Forum Moderators: LifeinAsia
Just wondering if you guys have new clients pay a deposit before you commence work or do you just go on trust? If yes, in general how do clients feel about paying the deposit for work they haven`t seen?
Also what sort of deposit do you ask for? 20%? 30%?
Thanks,
dc
It serves to make sure that they are fully committed, and so are you. The trick is to explain right from the start that you expect a deposit, don't drop it in at the end of a negotiation!
Contract-wise, I sent him a quote; if he authorises that does that count as a contract? It seems to be the way other services such as plumbing, computer repairs etc work.
A quote should always be accompanied by a disclaimer stating that this document is not a legally binding document - that's what a contract is for.
There's plenty of info in these forums about divising a proper contract, but at it's simplest it should just state the scope of the project, signoff points of the project (at what point can we consider the site to be "finished"?), responsabilities of each party (you html, they content, for example), payment terms and amount, project timescale and copyright issues.
I'm curious now though, how do plumbers etc. make sure we're legally obliged to pay them - I've never had a contract with one of them. (Feel free to ignore that, it's irrelevent)
Good advice above.
One of the most important things I learned early on is not to UNDERVALUE yourself and your skills.
If you are going for an important contract spend the night before telling yourself why you should have the contract and how great you are :)
Good luck!
Dazz
As I`m just starting up my own little venture I wanted to get some kind of business plan to stick to. The advice on this forum has been superb, I have printed out lots of topics and its been very helpful.
I didn`t want to ask for money up front, for the clients to turn around and say, well thats not how everyone else works, have a nice day. I can see from the advice here that I think clients expect to pay up front.
At the moment I am doing some coding work for someone but he`s family related, so I told him payment at the end will be fine. I know I can trust him 100%. Since then other potential clients have emerged who I don`t know from Adam.
Thanks for all the great advice.
Early in my web career, when I landed my first paying job, I was too chicken to ask for a deposit, and agreed to be paid in-full when the job was complete. I designed a mockup that the client reviewed and approved and built the complete site, devoid of content, because the client haven't provided it yet. Ten months later, he still hadn't done so. Even though I had completed 85% of the project, I still hadn't seen a dime, and was at his mercy. Needless to say, I never made that mistake again.
What I do now is require 50% up-front and 50% in a certain number of days, depending on the project. For example, if I think I can complete it in 45 days, then final payment is due then, regardless of whether it's finished or not.
On a few occassions, I've offered a discount if the client pays all of it in advance. This comes in handy if the client is pressing you for a lower cost. I'll either offer to remove some functionality, or lower the cost (within reason) for full payment up-front.
In our case, we require 50% to start - 50% upon completion. But since we handle everything from web design, through SEO, and hosting - we generally control all aspects of the site and have never (knock on wood) been burned.
Prospective clients understand up-front from our original proposal that the initial costs of web design is just the beginning. The longer term commitment (and costs) associated with SEM is what makes them a success. When they understand in advance what is involved in creating a successful, long-term online business, there are seldom surprises down the road that can sour any aspect of the relationship.
Also, virtually all of our clients are referrals, which adds a layer of credibility as well, since they don't want to look bad to the referrer.
Steve
50% down, 50% upon completion....
LOL, I would never pay that in a million years, already declined several guys over past few yrs who wanted 50% ($4,000) in advance (coding work), or a flat fee up-front for small jobs. One guy wanted $100 by PayPal merely to take a quick look at my issues, even though we were mutual well known members of a forum and knew each other from there.
What if he gets hit by a truck and I already paid him lots of money, thousands of dollars, how do I get that money back? What if he screws-up on the job, or his work is incorrect, poorly done, or contrary to instuctions, what if there are bugs not fixed? What if he becomes very poor at communications or worse yet does not communicate at all after a while?
Still another issue is the issue that he obviously wants the deposit because he does not trust me, right? So why would I trust him?
The one who wanted 50% pre-payment did in fact drop that news in at the last minute after weeks of talking about the job and its specifications. On the day I was to hire him out of the blue he said first send me $4,000 by bank check only, would not even take a credit card for the $ as I assume he was worried about possible chargebacks.
Of course, I never hired him and we both wasted lots of time talking for nothing with dozens of emails and phone calls back and forth, even FedEx cost from me sending him all my old code on disk and user manual before he started the job for his review. Later I even offered to voluntarily pay him 50% more for the job on completion if he waived the deposit but he said no.
The percentage is determined by the total project cost i.e. a $1000 job is so limited in scope that the milestones are really only design approval and completion. This is where the 50% max is reasonably applicable: 50% on contract signing, 25% on design approval and 25% on completion for example. At the other extreme a $50,000 job will likely have so many milestones that asking 10% on contract signing and 10-20% per milestone is reasonable to clients. Every project is uniquely similar (true if oxymoronic) and so is the pricing/billing.
I have done $200 jobs and a few over $100,000. No one ever declined a quote because of the requested deposit/payment terms. I have to say though that the loudest price complaints is in the sub-$1000 market. And from realtors.
The only time I got burned was when I succumbed to a client who was in such a hurry to get a presence up on the net that we bypassed the contracts and the deposit and went live, it was billed out, never paid, and thus the site was yanked. Lesson learned. Now, they don't even get to peak at an initial design online unless the 25% is paid up front, contract signed. end of story.
