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How to Assess Whether Offering Afterpay is Right for Your Business

04/26/23 | Dana LaRieal Morales

On today's episode, I tackle a user's question about whether solopreneurs should incorporate Afterpay into their businesses. As with most business-related queries, there is no one definitive answer that applies to all situations. However, I offer my perspective on the matter, along with several considerations that you should bear in mind while making your own decision. 

When contemplating the decision to offer Afterpay as a payment option in your business, it's crucial to assess factors such as:

  • the cost to you; 
  • the level of risk involved; 
  • the demand from your customers; 
  • the competition; 
  • and the overall advantages. 

Ultimately, your decision should be based on a thorough evaluation of these and other relevant factors, some of which we discuss during today's episode.

Should You Offer AfterPay or Similar Services In Your Business?

Have you heard of AfterPay? It's a service that lets you receive a product and pay for it over time. But did you know that it's essentially a loan? Just like when you buy furniture from a store and get a loan with that company. Now, you might be wondering what the problem is. After all, loans are a common way of financing purchases. But should you be using this type of service in your business? So I am answering this from my point of view specifically for side hustlers and solopreneurs.

First, let's talk a bit more about AfterPay and similar services. They work by allowing you to split the cost of a purchase into interest-free payments, which sometimes are automatically deducted from your account on a set schedule. This can be an attractive option if you don't have the funds to pay for a product upfront, but want to spread the cost out over a longer period of time. 

As a consumers, although AfterPay is interest-free, if you exceed the 4 installment payments you are subject to fees. If as a merchant your customer defaults on the payment you may not receive the amount owed for the sale or have higher transaction fees than what you are currently paying.

As a side hustler or solopreneur, you need to be careful about how you finance your business. While it can be tempting to use services like AfterPay to purchase equipment or inventory, it's important to weigh the risks and benefits. Will the product you're buying help you generate more revenue in the long run? Is it worth taking on more debt to acquire it? Is the debt you are acquiring something that needs to be financed or are you rushing the purchase?

Ultimately, the decision to use AfterPay or similar services is a personal one that depends on your individual financial situation. If you do decide to use these services, make sure you have a plan to pay off the loan on time and avoid additional fees. And always remember that loans, even interest-free ones, come with risks and should be used wisely.

My business philosophy revolves around responsible spending and purposeful financial decisions, both in personal life and in business. It's about following a process, being organized, and planning for the future with purposeful spending in mind. This means that we strive to do what we can right now while setting ourselves up for what's to come.

Is AfterPay or Similar Services In Alignment with Your Business?

As a business owner, I've made a strategic decision not to offer AfterPay in my business. It wouldn't make sense for me to tell people to be purposeful in their spending and to use tools they can afford while turning around and offering a service that counteracts that message.

AfterPay allows you to receive the product or service immediately and pay for it over time. I liken it to payday loans because it tends to attract those who cannot afford the purchase upfront, and they may be stretching their finances thin to make the payments. As a result, I do not offer AfterPay in my business, and I advise customers to save up for non-essential purchases rather than incurring debt. However, I can see why some business owners would want to offer this option to make their products more accessible to those with limited budgets. 

An option you can use instead is to evaluate your product or service pricing and ensure it is in alignment with your target market. For instance, Organized Academy was designed with my customer in mind. I recognized that most small business owners starting out might not have a lot of expendable money, so I didn't want to price the vault out of their reach. Instead, I decided to meet them where they are and allow them to pay $25 a month for access to the content for 30 days. This way, they can get what they need at the moment, digest the information, and pay as they go. It's essentially what AfterPay offers, but I've chosen to implement it in a way that aligns with my business philosophy. 

Ultimately, while AfterPay and similar services may seem like a convenient way to make purchases, it's important to consider whether it aligns with your personal or business spending goals. If you value responsible spending and purposeful budgeting, offering AfterPay may conflict with those values. As a business owner, you may choose to offer payment plans or adjust your pricing to make your services more accessible to those with limited expendable income, especially if they are your target market.

Using AfterPay or Similar Services as a Consumer

I feel like you will know my answer to this part of the topic, but I will go ahead and share it with you. So, in my opinion, as a customer, I would not recommend using AfterPay or similar services. I'm not saying they are bad services, but they are not suitable for everyone. If you can afford to use it and choose to do so to preserve your cash, then that's a different story. However, I will reiterate, AfterPay and similar services are a loan. While there is some responsibility involved, I believe it teaches the wrong approach. 

Instead, it's better to make a decision based on your budget and savings plan. If you want to purchase something that is a luxury item, you should be willing to make sacrifices and save up for it over time. For instance, if you want to buy a particular item, calculate how much you need to save over a certain period and commit to it. You could also consider cutting back on some expenses temporarily, such as making coffee at home instead of going to Starbucks, to save money. 

I have noticed that AfterPay is often offered for clothes, beauty products, and other non-essential items. While it's understandable that businesses want to make their products more accessible, I think it's important to question as a consumer why you need to have it right now and if it's worth putting yourself in a potentially difficult financial situation. Additionally, some businesses use marketing tactics such as creating a sense of urgency to encourage customers to use AfterPay, which is not something I support. In summary, my advice is to only buy what you can truly afford and avoid taking on unnecessary debt.

I understand that what I’ve shared with you may not be a popular opinion. However, as always, I encourage you to make your own decisions, but make them after you've gathered all the necessary information and have a solid plan. It's crucial to understand what you're getting into and avoid perpetuating bad habits just because it's convenient or because others are doing it. Ask yourself important questions such as: Will this help me achieve my goals? What are the benefits and drawbacks? How can I measure the return on investment? These questions are essential to consider before, during, and after deciding whether to add a new service or offering to your business or using it as a consumer.

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The Organized Holistically podcast strives to teach side-hustling solopreneurs how to manage a successful business and life using holistic systems. I help you develop, implement and streamline unique and organic processes and organizing systems.  I do this by helping you identify the right systems and processes so you aren't spending money or time on unnecessary things and instead can spend that time and money focusing on the things that are most important to you, your family.