Bethany Newman | Crain's Nashville

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Bethany Newman

Background:  

As an established boutique brand agency located in Nashville, ST8MNT has partnered with brands spanning a wide array of industries, including Bonnaroo Music and Arts Festival, Goo Goo Cluster, Bread & Company and Nossi College of Art. The 13-year-old company has been honored consistently for its design-centric work.

The Mistake:

I'm extremely operations-minded. Starting off, we had a lot of organic growth, and I was just following what I knew to be normal business practice.

A lot of businesses run on payment terms like net-30 and billing once services are rendered. This is what we did for several years as we grew bigger and bigger, until one day when it bit me in the butt.

At the same time, I wasn't being entirely legal, so to speak. I wasn't making people sign a lot of contracts. I just thought that they had accepted quotes and we'd move forward with the work and bill when complete.

In one year, I had two big clients totally stiff us. It was an eye-opener. I needed to make sure that everyone signed a client agreement, and I started to look into why we had to wait until project completion for billing. When it happens to you the first time, you think, "How can I be so stupid?"

I started to talk to a lot of business owners in many different spaces and realized that there were a lot of pros to getting something up front. It not only covers your hard-labor costs, but at the same time, it puts skin in the game. Projects don't just table out forever. Then you're never left with this huge invoice that you have to chase.

At the end of the day, it's pretty hard to go after what you don't get paid. I went after them myself, and then I had a collections agency go after them. With one of them in particular, I still have a collection agency going after them.

When it happens to you the first time, you think, "How can I be so stupid"?

The Lesson:

When you grow quickly, some of those business ops things like getting good agreements in place and taking things to the next level are hard to do when you're running the business.

It really got us smarter about terms and contracts. It keeps cash flow going for a business. Now when I talk to others in this industry, we talk about different ways of changing payment terms to fine-tune risk and cash flow.

One of the companies that stiffed us seemed to be a very legitimate business, and that shocked me. They had been recommended by someone else that we trusted. It wasn't even the kind of thing that you would questioned. It could literally be any company.

It happens all the time to other people, where maybe a company gets acquired or goes out of business that had every intention of paying. It's not always a nefarious thing; you just really have no idea.

As much as you are friendly and relational with clients, at the same time you have to protect your business. Though it might not always seem polite to say that we won't start the work until we receive a check, there's a reason why you need to do that and follow procedure in these cases. It made me a little harder.

Follow Bethany Newman on Twitter at @BethanyBNewman 

Pictured: Bethany Newman | Photo courtesy of The Bradford Group.

 

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