Archive for the ‘Project Work’ Category

What’s Better: Charge Clients Upfront or Collect on the Backend?

What's Better: Charge Client Upfront or Collect on the Backend?

This question was asked on the ACA LinkedIn Group recently:

“Hi! So I’m looking at signing my first services agreement with a client. There will be a big kick-off project and then a monthly retainer. Do I charge the client half up front for the kick off and then have them pay the rest once I deliver? For the monthly retainer, do I have them pay me at the end of the month once my work is done or the beginning before I start? I’m trying getting burned as much as possible. Thanks!”

Here’s my advice:

Upfront, upfront, upfront!

It’s important to remember that you’re in the administrative support business, not the credit and loan business.

As  a service provider, you’re not obligated to extend anyone credit.

Which is what it would boil down to by you doing all work upfront and billing later.

The problems with billing after the fact include:

  • You deprive yourself of cashflow, which is the lifeblood of every business.
  • Clients will take you and the work less seriously and abuse your time more frequently. It’s too easy to blow things off and rack up debt on that which they haven’t paid for yet. When they have made an actual financial investment (skin in the game, as they say), they are more compelled to focus their attention to it.
  • You’ll have more late/non-payers.
  • Having to chase after and deal with those late/non-payers adds to your administrative burdens, creates stress, zaps energy, reduces your morale and spirits, and deprives good clients of your full, positive attention.
  • It doesn’t do anyone any good (including clients) to go into debt to you. The more they owe, the harder it will be for them to get caught up while you’re the one who suffers and pays the price for that.
  • You’re in a far worse position if a client doesn’t pay after you’ve expended your time and business resources helping them than if you were to mitigate possible losses by getting at least some money upfront.

So here’s what I recommend…

RETAINERS

Retainers, by their very nature, are always upfront. That’s the whole point of them. They are typically due on or before the 1st of each month.

In my practice, instead of having retainers due on the 1st, they are due (and processed) on the 25th of the preceding month. For example, April’s retainers are due on March 25.

This is because I don’t want my billing and being paid (along with all that beginning of the month work and bills we have to contend with in our own businesses) competing with the 1st of the month work I do for clients.

I also process my payments automatically… and I never pay myself late. ;)

To do this, I have clients sign a Credit Card Authorization Agreement (AGR-30) at the start of the relationship. By signing this agreement, clients give their consent for you to keep their credit card information on file (because you can’t do that without a consent agreement in place), and for you to automatically process their regular monthly charges.

Once I process the payment every month, I put a courtesy PDF copy of their paid monthly invoice up in a shared Dropbox folder for their business records.

Retainers are the holy grail in this business because it’s where the bigger, more consistent money is. To learn how to make retainers profitable and build a business where you can earn a great living working fewer hours with fewer clients (and get off the nickel and dime project hamster wheel where you always have to chase down your next meal), I highly encourage you to get my Value-Based Pricing & Packaging Guide (GDE-39).

PROJECT WORK

A project is different from ongoing support in that it is self-contained and ends upon completion of the work.

Designing a website is an example of project work because it’s not ongoing. Once the site design is complete, that’s the end of the project.

With project work, clients should definitely be paying at least something upfront, and 100% is entirely acceptable business practice.

With projects, there are a number of ways they can be charged. Getting a minimum or deposit upfront works like earnest money and helps clients respect your time and take the work more seriously.

Requiring payment upfront also helps weed out those who are not serious prospects.

I hate to say it but it’s nonetheless true:  there are dine-and-dash clients that new people in business often fall prey to who engage them to do a bunch of work, and then disappear when the bill shows up. You want to avoid that.

The rule of thumb in my business is that if it’s $1,000 or less, I charge 100% upfront.

If it’s a larger project, we break it up into logical phases and they pay for each phase upfront. If you do it that way, you get paid for work you were engaged to perform and complete, and work only continues beyond that once the next phase’s payment is met.

While you’re at it, if you want to learn all my secret policies and procedures that allow me to run my business 3 days a week while earning a full-time income working with just a handful of clients, be sure to get my Power Productivity and Business Management Guide (GDE-41).

Is this information helpful or eye-opening to you? Let me know in the comments. :)

Dear Danielle: Should I Turn Work Away?

Dear Danielle:

I’ve learned a lot from you in regards to Value Based Pricing by purchasing your system. Love it! The only question I have is, do you turn away any admin work that doesn’t fit into your packages? I sometimes have clients ask me to help out with a quick spreadsheet or troubleshoot why a login isn’t working etc. Do you have any tips on how this translates in value based pricing? MD

Thanks for the great question! I’ll do my best to help.

