you are the person who is always adapting to the demands of others, can you ever reach your goals? It is easy to forget about our own needs and goals if we are not making ourselves enough of a priority. And I am willing to bet, that if you have trouble with this in everyday life, it will be a problem in your business.

In business, and in life, we have to have some terms and conditions. And we have to be able to communicate them and make sure that when we let go of them, we do it with full consciousness and awareness of the consequences. We can't complain about the problem customer, or the fact that we have no time in our life for making our art,.....if we have allowed the situation to happen through our behavior. If we don't set the terms, others will. And we may not be happy with the outcome.

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