Do you ask for upfront payments when you have approached by a new client?

[hoangvu]

Do you ever ask for upfront payments when you're approached by a new client who wanted to buy your products or services? If they are old clients then you can trust them but how if they are a totally new clients who you have not ever worked before, there are any risks when dealing with new customers, you will ask for upfront payments?

 

[elcidofaguy]

I would ask for initial payment up front and for the remaining it would depend on milestones should the project/effort be substantial. If its an off the shelf product then its normal that people pay first.

 

[Mike001]

Brett,

As a Program Manager and Web Engineer Developer I have always requested and received an upfront payment with all my contracts. Although I set that expectation during my first communications with a customer.

This is how a contract for my organization normally goes.

1. Respond to a Request for Proposal (RFP). My team and I will review requests for proposals and determine if there are any requests that are within our expertise and we have the available time based on our on going project schedule.

2. Prepare Proposal for perspective customer. (Usually around 6 - 24 Man Hours depending upon size of project and scope of work)

3. Submit Proposal to Perspective Customer schedule first meeting. This is a tricky part as you want the proposal to include enough information where the customer understands what you are proposing but so much where they can take your work and use that proposal to build there own project.

4. First Customer Meeting - spell out the proposal and walk through the project. Using Whiteboards, Slide Presentations and mock ups explain the process to the customer. During this meeting you spell out the project milestones. These milestones include payments on the project based on the percentage of completion. Again this can get a little tricky based on the size of the project. Smaller projects will include an upfront payment and a completion payment. Larger projects should include milestones based on major completions of the project. For instance: Initial application (site design) and beta testing of the application. Database design and database normalization. Database data entry. Alpha Testing, beta Testing, Go Live and project Completion.

Set Customer Expectations during the meeting. Set Realistic Timelines for the milestones. Set Project Goals. Set Project Expectations. Discuss What-If's and will be many of these based on a large project. Spell out the Project Goals.

I call these S.M.A.R.T. Goals.

1. Specific
2. Measurable
3. Achievable
4. Realistic
5. Timely

Discuss the Change Order process and what is considered a Change Order.

Spell out project scope and make certain that everyone, the project team and the customer team, understand what is being developed and agree on the scope of the project and how changes will impact the timeline and the cost of the project.

5. Followup with the customer after a few days with a overview of the presentation and thanking them for there time. Email correspondence is usually good and make certain to stay in a professional business type email.

6. Wait for the customer to decide which team they will select for the project. Depending upon the type of contract, small business, large organization, local government or federal government this can take a while. Sometimes there are many approvals that are required on large projects. I have had projects that have taken over a year from the initial meeting until the project kickoff meeting. I always have a couple of project in the pipeline to keep my team busy.

Notes: During the initial customer meeting I will apply percentages to the payment schedule. Normally the first payment will cover my upfront costs of the projects. That will include time, man hours, any equipment needed, any third party vendors that may be needed and any hardware. Normally the initial payment will be around 40 to 50 % of the project cost. This is pretty much standard.

Then I will break down the remaining payments over the length of the project with a 20% final payment at project completion and project checkoff.

Of course this can all be adjusted based on the customer and my comfort level with working with them.

One thing I cannot overly stress: Make certain that with each milestone there is a written way to confirm the milestone completion and that a signature is required from both the project team and the customer team. Make certain that the customer understands that the signature signifies that the milestone is completed and triggers a payment to the project. If you set these expectations up front during the kick off meeting there is normally very few problems with the project payments. If you leave this open ended and try to enforce this after the project begins it just creates truest problems with you and the customer.

I hope this helps you. I have just spelled out for you what has taken me 20 years to perfect. I use this type of process with all my projects with some slight modifications based on the project size and how well I know thew customer and it has worked very well. I have customers that have projects that go from a few thousand dollars to several million dollars and many of them I have done 3 or 4 different projects for based on repeat business.

Running a project team can be a challenge. It is kind of like web developing, constantly changing and a balancing act between keeping the newest technologies deployed and making certain that everything stays stable.

There are many more things I could put here but I think this gives you a good overview. Let me know if there is anything I can help you with.

 

[hoangvu]

hoangvu

Mike, I have to agree with you on this and mostly freelancers I worked with, asked upfront payment first for their works but for the first time we work with any freelancers, we should send money to them without any conditions to maintain our money is safe.

