According to new research, customers are becoming increasingly wary of spending beyond their means, and it's no secret that construction services can total amounts that cause your clients to flinch. So what if builders could offer a secure and responsible financial solution?
One of the biggest challenges in the building industry is avoiding the dreaded ‘bill shock’ that can leave potential new customers running for the hills. And according to new research outlined in flexigroup's 2019 Spending and Saving Report, consumers are becoming increasingly wary of spending beyond their means.
More than half the Australian respondents put off expenses such as necessary dental work because they can’t afford it, while 29 percent delayed undergoing a medical procedure. The report also revealed that customers have become smarter with their finances in recent years, with 55 percent using special techniques or tricks to stretch their dollars further.
Combine these two finds, and things aren't looking great for the building industry. Clients are demanding cheaper services and putting off essential work until they are absolutely sure that they can afford it.
So what can construction providers do? Cash or debit transactions are obviously best for the business, but they are quite clearly not always feasible for the client. Issuing invoices or offering trade accounts opens the business to the risk of late payments and a cycle of chasing remittance that diminishes goodwill from your customer relationship.
What if there was an alternative; one where the business could secure payment early while offering the client a way to pay in more palatable instalments?
Build now, pay later
One solution to the problem of payment may come from buy now, pay later payment options, which have become a popular way for retailers to offer an instalment plan to consumers. The report discovered that about 86 percent of respondents have a good understand of buy now, pay later, making it a good time to debut this option in trades and services.
Your clients have a variety of financial needs. They may be consumers undergoing home repairs or renovation, or a tradie who has their own cashflow challenges. Offering buy now, pay later removes the pressure of having to finance a large purchase and allows clients to 'build now and pay later'. Consumers can go ahead with repairs or their renovation and tradies can get on with their work and manage their cashflow better.
There are many buy now, pay later providers out there and so, as with any financial partnership, it's wise to do your due diligence on what they offer. Ask yourself:
How do they vet their clients? This should include age limits, identification, residency and employment checks as well as solvency checks.
How does the provider make money? Predatory providers have high interest rates or sting customers with substantial or unfair late fees. Responsible providers have low or no interest and they don't rely on late fees for profit.
When does the provider pay businesses? If it's at the end of the month then you may as well stick to invoicing. The next day? Toast good health to your cashflow.
Building costs can also be substantial, so choose a provider that will stretch to your price range. Many providers specialise in smaller retail purchases of a few hundred dollars, whereas in the building sector a bill of a few thousand or even tens of thousands of dollars is quite common.
Having a 'build now, pay later' option offers peace of mind to your client and makes the quote approval and payments process easier and more flexible. By providing a wider range of payment options, you'll find it will improve both your relationship with your customers and your own cashflow.
Communicate, communicate, communicate
Aside from making it physically easier to pay, it's equally important to get the consumer in the right headspace to understand the essential nature of the service you're providing. It's easy for building work to be put off if a consumer can't fully appreciate the importance of the work.
Communicate this well, including explaining the implications of delaying building work. Try using illustrations and visual aids, and make comparisons with other important maintenance that they need in life, such as their health. This is all part of helping them make an informed decision, rather than a decision based on cost alone.
Once all the barriers to purchase are removed, the customer will no longer be able to put hiring the services of a builder at the bottom of their to-do list. The key is to make the decision no longer feel like a difficult one, but rather a natural and obvious step. With the help of clear communication and flexible payment options, the building industry can begin to make this the norm.
Libby Minogue is the Chief Revenue Officer at flexigroup, the pioneer of buy now, pay later in Australia, and the engine behind humm. Humm offers consumers access to responsible buy now, pay later for purchases with partner retailers from $1 to $30,000.
Image: Jordan Rowland via Unsplash.com