The Small Biz Buy-Back

A buy-back is that critical moment, impossible to anticipate, when your favorite bartender rewards your patronage with a round “on the house.”

Cynics (and bar owners) dismiss it as an underhanded way for bartenders to earn tips at the expense of the tap, but patrons know otherwise. It’s an “in,” and it feels good. Highly personal business relationships always benefit from highly personal rewards, and bartenders are better-acquainted with this rule of thumb than most.

If you’re in the creative services industry, the buy-back is a great lesson in how to build customer loyalty. Rather than discount your pricing, loyalty-based buy-back -- in the form of free goods or add-ons -- encourage repeat business and foster goodwill.

Deep discounts seem like a quick fix. But quick fixes don’t build relationships. And in the creative services industry, relationships are everything.

"Free, not cheap" and market saturation
I co-founded Well Versed Creative in 2009 as a streamlined way to provide front-end web design, graphics and content to other small-business owners; services my husband and I had been offering independently for years. It made sense to join forces and offer them in package form to better serve clients -- or so we thought.

While our micro-overhead, allows us to provide our services at a reasonable cost, the market is increasingly saturated by cheap services and spec work. It’s a business nightmare.

So  how in the world do we ever make money? The answer is trite but true: relationship-building, which leads to qualified referrals and positive word-of-mouth.

After a fitful year one, during which we tried many approaches to price-based rewards, we now have an official mantra: "We'll work for free, but not for cheap."

Before any enterprising young designers and writers gasp in agony, let me explain what I mean by "free." We will do barter or do pro bono work, providing we believe in the project and its potential to build goodwill and plump our portfolio.

More importantly, we’ll do buy-backs. That is, we will absorb the cost of goods sold for small or one-off goods, like a small print run of business cards, to earn a client’s trust and reward them for timely payments and positive attitudes.

How it works
A typical Well Versed Creative buy-back program includes a complimentary small print run of envelopes or business cards, designed by us. The cost is perhaps $50 or even $100, but the client's worth to me -- demonstrated by timely payment, volume of referrals, or lifetime value -- is easily 10 to 50 times that amount.

We also only do buy-backs on items that are part of a suite of services, so from a strict cash-flow perspective, we can absorb the hit with no real-time cost to the business bottom line.

Notably, the buy-back still goes on the invoice -- but you'll see its unit cost crossed out, or a zero next to the estimated line price. That way, my client knows what I’m up to -- and comes back for more.

Why spec work and discounts fail
Except in the pro bono or buy-back scenarios, truly "free" is a no-no. I stand with AIGA on this as an ethical matter. Free, spec-based work, whether it's a crowd-sourced competition or a promise of possible new business, always creates a tenuous, unhappy relationship -- on both sides.

Discounts don’t work either, because clients calculate them in advance -- they don’t plan or want to spend more. They’re hiring you because of your pricing, not your value, and this is deadly. Providing a service for cheap can do major damage to a service-based business' reputation.

Besides, the payout is low. All you get is a brief surge of multiple projects at an unsustainably low hourly price -- and a horde of new customers who won't return. That’s a price I’m just not willing to pay; neither should you.

Transparency and value vs. cost
Clients love an unexpected reward. They get to enjoy a tangible free thing, something they expected to pay for. The novelty builds loyalty, and it builds confidence too. Although small creative firms or solopreneurs can have trouble making collections, being overly pushy is a recipe for disaster.

Trust and confidence, on the other hand, can make payment collection nearly pain-free.

In the end, it comes down to transparency. A buy-back is not a free beer. It's a friendly, direct way to cultivate relationships with people you want in your network, those who generate leads or business or both.

For us, well into year two and going strong, buy-backs are a fool-proof loyalty program, no paperwork required. And the effect on our bottom line is encouraging indeed.

Lindsey Donner is a copywriter, editor, poet, and committed multi-tasker who graduated magna cum laude from NYU-Gallatin in 2006. She co-founded Well Versed Creative, a consultancy that partners with bloggers, authors, and small business owners to produce best-in-class copy, design and front-end web development--without agency overhead, attitude, or pablum.

The Young Entrepreneur Council (Y.E.C.)The Young Entrepreneur Council (Y.E.C.) provides its members with access to tools, mentoring, community and educational resources that support each stage of their business’s development and growth. Our organization promotes entrepreneurship as a solution to youth unemployment and underemployment.

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