Today we are talking about when to charge for your services, when they are linked to a project that requires a certain amount of dedication. Before? After? During?
Depends
Most of the subscribers who have done the , at some point have asked themselves not “how much to charge” but “when to charge”. And my answer is always the same: It depends.
And in this case it depends on both internal and external factors, both from the one who offers the service, and from the one who pays for it, as well as the service itself, or even the sector. That will determine the time of payment. Let’s analyze the main ones:
your personal situation
One of the factors that should not influence (in theory) but yes it does (in practice) it is your personal situation. Depending on how desperate you go, you will accept certain conditions, and depending on how well you go, you will impose them.
For example, someone who has just started and is not known in their sector, and needs money to pay their bills, will surely agree to charge for a project after of its delivery. Whatever it is. A web development, a corporate design, a custom-made piece of furniture, or the reform of a sink. Does not matter.
In any negotiation, the one who is desperate has completely lost the game. And in many cases, if he is accompanied by other cards like “low experience”, “no references” and “no reputation”, you have to lose.
Even so, I advise that you establish your conditions from the first client, regardless of your situation. If you decide to charge a part of the project in advance, and that is your criteria, you must keep it, even if it costs you a client.
Although it may seem unbelievable, it will be on very few occasions that this will really happen, and as I commented in , you will discover that it is worth it.
The client’s situation
Another factor to take into account is the client itself, and the relationship you maintain with him. A client who appears out of nowhere, with whom you have never worked, is not the same as a regular client, who asks you for work frequently, or one who does so sporadically.
For example, I work with various professionals from various sectors. Podcasters, bloggers, writers, designers, programmers, consultants, etc. I have several references to whom I usually commission projects. They already know me, I already know them, and they pass me 100% of the bill at the end of the project that I have given them. And my payment is immediate. And when I say immediate, I mean “ipso facto”. As soon as I see the email with the invoice, I make the payment. No “at the end of the month”, “30 days” or “when there is a lunar eclipse”. Bills to pay make me sick, they burn my hands. Furthermore, there is nothing more appreciated by a professional than a high-paying client.
So it’s normal collect later to do the job if you are a recurring client and a good payer, because you have earned it through merits and deeds.
On the other hand, if you don’t know the client at all and they ask you for a job that will take you a certain number of hours and your dedication, it is normal to want collect in advance a percentage or even the entire project.
The sector
Unfortunately, there is another factor that sometimes plays a role as well. Standard industry practice. I have clients who work in certain sectors (like the construction one) who charge their services with 180 day promissory notes. If right. That’s 6 months.
Collecting through 180-day promissory notes is outrageous, no matter how you look at it, and I take pity on the poor professionals who are forced to enter into this dangerous vicious circle. (and my blood boils too). They are usually self-employed who have to work (and financed) for 6 months, until the first payment arrives. We are crazy? I have seen million-dollar companies pay 180 days to small self-employed people who can barely pay their mortgage. Shameful.
Not to mention the risk that a default entails in such cases. Can you imagine what goes through the head of someone who has been working for 6 months without getting paid, when the first payment does not arrive, or is returned? Yes effectively. The first thing you think is that the next 5 payments will not arrive either. A scenario as unfortunate as desperate.
Anyway, personal complaints aside, what I want to say at this point is that on many occasions we will find ourselves unable to negotiate payment terms if we are in a sector that has certain practices “entrenched”. It takes a lot of courage, self-control, and self-confidence to ignore all that and set your own terms. But that’s my advice. Set your terms, and completely ignore what the rest of the sector does.
Obviously I am aware that saying this and putting it in bold is much easier than doing it, because theory and practice are two parallel worlds, but I assure you that you will sleep much better at night if you do not have 6 months of receivables.
The service
Obviously, we cannot ignore the service itself. In other words, the compensation. Making a logo is not the same as making a brandbook, in the same way that unclogging a toilet is not the same as tiling a bathroom. Normally there are two key factors: Time and amount.
Weather
If the project you are entrusted with is something quick, 10 or 30 minutes, it can be charged after the service itself. A private class, a quick repair, a small change on a website, etc.
But if we’re talking about something that can take hours, days, or even weeks, we can’t risk all that time. Because after all, time is money. And if we invest our money in a client, we want to minimize the risks.
Some examples could be web developments, corporate image designs, major reforms, marketing plans, etc.
Amount
Just as we don’t want to risk our time, we won’t risk our money either. If we are talking about a low amount, that if we “lose” because we have a default, our family economy will not shake, it is much easier for that to be paid later.
But if we are talking about a project of hundreds or thousands of euros (which will surely be linked to a long period of time)we are not going to want to risk that amount, since at the end of the month it may mean not receiving salary.
What percentage to charge in advance
Once we are clear about whether to charge sooner or later, another question that usually assails us is what percentage is requested. 25%? 50%? All?
Once again, all of the above factors also apply. It will depend on your situation, your bargaining power, the client, the sector, the service itself… All these variables will affect that percentage.
The most common option due to its relative “fairness” is 50%. In many sectors and many professionals consider it the most appropriate. The client pays half of the service for the professional to do the service. And once it is finished, the other 50% is paid.
That percentage can also vary depending on whether the professional must buy something to carry out the work. (construction material, software, stock images, renting machinery…). In those cases, you can even collect all those items in advance, so as not to risk that money that you have to advance.
Phased projects
Sometimes, when the project is especially complex or long, a recommendation is to charge in phases. It is a little more advanced, but both the client and the professional minimize risks. It consists of dividing the project into several phases, and charging at the end of each one of them. For example, in a web design we could say:
- 25% initial
- 25% when delivering the design in PhotoShop
- 25% when delivering the layout
- 25% when uploading the web
It is a simplified case, but the objective is only to convey the idea. Actually, a web project has more phases, as I indicate in the tutorial. Here the important thing is simply to see how a project can be divided into phases and charge in each of them according to what has been contributed.
When is the “end” of a project?
As a last point, we must make an important consideration. When is a project “finished”? This point is always very key, but especially if your collection depends on it. If you are going to charge “when it runs out”, it is very (but how very) important to establish what is considered “finished”.
Let’s imagine that someone wants a website. You do it to him, and he asks you for changes. Is finished? Yes? Nope? And what happens if he asks you for more changes? And then others. And more. And you’ve been making changes and more changes for 3 months without seeing a penny because “It’s not finished”. And that can happen with a website, with a brandbook, with a home renovation or even with the design of a simple business card. Sometimes there are clients who forever They are asking for changes. And consequently that makes never be “finished”.
Therefore, and although it is complex, in the budget, together with the rest of the payment terms, it should be clearly specified what that payment, that service includes. But that is already material for another tutorial… If you are interested in me writing it, let me know, and it will be a pleasure.
Summary and conclusion
The services can be charged before, during or after carrying them out. The moment and the percentage of the amount depend on your situation, that of the client, that of the sector and that of the service itself.
A highly recommended technique that minimizes the risk of not charging or not receiving the service are projects in phases, in which you pay as the project is carried out.
If you want to know more about online business, I invite you to take a look at , where you will find very interesting information, especially if you are self-employed and entrepreneurs.