We're in the process of revising our agreement to include more about what happens if the client holds up completion, in the past the final installment has been due when the site goes live. (note how that is different from on completion)
I have to say though that the loudest price complaints is in the sub-$1000 market. And from realtors.
Yes, that's so true. Getting away from those (the sub-$1000 market), we are. Realtors, we tend not to quote - we've produced too many detailed proposals only to be told we weren't the cheapest. We've even had one particular real estate guy come to us several times for quotes, only to tell us the same thing, after hinting at "lots of work, after this". Standing orders are now to decline to quote him. No offense, and I hate to set up a stereotype, but we just can't waste the time.
We're also looking at including language that covers non-performance of the client on their part of the project - you can't put together a site without their input. What do you do when they don't cooperate, provide you with input, documents, information, etc. How do you handle this?
LisaB
I get 50% up front or I don't produce anything. People around here are all too ready to take whatever they can get out of you and walk.
Realtors, we tend not to quote - we've produced too many detailed proposals only to be told we weren't the cheapest. We've even had one particular real estate guy come to us several times for quotes, only to tell us the same thing, after hinting at "lots of work, after this". Standing orders are now to decline to quote him. No offense, and I hate to set up a stereotype, but we just can't waste the time.
A valid stereotype. I know from dealing with many REALTORS myself they are vey cheap and think everything is overpriced, especialy anything related to the internet and websites. IMO, a 25% deposit up-front would be good to get from them, plus a credit card number for future billings as work progresses.
The amazing thing is a typical REALTOR is in the most overpaid occupation in the world and many of them make more money in commissions than Doctors for far less work and no degree required.
An Agent can spend 1 hr or so listing a home (which business normally arrives at no cost from a personal referral, rarely from the web) on the Multiple Listing Service computer and not do any serious work or spend much time.
Then a buyer comes via a different broker (not from the listing broker) and it sells for say $400,000. That means the Agent (who did little more than the MLS Listing process), and no real work earns 3% or more commission, that is $12,000 for perhaps 1 hr work. It should be illegal to make that much for doing almost nothing, yet they are so amazingly cheap.
The exception to the way over-paid agent is a flat fee listing real estate firm, a comparatively new area but with oddly small use by the public, where the home sells for say $500 flatfee rather than high commission.
Those flatfeelisting agents normally spend a lot more money and time on the internet vs more traditional ones so money spent on websites is far more valuabe to them since they rely on the web for most of their business (and they do not rely on personal referrals and word of mouth).
First find out what kind of REALTOR they are (traditional or flatfeelisting) to detemine if they will pay you or not and how open they will be to advance deposits.
We're also looking at including language that covers non-performance of the client on their part of the project - you can't put together a site without their input. What do you do when they don't cooperate, provide you with input, documents, information, etc. How do you handle this?
I just put this into my contracts to play it safe. Merely stated that if the client fails to provide necessary materials (text, graphics, etc.) on time, that I can't be responsible for the project running late. Same with their approval of certain steps.
Also, I mention that if the client fails to provide materials within a certain number of days, I could suspend the project and keep the deposit as damages/payment for work already done.
We also do the 50% deposit and 50% at completion thing. It's worked so far. No complaints yet.
What you seem to be considering is a "liquidated damages" clause. Do a search for that term and you can read yourself to sleep for the next month.
See also this thread (my post is #4: liq dam is point #5):
[webmasterworld.com ]
A good lawyer and a good accountant are a businesspersons greatest assets after him/herself.
Discuss billing best practices with one and contracts best practices - with your specific requirements in mind - with the other. Revisit these topics on a regular (I do annually) basis as the economic and legal worlds are chaos theory in action.
Without a happy D&B and no credit history with me, hell yes, 50%. Balance on delivery if possible.
Thanks for that link, really good points - you've given me a lot to think on.
The more I've read and talked with others in this business, the more I've learned that we've been pretty lucky with respect to agreements, but the last year or so seems to have produced some bad apples, prompting me to really look hard at the CYA angle.
Which raises another thought: I've got a particular kit that included a standard contract/agreement. Had it for quite a while, never used it. I pulled it out and reviewed it but it seems like overkill, pages and pages and pages long, and that on top of the proposal. How did you get something that covers it all for your needs, but doesn't scare the client to death? Do you do a proposal, and use a separate contract or is it a combined document?
LisaB
Besides, having to make a deposit for a product or service is not unusual. If someone doesn't want to give you a deposit or questions it--ask yourself are they going to make their payments as agreed? Will you have trouble getting paid when the project is completed? With those doubts, is this a person/company that you really want to work with?
With that in mind, I usually ask for 25-50% deposit depending on the business and the size of the site.
Like Johntabita I too have been burnt by clients not getting content to me. It's been a year now since I completed the layout and have been waiting for the content from 2 clients who were referred to me by a business I partner with. I'm thankful for the 50% deposit, but 75% of the work was done. So, I've had to absorb that loss. But imagine how bad it would have been if I didn't get that 50% upfront!
Now, I outline deadlines and payment dates in my contracts. I also have built in a clause so that if the project extends beyond the completion date, that I get another percentage when we agree upon the extension.
Then for any deadline extensions, I have the client sign a variation of iamlost's change order (see [webmasterworld.com ] ) which outlines the new deadline, reiterates the amount due and indicates that no further work will be done until the payment is received. I've only had to use this once, but so far it's been effective. :)
Sari
