Deposits to Start Work: Deciding How Much to Ask For
Most of us know that we need to ask for deposits in order to start work, particularly with a new client: a deposit guarantees that even if something goes wrong, we won’t be completely without recompense for the work we do.
But more than a few of us put off making a deposit a standard part of working with a new client, unless we’ve already been stung. Part of the problem is that it’s not really clear how much to ask in terms of a deposit.
Just like with setting your prices as a freelancer, there’s no one true way to handling the deposit process. In fact, there are plenty of freelancers who may never take a deposit in their entire careers without a major problem — despite most of us agreeing that requiring deposits is a sensible practice.
How Much Can You Ask For?
You can ask for a third or half of your project fee upfront. You can ask for all of it — although I know only two freelancers who do so as a standard practice. You can ask for a flat deposit, no matter how much you’ve estimated the project will actually cost. You can ask for just about anything you want.
As long as your client is used to paying his vendors half (or whatever your deposit rate is) upfront, the amount is less of an issue.
Whether you’ll get it doesn’t seem to be as dependent on the actual amount you’re asking for as you might think. Rather, it’s more a question of what the norm is for the industry your client works in. As long as your client is used to paying his vendors half (or whatever your deposit rate is) upfront, the amount is less of an issue. That is, of course, assuming that the client has the money in the first place.
Do some research into the industry or niche you work in. While specialization makes sense from a marketing point of view, this is one of the times that it’s also practical from a mechanical perspective. It’s pretty hard to maintain different policies for different types of clients, so if you’re working to bring in the same types of clients over and over again, it’s easier to set payment policies.
Choosing Your Deposit Comfort Zone
The goal of a deposit is to make sure that you feel comfortable with starting on a new project. If you’re constantly worried about getting paid, after all, you can’t do your best possible work. If what’s considered industry-standard isn’t enough to make you feel sure that a new client isn’t wasting your time, feel free to raise your deposit requirements. As long as you do good work that your clients feel is worth paying for, most won’t quibble too much over a deposit.
In an ideal world, any deposit you receive should be enough to cover your work form now until the next time you will receive payment. It doesn’t really work out that way: if you get half upfront with half due upon completion, than there’s a chance that half the payment will wind up needing to cover the total time you work on a project. Unless your rates are pretty high, that probably won’t work out.
Your clients probably won’t go for a setup like that, either: unless you’ve worked together, a deposit is a compromise because their ideal situation is having you do all the work upfront with no payment — the mindset is that an untrustworthy freelancer could always disappear with a large deposit.
You’re looking for balance: a deposit that helps reassure you that a project is going to go well, while showing clients that you’re a professional who will take their project seriously.
The Mechanics of the Deposit
No matter how much you decide to require for a deposit, it should be a universal decision. Without fail, you should collect that deposit from each client. It’s easy to get out of the habit of worrying about deposits if you make a lot of exceptions.
Put your deposit policy in writing, even if you expect that you’ll be the only person who ever sees it. Having that sort of description, along with the reasons why you know asking for a deposit is important, makes it easier to ask for it. It wouldn’t hurt to add a clause regarding the deposit to your standard contract, either.
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I ask for a deposit as in my business (helping one man bands and freelancers with the money/life/business balance and tax returns), a lot of people ask me for a quote while expecting me to do work for almost free. An amount up front sorts out who is serious.
It’s ironic as my rates are very reasonable, and actual clients are often pleasantly surprised. That amount up front helps me with my cash flow as a lot of my work is seasonal, and the client who doesn’t have an all in one go bill at the end.
You definitely should ALWAYS get a deposit, whether it’s half or a third, etc. I’ve had new clients that didn’t want to pay anything up front so unfortunately I had to pass on the work. I think it’s just standard practice. A client than doesn’t want to pay up front is a client to be avoided.
I completely second what David said. I think it’s a huge warning sign if the client refuses to pay anything up front or asks for some kind of work to be done for them before they decide on whether or not they’re going to choose you for the project. I (like many freelancers starting out) have been bitten in the past because of the feeling of having to take the work just to build up a portfolio of client base right out of the gates. Believe me when I see to trust your initial gut instincts about a potential client!
Asking for a deposit up front just weeds out those type of clients, as most likely they’re going to turn out to be much more of a headache and source of stress than the project is even worth.
The alternative to asking for a deposit is that you do all of that work, submit it (even with a written contract in place) and you then never hear a thing and never get paid.
Here’s a KEY THING – you have NO idea if the person or business will ever pay anything when you deliver. Maybe they are planning for free work. Asking for a deposit is a built in “credit check”. Or maybe they don’t have real authority to purchase on behalf of their business. So asking for a deposit tests their authority level.
Real business people will understand that another business person needs to see a money commitment from them in order to start work for them. Deposits are well accepted in business. Asking for a deposit usually goes smoother than getting tied up in knots over payment terms.
Also, for small projects < $1000, it is often easier to waive a signed contract and tell the prospect that sending their deposit initiates work.
Have discipline here. If you as for a deposit and the person objects and says "my/our policy does not permit that" or gets all huffy and condescending like the lowly anonymous freelancer is asking for the moon – drop them. Do not then cave and ask to start the project anyway.
An arrogant prospect who won't pay a deposit won't pay when you're completed either.
One (only one) exception for deposits – personal friends, where it is exceptionally awkward to demand a deposit. (But sometimes doing business with a friend is not a desirable situation anyway.) If someone is known to you already socially you may drop the deposit requirement, but make CLEAR that the work is your livelihood and it's not a favor. (Unless it is.)
When I deal with projects, I run into this all the time. I do a lot of SEO work, and have a ton of samples, but even then, clients are like, “well, I want to see what you can provide first before I commit.” So what I do is ask for an upfront amount, even if it’s not much. For example, if their end project is thousands of words, I will have them prepay for, say, 500 words, and I will do that much and send it to them. I will not continue until they put more money out. This gives them a chance to, very inexpensively, see how I handle the project, the voice of my work, etc. As long as they approve, they will keep sending deposits. Otherwise they’ll disappear but won’t give you feedback or edits. This has only happened a handful of times in my earlier years, but now I can sniff out trouble from a mile away! LOL