When my wife and I got married we were so excited. Planning the food, music, guests and most of all the honeymoon. Throughout the process it felt like we were giving a deposit every day to someone different. This was to have them put us on their calendar. I look at it now and how or industry is no different. You are in high demand like the wedding cake company and the client needs to give you a deposit to work with you.
We have many clients that are adamant about collecting a 60% deposit on every job sold. Since those jobs are usually around $25,000, some homeowners have a hard time giving you money at first. But securing it—even some part of it—is a matter of principle. The reason is that when people invest their money they tend not to go somewhere else and will secure a place on the contractor’s schedule.
Somethings to know about deposits:
Know what you can legally ask for. Some states regulate the amount of money, or the percentage of the job, that a contractor may request as a deposit. Most of our clients ask for the product costs up front and the labor costs as finished. Some even ask for a % upfront and then more divided out percentages throughout the job.
Be consistent and build the deposit into your sales model. Asking for a deposit check may cause some stress. Understand why it’s necessary. “I use to tell homeowners that this is what our policy is, and we can’t put you on the schedule without a deposit.” If the homeowner does not want to pay a deposit that could be a red flag for the relationship of payments. It is a trust issue. Take them to a recent job and let them see your work in person.
Discuss the deposit as part of the overall payment plan. It’s much easier to ask for a deposit in the context of the overall project payment plan. That makes sense to homeowners. Prepare to stand firm. However much you ask for, be sure you can explain why you need that amount. Awards and testimonials also help calm the client when asking for the deposit. Anything that makes you reputable in the business builds trust.
Be creative. Commercial building managers budget for maintenance and repairs. Homeowners don’t. So not everyone who needs a new roof or gutters or basement waterproofing can write a check, let alone reach for their wallet. Often that deposit may be more than they thought it was going to be. If homeowners want the work done but hesitate, it’s up to salespeople to find out if the deposit is standing in the way. “That starts a negotiating process. You need to find out when they can get it, and write on the contract that the deposit will be mailed on or before that date.” The company pulls permits and orders materials after the deposit has been received.
Choose your payment method. Many companies take deposits via credit card payment. That’s convenient for homeowners but it costs businesses 2% to 3% in bank fees. State your preference. Don’t assume that a written check is money. To Rose, “it’s not real money until it has moved through the bank.” He won’t order materials or pay a subcontractor before the check has actually cleared. Clients have asked if they can post-date the deposit check, or write two at different times in the week. “That’s an honest, up-front conversation,” he says. “But the check that was written on the account that was closed, or the one that bounced when no one told me there was that possibility … that tells me we have a trust issue.”
So build the relationship, build the trust and get the deposit. The deposit takes your client off the market. They are married to you now. So take them on a honeymoon of renovation. See you next week.