Ahhh, money. Freelancing can be feast or famine, what we call Steak or Stinky Sneakers… (cc kevinspencer)
PROBLEM: Cash-flow ouchies
You’re in the middle of a project that you thought’d be a snappy 2-weeker, but somehow it’s turned into a snippy 6-weeker. The end is in sight… but your pay day’s another Net 30 away.
It’s not quite time to start those old boots a-boiling but, all the same, it’s not exactly a trip to Disneyland. Or even a night club-hopping with 7 tequila-sopped dwarves.
SOLUTION: Payment schedules
Repeat after me:
I take a 50% deposit to begin work. I take a 50% deposit to begin work. I take a 50% deposit to begin work. (Unless it’s over $10,000, in which case, it’s 30%.)
A fixed payment schedule, including up-front deposits, is one of the biggest differences between a Serious Freelancer and a Seriously Cash-Strapped Freelancer.
To create a payment schedule just for you, follow this formula:
- Take an up-front deposit to begin work (30-50%)
- On large projects, take a payment mid-way (25-30%)
- Bill the remainder on completion (25-40%)
As long as those percentages add up to 100%, you’re golden.
If you do small, one-off projects — such as illustration, single-page designs, or telephone consultations — take 100% up front. Nobody wants to fiddle with 3 payments of $300 (unless they, too, are cash-strapped).
Won’t my clients run away screaming?
Well, they might if they’re really bad clients who look at your non-existent payment policies as a way to avoid laying out cash for as long as possible.
In which case, congratulations! You’ve avoided being screwed six ways til Sunday.
For bad clients, the deposit will either reform them, or force them to show their true colors before Net 60′s passed.
But, for good clients, you’ll find it’s a non-issue. They won’t mind paying your deposit. You might even find that they like it!
You mean good clients like to pay up front?
Many of ‘em do, yep. Not only is it nice for them to have a sort of 3-part payment plan (while you’re doing the work, instead of after), but many more experienced clients will find you more appealing.
Here’s why:
Anyone who’s hired freelancers has worked with a few unscheduled types — sad creatures too distracted by old projects and money woes to get the job done.
You’re not one of them. Your clearly defined, no-nonsense payment schedule proves it. Your deposit requirement is big honking sign that reads, “Hire Me Cuz I Am So Not That Guy.”
When a Good Client pays you some up front, they feel better about you getting a nice, firm grip on their project. They can rest easy, knowing you’re not wasting your time (and theirs) trying to rustle up fast cash.
And you, relieved of money worries, can do your best work.
Everybody wins!
The Twitter version?
I take a 50% deposit up front. I take a 50% deposit up front. I take a 50% deposit up front. And 25% at the half-way point. Thanks!
TweetPreviously: How to Avoid the Sales Funnel Swirly
To the point. I like the bad client detector idea.
Thanks! “Bad Client Detector” – hmm, that sounds like an idea that could evolve some more, too
Me, I learned the hard way that I had to stop focusing on how to GET the client, and figure out if I WANTED the client. Guess I’m not the only one
A lot like dating, eh?
OMG. You’re using the default WordPress smileys. I can’t stand them! Am I the only one?
<= ugly.
Nope, Philippe, you’re not the only one. I forgot about em. Now looking for how to turn it off…
Great! Every blog post should have a twitter version.
This is spot on.
We’ve always charged deposits but it was never enough and we weren’t strict with it. Our cashflow really suffered for it.
We started charging 50% up front a few months ago and none of our clients (existing or new) questioned it.
What we have been doing is only charging deposits on jobs over £1k – I like the idea of billing the lot up front. Part of the battle is just changing the way we think about our services. No one questions paying for an event or product up front.
Stephen, exactly! It’s much more about changing yourself than changing your cilents. That’s the hard part
Glad to hear the more serious approach to deposits is helping you now!
Interesting article. I’ll be sure to follow those principles if I ever freelance.
The principle of having cash upfront seems like a fair and reasonable business practice and helps you weed out potential bad employers.
There’s a reason lawyers have long worked on a retainer basis. Essentially, attorneys are freelancers. The quickest way to see if your client is serious about the commitment to a project is to ask for a retainer/down payment.
Asking for an upfront deposit is probably reasonable for any number of reasons, including the ones you cite, but (as a freelancer myself) I would have to think if you’re in a situation where a 30 day delay on getting paid for a job is a serious financial problem, you really really should have a larger slush/emergency fund. On a salary, living from check to check is bad enough, but doing it as a freelancer seems foolish in the extreme; you never know when the next job will be. And, truly, one of the joys about being a freelancer is the ability to enjoy the dead times – no work worth doing to be found? Cool, take a week or three (or a month or three) off to learn something new, go on a long camping trip, whatever.
Just because you’re a freelancer, doesn’t mean you’re different from companies when it comes to cashflow.
Strictly speaking, we state that we expect the deposit to be paid prior to work starting. In reality, we start sooner which makes clients feel a bit more special
Before I teamed up with others and was freelancing, I used to bitch about how difficult it is to establish cashflow but the truth is, I just didn’t know/want/try hard enough.
That’s not to say the core of what you said isn’t great – the flexibility that comes with freelancing is often overlooked too
You nailed this.
A. Raise your prices, you’re worth it.
B. Money up front.
C. Charge for changes. If they’re important enough, they’ll pay for them.
Act like a pro, you’ll be treated like one. Besides, there’s nothing that builds amity with a customer so much as making sure they’ve got skin in the game.