What is the best way to deal with new freelancers that we didn't know them or no make any transactions before? we can send money to them and believe them will delivery works?

 

[Mike001]

That is a great question.

When I am dealing with a new freelancer on any of my projects the very first thing I will do is research there work. Many of the freelancers that respond to my ads for help will have a pretty good portfolio of their previous work that I can look through. Now when I say look through I will look through not only their printed portfolio but also visit the sites that they have helped to implement. While I am on the sites I will ask them questions about aspects of the site that they claim they have been a part of designing. This can usually give you a grasp of their knowledge of the technology.

There are times when the work they have done has not been on commercial sites so then it becomes a little trickier to confirm their abilities. What I do then is sit down with them and give them a group of what-if scenarios. See how they respond to the questions and if they have the correct technologies to address the questions. I have acquired some very good developers going through these types of scenarios, these individuals were fresh out of school but had no actual experience. They did have the knowledge but just no real experience yet.

Once I determine that the individual does have the knowledge just no experience. I will work with them to help them build a skill set. We will determine where their strengths are, help them build on those strengths by assigning them small projects starting out. The payment milestones will be based on their level of completeness of the project task. I will keep the initial payment to nothing more than 10% of the completed task total. This way I am covered if I need to find a new developer and they cannot complete the work. Then assign a group of milestones to that payment schedule based on the complexity of the task they were assigned. As those milestones are achieved I will pay them on the milestone percentage based on what we agreed on.

Upfront there is a lot more guidance needed as you develop the relationship with the freelancer but if you manage it well and the individual is proficient at what they are doing you will build a relationship with that freelancer that will benefit both of you.

A good freelancer will move through the steps quickly and become a valued member of the team. It all depends on the individual.

So as you can see each freelancer will need to be handled on an individual basis. Some you will use over and over for many projects and as time goes on they will become a valued member of your team. Others will not work out for a variety of reasons.

The thing I have found most often with individual contributors (freelancers) is that many people cannot work on their own. They just have not learned time management skills well and have a lot of difficulties maintaining schedules. When you are running large projects schedules are critical. Missing milestones can impact many other aspects of the project. I am pretty easy to work with but that is one area where I will become unglued. I always try my best to keep my schedules realistic and attainable. I stress that with my customers and my staff.

Missing scheduled milestones will have financial ramifications. That has to be stressed to freelancers, if they have an issue with the schedule it needs to be addressed at the beginning of the project not the day before it is due.

I hope this helps you with your question.

 

[FreebieBoy34]

Not necessarily, but it actually depends more on the person that I'm dealing with. What I do most of the time is I educate them first about the product or service that I'm selling and tell them about the benefits they can get from buying it (at least, that's what I do in one of my previous marketing stints). And when you feel that you captured his interest, that's the time I tell him/her more about the pricing details of my merchandise just to set the right expectations. And if you get a "positive" reaction after disclosing the prize, that's the time I ask them for the payment...

 

[Claire_Anderson]

When you ask for upfront payment from the client, the client usually see it as a negative sign. As clients also have trust issues with the new freelancers. The clients think that if they would pay the freelancer before the task is completed, the freelancer might disappear with the money. The freelancers also worry that the client might not pay them for the work.

The best solution for this problem is to ask the client to make the payment in partition. This way both parties will be satisfied and the best part is that when the freelancer will receive the part of payment for every task, it will motivate him to work harder.

 

[Adam Yunker]

Hello there Brett,

It honestly depends.. Usually the rule of thumb is to cover your overhead for the project for the upfront payment. However, if your overhead is 0 and is not going to cost you anything to have them as a client then go ahead and give them a trial for free!

That is usually the rule of thumb when it comes to that, but I hoped it helped in 1 way or another!
Have a good one!

 

[SethTurin]

It really depends on how valuable you are to the client. If you're a big name media company, or marketing consultant, or strategist, you've earned asking for a partial payment up front. I know it's not the same, but at UBot Studio we've never offered a trial of our software, because we've built a name for the product and given plenty of examples of how it works and what it can do. AND, we offer a 30 day refund.


Refunds may, in fact, be the key. If you can convince someone that you are taking their money but there's no risk to them, you might be able to get away with it even if they don't know who you are.