Quick answer: It depends. But let’s examine why and where you may be wanting to take your business.

Personally, at my stage in business, yes, I typically do turn away small ad-hoc project work if that’s what you are referring to. It’s just not worth my time or attention. I make enough from my retainer clients that I don’t need to bother with penny ante stuff like that. And I have more time to devote to my retained clients and more time for my own life because of it.

This is something you begin to realize once you decide that you want to start earning better in your business. Lots of people think they need to take anything they can get, everything that comes their way. And that’s certainly their perogative. If someone is starving and they need to put food on the table, yeah, you’re going to take that work, and any work you can get.

However, continuing to operate in that mode will keep you in the position of what essentially amounts to picking pennies up off the ground. You’ll never create a better, more well-earning business that way. And project work like that will keep you from building a more leisurely paced business–and life. You’ll forever be on a hamster wheel in a business like that.

Getting to a place of higher earning requires intention about the kinds of work and clients you take on. It means saying “no” to certain work in order to focus on getting the kind of work and clients that actually lead you from a hand-to-mouth (or hamster wheel) existence to one where you are earning and profitting well and, in turn, creating the life you want for yourself.

Now, you use the word “clients” rather than prospects so I’m not sure if you meant people who are already retained clients or if you actually meant just random people (prospective clients) who don’t want to retain you, but just want little one-off things.

If it’s retained clients you meant, and they were asking for something outside the scope of their support plan, again it depends. For retained clients, I give the best of my time and attention. If they have a quick, little one-off thing that falls outside the scope of their support plan, a lot of times I will knock that out for them just as a bit of client love. Their long-term business and relationship is more financially profitable for me than a few extra bucks. However, if a pattern begins to emerge (which I will notice in my six-month review of their account) that they really do need ongoing support in a particular area, that’s when we have a conversation about adding that support area onto their plan (and the price goes up accordingly).

But, yes, if it’s just a random person who has found my site and just wants a little project, I turn those away. Just not worth the distraction or my time and effort. One of the reasons I’ve been able to build the practice I have today is by saying “no” to things like that.

If you want to build a retainer based and more well-earning business, you have to say no to any client or work that isn’t in alignment with that goal. I realize there may be a balancing act some folks need to do when they are first starting their business. The caution (and where folks get caught up on) is that if all you ever do is taken on penny-ante project work, it will keep you from building the business that you’d rather have. It just eats up all your time and attention.

I know some people like to say, “But those little projects could turn into retained clients if they like my work.” Again, that’s not building a business based on intention. That’s trying to grow a business based on hope. Doesn’t work. And there’s a better way.

I’m sure you’ve heard me repeat the adage, “You will never get what you don’t ask for.” And this is exactly what this means. If you don’t ask for and expect a commitment from clients, you will never get one. If you don’t ask for exactly the kind of clients and relationship that you prefer to have in your business, you will never get them.

The tail will forever be wagging the dog (the business and clients running you and not serving your needs) and you will never build the business you want unless you ask for it. That means not accepting just any ol’ work and clients. It means telling clients exactly how you work with them (e.g., by monthly retainer) and then only accepting those clients who are ready to work like that. You gotta stop wasting time on everyone else. It’s just delaying and distracting you.

And contrary to all the advice you hear out there on this, I do not recommend you take on a small project so clients can “get a taste of what it’s like to work with you.” Would you go to a home builder and ask them to “just build me this little thing here so I can get an idea of what it’s like to work with you?” They wouldn’t do it (and they’d probably laugh behind your back). It’s just not worth their time to deal with dabblers. And you can’t make it worth your time either or you’ll be doing that the rest of your life.

Focus on the people who are ready to work with you. There are far better ways to allow prospective clients to “sample” you without you being distracted or wasting your one-on-one time. Heck, your entire website should be a “sampling” and demonstration of you and your skills, knowledge and expertise.

I want you to refer back to the Administrative Consultant business model blueprint you received with the Value-Based Pricing Toolkit. This outlines exactly how you can offer them “samples” without letting the “nibblers” take you away from your focus.

Let me know if that helps. :)

Dear Danielle: Should I Get Payment Up Front?

Dear Danielle:

I have a billing question. Should I ask for payment up front or after the work is completed? –KH

You don’t mention whether this is for project work or retained services. Either way, I have some advice for ya. ;)

If you’re doing project work, it’s definitely a good idea to get some kind of up-front payment. Here’s how I do it in my business… if it’s under $500, I tend to require full payment upfront. If it’s anything over that, I require 50% upfront.

