On Sat, 2009-02-28 at 11:56 -0800, Kent Parker wrote: > > I don't like asking for money up front. I think that is all wrong. I > never pay my plumber up front or my phone bill, and, when I was > employed by other people I never got paid in advance. I do pay for my > groceries up front but I get it as a finished product. If someone > pays up front it destroys the motivation-to-get-the-job-done-and-get- > paid factor which is what drives me.
For one of my consulting businesses I have two rates - the paid in advance rate and the pay on invoice rate. For clients who choose to pay in advance they get a 25% discount on the hourly rate. They also become one of my "VIP clients" which means their work gets priority and they get access to a few other things. In reality the "VIP" status is mostly just a label but I did it to give the client as much incentive as possible to choose the payment in advance option. If a client asks why I have two rates I explain that I've had too many situations where I did a lot of work for people and suddenly they decided they couldn't pay. So I've decided to focus on and reward those clients who pay in advance so that it is a win / win situation. Most business owners have had late paying clients so completely understand. As far as pricing I simply raised my prices until the "pay in advance" rate was the acutal rate I wanted and added 25% to get the "pay on invoice" rate. Even if clients pick the pay on invoice rate, the maximum exposure I'll allow is $1000 or 2 weeks work. At that time I'll invoice them until they build a strong payment history. At that point I'll consider extending the terms. I've only been doing this for 2 months but so far every new clients has taken the pay in advance option. I only have two remaining pay on invoice clients now. They both pay on time so I'm happy to leave them that way for the time being. Key things I've found to be important when getting paid in advance are: 1) Keep the paid in advance funds in a separate account - do NOT spend it until you've done the hours. This helps provide the motivation to get that work completed. It also means you can refund unused hours at any time. 2) Let clients decide how many hours they want to pay in advance - I have options for 2,5,10,20,40 hours. We use those hours up and then remind the client to pay more. If a client is hesitant I encourage them to choose a small number of hours up front at first so they can see how the process works. 3) Stay in regular communication with updates & progress reports. Keep a detailed breakdown of work completed that can be sent to the client periodically so that they can see how their money is being spent. Some clients will want this, some won't. 4)Always try to find ways to over-deliver. If a client feels you are giving more than you promised in little ways then that goes a long way towards smoothing over any other issues that might come up. This may not be an option for everyone, but it is certainly working for me. --~--~---------~--~----~------------~-------~--~----~ NZ PHP Users Group: http://groups.google.com/group/nzphpug To post, send email to [email protected] To unsubscribe, send email to [email protected] -~----------~----~----~----~------~----~------~--~---
