Securing work from a customer is always a great feeling – all that hard work of quoting and negotiating seems worthwhile when you get that call to go ahead from your customer. However that feeling can quickly disappear if the customer doesn't agree a start date or worse still pulls out or tries to change dates at the last minute. This can leave you out of pocket and twiddling your thumbs when you could be earning.
So how can you protect yourself from the situation of lost work and in turn lost income? One of the simplest ways is to request a deposit upfront from the customer once they have accepted your quote.
Not all electricians are comfortable asking for a deposit, in fact most electricians are still not sure whether they should or could ask for a deposit, but today we will discuss why taking a deposit is a good idea and why it won't harm the relationship with your customer.
Dispelling the myth that taking a deposit is a bad idea!
There is often an unspoken feeling or myth that asking for a deposit is in some way a bad idea. Taking a deposit is not a bad idea. What is a bad idea is taking a deposit and then not turning up to do the work. Unfortunately this has led to some hesitation on both sides about paying/asking for a deposit to begin with.
However taking a deposit safe guards you and your business against potential losses such as the purchasing of materials and overheads in advance of the job starting. It also protects you against turning up to the job to find the customer no longer needs the work doing or got someone else to do the job for them and didn't let you know.
No doubt, the experienced sparkys amongst us will be familiar with the situations above which is why it is important and not a bad thing to do to ask for a deposit.
Taking a deposit means your customer is serious about having the work done and you can confidently plan your schedule. When you have a business to run, you cannot afford to be let down by clients. It is not unreasonable to take a deposit up front at the point at which you agree a specific date for the work to start. Customers who are serious about the work won't have a problem with paying a reasonable deposit upfront to not only confirm the booking but also to contribute towards the upfront cost of doing the job.
Asking for deposit is becoming more commonplace now. Here at Trade Skills 4 U we take a deposit for all our bookings on the day we receive a booking request. We ask that the balance is then paid with 21 days of the course beginning. This safeguards us against last minute cancellations or non-turn ups when someone on the waiting list could have had the place.
Taking a deposit is not only peace of mind for you from a business perspective, but also means that your customer is not planning on letting you down. Almost all genuine customers are happy to pay a deposit upon booking.
Taking a deposit protects you incurring costs if the customer doesn't pay
Not being paid at the end of the job is quite rare thankfully, however you do not want to risk your business cash flow by paying for materials out of your own pocket. This is another perfectly valid reason why you should ask your customer for a deposit when securing the booking. If a customer is unable or unwilling to pay a deposit then this could be an indicator that there could be problems with getting paid further down the line. As such taking a deposit is a great way to identifying these potential issues before you start the work.
How to ask for a deposit
You should always make a customer aware that you take a deposit when you quote. It should not be a surprise to them once they confirm they want you to do the work. When you first meet with a customer it is always worth explaining why you take a deposit and ensure they are confident that you will turn up and deliver what you say you will. If you are established with a good online reputation on a site like Checkatrade then customers are going to feel more comfortable paying you a deposit as there is some comeback if you do not show. If you explain that by paying a deposit now will guarantee you the slot they want in your diary at a time and day they choose, they are normally happy to pay the deposit that you are asking for.
If you are new to the industry you may want to hold back on asking for a deposit until you have a more solid reputation to give customers the confidence to pay you in advance.
Asking for a deposit of 30% on every job above £200 is not unreasonable and will protect you and your business from being out of pocket. It is not normally necessary to ask for a deposit for jobs under £200 unless there is a large portion of up front costs.