Remember, you aren’t a client’s bank and they need to have some skin in the game. They’ll take you and the work you are doing for them more seriously. Plus, getting at least some payment upfront will not only help mitigate your losses should you end up with a dead-beat client, but it will help avoid working with flakes in the first place.

When it comes to providing ongoing support work, clients are usually charged an upfront fee called a retainer. By it’s very nature, it is upfront because they are retaining your services in an ongoing relationship and guaranteeing your time and their place on your roster. There is no deposit or 50% when it comes to retainers. It’s in full, upfront.

Here are some older posts related to this topic that I think you’ll find useful as well:

Help! Client Not Paying!

How to Avoid Getting Stiffed on Payment

You want to also check out these categories on my blog here:

Billing
Getting Paid

Hope that helps!

Should I Go Back to Work?

Dear Danielle:

I was wondering if in starting your business you also worked a job or ever decided to go back to work while building your business? My first fully paid retainer is coming to an end. The client is realizing she doesn’t have enough to delegate to continue retaining me. With unemployment running out, I am pushing myself to make this work. –LY

Yes, when I very first started my business, it wasn’t even really a business. It was more of a sideline I did while I worked a “real” day job. I was always striving toward working for myself, even if it wasn’t a fully formed, conscious thought at first. So many people (family, friends, coworkers) were giving me little projects that eventually I wondered if I could actually turn it into something real and earn a living from it.

I spent many years taking on piecemeal work like this prior to actually taking out a business license and officially forming my business. And I continued to work my day job all the while. Several years later during a company-wide round of layoffs, I was able to engineer my own layoff. I receive a very nice severance package and used that to fund my full-time business operations from that point forward.

It was somewhere during this time that I realized project work just wouldn’t ever afford me a living. This was also when I started realizing the difference between merely being a secretarial service doing odd, piecemeal project work and being a business that provided actual administrative support. Once I got clear and conscious about this distinction was when I really started making money. I still did and do project work that comes along that interests me, but my main bread and butter is and always has been the administrative support work I do for clients who pay a very nice monthly fee for that support.

Now, during my early years in business, I accidentally fell into a target market of the local retail shops, clubs and restaurants. These are businesses that are notoriously difficult to succeed in. They always had money issues and I was always having to deal with people who didn’t have the slightest clue about business. They drove me crazy, lol!

This wasn’t a market I intentionally chose. I just fell into it due to having a few clients in those areas and then having my word-of-mouth marketing take off. But I didn’t care for these clients  and all their “issues.” This was when I started getting conscious about who I actually wanted to work with and what fields dealt with work I found more interesting. I realized I didn’t want to work with start-ups (because they had too many financial feast-and-famine problems) and I wanted to work with a more sophisticated clientele in a more professional field.

It was at this time that I let go of all my current clients at that time in order to completely reinvent my business to cater to attorneys.  I took on a part-time job to help replace part of the income I lost in letting all my old clients go. But it was crazy-making. I found it really difficult, even at just a few hours, three days a week, to juggle the marketing, networking, business-rebuilding and everything else while working a job.

And it only took a couple months to realize that I was completely ruined for ever working as an employee again. I just could not stand the having to be somewhere at a certain time and report to anyone, lol.

So long story short, that’s my experience in case any of that is helpful.

In your case, I don’t want to sugarcoat things… Since you are down to the wire, you may need to go back to work for a time. And that’s okay. Because being in a position of need and desperate financial straits is never good for any business. You want to get your feet more firmly in the ground. And I can see that it could be a really beneficial time for you to take some of the financial pressue off, give yourself some breathing room and go back to the basics in setting up the foundation of your business and having time to study up a bit more marketing and developing those all-important consulting skills.

And the reason I mention re-setting up your foundations and working on developing your consulting skills is because those are the things that would have better helped guide and inform the relationship with this client right from the beginning. Getting clear about a target market and ideal client helps you in making sure you are working with a sector that has money (rule #1: it must have money to spend and a need for what you do; you can’t force a horse to drink water and you can’t afford to work with anyone who can’t afford you).

Likewise, in developing your consulting skills, you will become better at leading and coaxing the consultation conversation along so that you are identifying what areas of support clients need help in and better identifying what the level of work may be. Of course, this client could be just using that as an excuse, but either way, an improved skillset in consulting would help you identify these issues right from the beginning. I would encourage you to put consulting skills at the top of your list as you rebuild your business.

Hope that helps!

