Project down payment?
I’m wondering if you business owners in your policy, require clients to put 25% down before you begin a project?
How do you go about collecting that and scheduling?
If I estimate a 10k to 20k range, I require a 10k retainer. We usually obtain a retainer that is at the lowest part of the estimated range, if the estimate is 10k or below. The estimated delivery schedule is tied to receiving the retainer, although we may start on research and calculations after obtaining a signed agreement.
No, I don't
I've asked for retainers and never had anybody balk. If they did it would be a huge red flag. We recently did work on the house and all the subs required up front deposits and weekly payments.
It depends on the size of the project and the reputation of the prospective client. We've required as high as a 60% retainer for a large project where the client was unknown to anyone in the company to no retainer on large projects where the clients are known to pay promptly upon receipt of the invoice. You have to do a little background check on the potential client(s) so you don't get the shaft and wind up in court.
1. New client and over a couple of thousand, 50% down, remainder due upon personal delivery/pickup of the map.
2. Previous client and over $10,000, 50% down, remainder due upon receipt of map, i.e 30 days.
You dont leave the grocery store owing do you?
10k or under 100% up front. Larger projects 50 to 100% depending on relationships. Government is the sole exception.
require clients to put 50% down before you begin a project?
There, I fixed it for you.
Have only demanded a retainer one time. For the full amount of the estimate. The client was a past client who I had to take to court to get the bill paid. He understood precisely why I insisted on the retainer. I believe I returned something like $20 to $30 to him as we came in under my estimate. He needed a third job and gave me a retainer without so much as my asking for one.
I have missed out on very little money over the decades without demanding a retainer. It is simpler to tell the potential client you don't have time to do what he needs done in the first place. Sorting the wheat from the chaff is a skill learned best through bad experience.
Avoid people who make their money by not spending their own money. Oil people, horse traders, etc.
what was your process?
Nothing real complicated
1. Prepare proposal letter and contract. Submit to potential client for approval.
2. If satisfactory, client returns signed contract with check for retainer amount.
3. Bill monthly, or upon completion if job takes less than a month. Cash on the barrelhead, as the saying goes, for non-businesses. Outfits with Accounts Payable departments will have a schedule. Know it and plan your month accordingly. Suspend work if bill not paid within reasonable time.
NOTE: If you are working for the government you will not get a retainer. They can't do it. But they will pay reasonable costs of preparing the bill, and there is no chance of them welching on you.
Certain business clients love to play little games to postpone when you will get your money. You find out who they are the hard way. Future work requires a nice "cushion" to make up for the delay that will happen. They will eventually pay it all, just not as soon as you would prefer.
there is no chance of them welching on you
It can take some time though. I was once a third tier sub on a city DOT project. The invoice flow was: me > small engineering firm > huge engineering firm > DOT > huge engineering firm > small engineering firm > me. Basically six months for the invoice to flow uphill and the money to flow downhill.
On day the CFO passed me in the hall and said "do you know you have $600,000 in aged accounts receivable? I just looked at him and responded "do you now what kind of stud you have to land a contract that wasn't put on the street for open bid that allows you to rack up that kind of aged AR."
The invoice flow was: me > small engineering firm > huge engineering firm > DOT > huge engineering firm > small engineering firm > me.
I've been there. Not with quite so much money, but with 6 figures. Small Engineering firm is most flexible, schedule-wise. 90-120 days is routine. Set your rates accordingly.