People greatly enjoyed "How to Set Your Consulting Scope and Fees," and there were a number of questions. Here's a crucial one -- reader "Tom H" asks --
"Get at least 50% upfront. Always have the remainder paid on a calendar date (ex, 30 days after commencement)."
I'm struggling with how to word this. I have a project that could be subject to some serious mid project delays, so it could be mostly complete in 1 to 3 months. Obviously the client wont want to pay the remainder in say 60 days if there is still a large chunk of work to be done. How can I word this so the calendar date is tied to a certain amount of completion?
Here is the exact verbatim language to put in your proposal --
The fee for Option 1 will be $xxx total.
The fee for Option 2 will be $xxx total.
The fee for Option 3 will be $xxx total.
Terms: 50 percent on acceptance of this proposal, and 50 percent thirty days after commencement of work. Alternatively, you may receive a 5% discount with payment in full on acceptance.
The quality of work is guaranteed, if the work is not consistent with the quality expressed, your full fee will be refunded.
Well, there you go, my secrets are out. That's verbatim how you phrase it.
But we're not really talking about how to phrase it, are we? We're talking about expectations.
You have an expectation -- maybe justified, and maybe not -- that your client "obviously won't want to pay the remainder [of your fees] if there is still a large chunk of work to be done" due to their own delays.
Now, I hate accounts receivable. I hate people owing me money. I'm not a banker and don't want to be a banker. My business is not in being owed money; being owed money is a problem in my business.
And yours, too, eh?
Keep that in mind. You have bills to pay. You have kids to feed. And if you're very good at what you do, you can absolutely only work on favorable terms. Maximum money is not required for success, but favorable terms are required in my experience. Nothing is more maddening than having zombie-projects with zombie-receivables eating your mental bandwidth from zombie-clients. I've been there, and I just simply refuse to go there any more.
My clients are obviously alright with my policies which is why they're my clients. The people that aren't, don't become my clients. See? It's that simple.
So while I'm not sure exactly what your issue is, let's go through a few points that might help:
1. You might have a self-esteem and self-worth thing going on.
Maybe you don't. I don't know. I'm not throwing that around willy-nilly. But you should ask yourself these questions: "Do I know I can deliver results on what I bid on? Do I have integrity and decency to do the right thing if the client hits roadblocks? Am I worth my fees? Am I good enough to refuse to suffer through delays and unprofessionalism that isn't my fault, that I didn't cause? Is it right for me to refuse bullshit, because my work is good and I am good?"
Or something like that. I know it sounds fluffy, and maybe it isn't your issue. But sometimes, there's a self-esteem thing going on with asking for rates and terms. If you refuse to ask for something in life -- not just in business, but anything in life -- you should consider whether you (internally) think you're worthy and deserving and a good and competent person. The answer can sometimes be surprising, if meditated on carefully.
2. You might have an incorrect understanding of your clients' expectations.
Maybe they'll just accept your terms and pay you. I used to think I needed terms that were hostile to myself and way-too-liberally-client-favorable, even though some of my clients had considerably higher income and net worth than me. Did they need those terms to function? No. Why did I think they needed those terms? I still don't know. It was just an error on my part.
Then, I set favorable terms and there's been basically no complaint. I really get almost no pushback here. Hell, now that I'm writing this, I'm tempted to start asking for an entirety of my rates upfront, always. The times when I have required that, I've gotten it. Why not try it and see what happens?
3. You might need better clients.
Some people are a pain to work with. Don't work with them.
Easier said than done?
Yes. And, no.
Working with painful people is painful. Working with discourteous people leads to frustration. Working with unserious people leads to getting screwed around with. I only work with people I really like and admire, who can get a lot out of my services, and where I'll get a lot out of the assignment too. And I simply don't take assignments I don't believe in, or ones that look like they'll be a huge headache.
The massive-emergency-shit-isn't-together type clients will eat your mental bandwidth, and you won't be able to find new, good clients, and serve your existing clients well. You'll be unhappier and you'll be less kind and attentive to your family, friends, and civic life. You won't sleep as well. (Really!) Don't work with clowns. Or at the very least, get all your money upfront and charge a huge premium if you're working with clowns. But, no, really, dignity and peace of mind are worth more than money. Don't work with clowns.
If you get an objection of, "There might be a huge delay, I don't want to pay you if there's a huge delay" your reply must be, "I'm asking for the entirety of my money upfront for just that reason. I run a lean shop and give my clients full consideration, and my rates and terms are the only way I can do that and serve you in a maximally effective way. I want to be 1000% on your side, and my terms are designed to make sure that happens."
4. You could scope your assignments differently.
So you could have a "Phase 1" and "Phase 2" thing, activated by them, at their discretion. These are, in effect, two separate contracts. That way, Phase 1 finishes, and you just forget about Phase 2 -- if it comes in, gravy. If not, you keep moving with your life.
Mental bandwidth is a huge underrated resource. You don't want large open loops in your life. So if there's a project where the second half of it is totally outside your control to activate and get on with, and you never know when it can happen, break it off as a separate piece so you can get conclusion from the Phase 1 which is under your control, and move on with your life. Having an assignment that is broken into discreet components lets you take your mind off of it once one is completed and the other isn't started.
Important: Don't give anything like a discount on Phase 2, because it'll come at you at a random time in the future which you have less control over. A couple years ago, I made a huge mistake in bidding too low for a job when I had some spare time, but then agreeing to start in two months. In two months, I was at full bandwidth and the contract was not a good use of time. Don't get into this situation: if there's an unknown start date, it needs to be considerably above your average rates to protect yourself.
5. Finally, are you the best at what you do, and do you have set policies?
Maybe you start asking for 100% upfront, always. When someone says, "That's crazy, nobody in our industry asks that!" you reply with, "I'm not like anyone else in the industry. I provide my clients with X, Y, and Z -- and this is how I work."
But, really, are you the best at what you do? If you're providing commodity level quality and service, you probably have to take standard industry terms. But if you're doing that, you've got a problem anyways. You need to be uniquely good, uniquely skilled, have a unique approach, or provide uniquely good service. Something. Don't be a commodity.
Become the best at what you do, make your value overwhelmingly crazily amazingly good, and work on terms that leave you with peace of mind and a great attitude towards your clients. Remember this: When you have money that is owed you but not in the bank, there's always the potential for shenanigans, negotiations, and adversarial or competitive behavior. When you've been paid, you can focus all your energies on just executing incredibly well and serving your clients. Be the best, build a fantastic reputation for that, serve incredibly well, and work on terms that support the life you want to live. Godspeed.
Question from a reader --
Short post tonight.
In 8th grade, my algebra teacher Mr. Balthrop opened one of the very first classes with this statement (not exact words, I suck at quoting):