Help! Client Not Paying

A colleague reached out to vent on a listserv I belong to. She shared how a client she works with on a project to project basis had gotten several payments behind to her. He’d stall, put her off, and whenever a due date that he promised to pay rolled around… you guessed it–he didn’t pay. AND to add insult to injury, he was starting to get snippy with her and tell her to get off his back. The nerve of some people, huh?!

Here’s my advice to her:

Dear Peeved:

So sorry for your predicament.  Unfortunately, it’s an all too common one for folks in our industry who work on a project basis. I don’t know how this one will turn out for you, but there are definitely steps you can take (and things you can rethink) that will help improve your odds for ensuring payment in the future.

1.  Always, always, always, always work with a contract. Did I mention “always?” You perhaps are very aware of this already, and may have even had this client sign a contract before working together. As you know, a contract doesn’t guarantee that you will get paid or that people will always be honorable and have the integrity to abide by their agreements. But contracts are legally binding and enforceable agreements. Should it get to that point, they will definitely help you prevail should it become necessary to take things to a Court.

Now a lot of times, that’s more work, more money and more energy than the debt is worth. That doesn’t mean you forgo using a contract. A contract does a lot more than just formalize your agreements. A contract helps clients take you and your business more seriously. It shows that you are a professional and helps ensure that everyone is on the same page and knows what is expected from each other lest anyone conveniently “forget.”

Likewise, it also helps ensure that you are working with more serious clients. The ones who don’t want you to operate professionally, maybe because they have intentions to stiff you in the first place, will be shooed away. So never cut corners on this, no matter how big or small the project.

2.  If you work on a project basis, get some kind of payment upfront. Would a grocery store let you take home groceries and decide whether or not to pay later? Of course not, and neither should you allow your clients to do that. You are not a client’s bank. It’s not your obligation to extend them credit (especially not with new clients you have never worked with before). And the time, energy and expertise you expend on a client’s project are very tangible, valuable–and finite–resources in your business. If not 100%, get at least 50% payment upfront. It’s perfectly acceptable, established professional business practice to do so. Not only does it help clients take your business seriously, it also shows that they take their project seriously. If it’s not worth it to them to have some skin in the game, then it definitely should not be worth it to you to work with them. In the event that they don’t pay the balance, at least you’ve got half your losses covered.

3. Don’t let clients go into debt. You don’t do anyone any favors by allowing them to continually accrue outstanding debt to you. You also have a responsibility to mitigate your damages. That’s why you see work-stoppage clauses in contracts that tell clients:  No Pay-No Work. Immediately cease any further work until the client gets all outstanding payments to you in full.

4. Work with clients who can afford you. Clients who aren’t in profitable businesses or industries are going to more often be problem payers. It’s just a fact. No amount of wishful thinking is going to change that. Wish them well, but you have yourself to think about first. You can’t help more people (or stay in business long) if you are constantly trying to rescue folks who need to rescue themselves. You aren’t going to “save” them by taking on their responsibility or their lot in life. All you’re doing is enabling them while harming yourself. Save your energy for the clients who can easily pay. It’s really the healthiest, kindest thing you can do for yourself and the world.

5. Work with honorable people. The minute you see any inkling that a person is less than honest or ethical, run away. Fast. Don’t fool yourself into thinking you’ll be the one person in the world they would never do wrong. That is a fantasy. There will be a day they do it to you. It’s just a matter of time.

6. Perhaps rethink the whole project basis. Project work is grueling. You have to constantly chase down new projects, new customers, to survive. While you’re working on one project, your mind is thinking ahead to the next 10 you have to get to pay the rent. It puts you on a neverending hamster wheel of marketing and networking. And the administration you put into answering RFPs, conducting consultations, negotiating terms and contracts, invoicing… often it costs more and expends more time and energy than a project even earns!

Administrative Consultants who work with clients on an ongoing, continuous basis and charge upfront monthly retainers make more money and have much simpler businesses to run. They have better cashflow, less overhead and administration, and have to do way less marketing and networking once they’re established. There’s much more ease and continuity in the work and the client relationship, which, in turn, brings more ease and continuity into your business.

And there’s nothing that says you can’t also opt to take on intereresting or lucrative side projects that come along if you choose to, “choose” being the operative word. Retained Administrative Consultants have more choice in their business because they aren’t constantly scrambling for income and cashflow the way project workers must. Therefore, they get to pick and choose what they want to expend their energies on in terms of other opportunities that arise. They get to decide if a project is worth their time (i.e, is the money it will bring in worth the effort?). They don’t have to be distracted or have their energies divided or waylaid by nickel and dime work if they don’t choose to. Doesn’t that sound like a much nicer kind of circumstance and way to operate your business?

Robbing Peter to Pay Paul

Thinking along the lines of the last Dear Danielle question, I was reflecting on how often I hear colleagues talk about all the project work they do, but never getting ahead.

When I say project work, I’m talking about the one-off transactions done for transient clients on a one-time, sporadic or occasional basis as opposed to ongoing administrative support provided within the framework of continuous monthly relationship with clients.

The complaints I hear so often involving project work generally fall into the category of profitability and lifestyle.

For example, a colleague will come to me explaining she’s been advised that project work “pays the bills” when you gotta keep the lights on, feed the kids, pay the rent, etc.

The problem with that strategy is that it’s not a strategy at all. It’s more like robbing Peter to pay Paul.

It’s simply reacting to the immediate circumstances—the need for cash—rather than proactively planning, setting foundations and working in a way that’s going to build long-term sustainability and profitability and create a business that meets both your long-term financial AND emotional/happiness needs.

What does that mean?

Well, when a colleague comes to me with this kind of question, the first thing I ask her to think about is what she wants for life and and what kind of business would support that vision?

The answer is generally something to the effect of “I want to be self-employed; my business is as much about making an excellent living doing work I enjoy as it is affording me the time and freedom to live the way I want.”

Most are not interested in “creating an empire.”

When that’s the case, the next thing I get them to think about is how to go about their business so that they can achieve those things.

The answer lies being smart about the kind of work you take on, the kind of clients you work with, and the platform from which you deliver your services. It’s going to involve charging profitably and setting the kind of standards, boundaries, policies and procedures that allow you to work effectively, earn well and live well.

Profitability and being intentional in your business model are the two things that are going to give you choices in your business.

So, if you are on a constant treadmill of project work, with constant turnaround of consultations, proposals, contracts and deadlines to manage, when are you going to have time to do the things you enjoy?

How much harder do you have to work and market to keep those projects coming in?

When will you find time to work ON your business?

If you are working at the beck and call of clients, how much freedom does that give you to call the shots in your business?

How much more freedom and flexibility would you have if you started working with clients as an administrative expert and focused exclusively on that work instead of thinking of yourself and working with them as an assistant?

If you aren’t charging profitably, how is that going to help you build long-term financial gain?

If you decided to work in ongoing collaboration with clients (which is the definition of administrative support) instead of sporadic project work, how would your own administrative chores and processes decrease in your business?

Would your cashflow be improved?

How much better would your service be to clients because you are growing a meaningful shared body of knowledge of their business that in turn allows you to serve them better and improve their business?

How more value would they find in that?

Would that higher value allow you to charge more for your expertise?

And if you were making more money, can you imagine how that would enable you to work with fewer clients and thereby have more freedom in your business and your life?

What could you do with that increased time and freedom? Create new products for your clients that held passive income opportunities for you? Work in a more relaxed, less stressful manner? Take on choice projects as you see fit instead of having no choice about the projects you take on because you “need the money?” Take a vacation when you felt like it?!

Food for thought. ;)

Dear Danielle: Should I Get Upfront Payment?

Dear Danielle:

Do you suggest requiring an up-front payment of any kind from clients? –CM

Absolutely!

Does your supermarket let you take your groceries home and eat them before deciding whether or not to pay for them?

Okay, I’m being a little flippant, but, seriously, this is business, not charity. Allowing folks to pay after the fact not only leaves your business unnecessarily vulnerable, but it amounts to extending credit, and credit is something that must be earned, not expected. I don’t know about you, but I’m not in business to subsidize or finance someone else’s business.

I’m not sure why the Virtual Assistant world continues to have a problem understanding this, but it’s actually very common for businesses to expect 100% payment upfront.

If you are doing project work, I really recommend you require 50% payment upfront or the per-hour minimum you have established in your practice (whichever is greater), with the full balance due in full upon completion and prior to delivery. You could even bill in other percentage increments throughout the project to correspond with completion of certain phases.

Requiring deposits and upfront payments (such as retainers) helps your business in a few ways. First, it weeds out anyone who isn’t serious about having the work done and might end up stiffing you (with a deposit, at least part of your business interests are covered). Your business cash-flow is improved, and administrative time reduced. And you end up getting a whole other (better) kind of clientele.

With new clients on Pay-As-You-Go (PAYG) plans, who pay by the hour rather than on retainer, I would require a first-time deposit in the order of something equal 3-5 hours work or your smallest retainer fee. It’s sort of like earnest money, and helps weed out those who aren’t going to be committed to working together.