How many times have you had to pay a deposit or make a full payment upfront for something?
You put a deposit down on a house.
You might pay one if you’re buying a car.
You may also pay some money in advance when you book an event space.
It’s perfectly normal, so are you taking any kind of deposit for your service?
If not, you should be. Here’s why:
Until they book, your customer is still a prospect
Actions speak louder than words.
Your client may say ‘Yes’ face to face, over the phone or by email, but until they hand over some money, it’s still just a ‘Maybe’ or, even worse, a ‘No’.
You’ve got to ask for that deposit and clinch the sale.
Transform the prospect into a paying customer or client.
A deposit will improve booking confirmations
Now that the client has paid some money upfront, they’re likely to go ahead with the project.
There’s also a good chance they’ll see it through to the end, rather than drop off the radar suddenly, which sometimes happens during projects and can cause the service provider(s) anxiety, not to mention frustration.
However, if the client cancels the service or pulls out of the project halfway through, they’ll have lost the money, which is never a nice feeling for anyone.
The other plus, in terms of the project, is that asking for a deposit or full payment in advance can help the project to run more smoothly.
The fact that the client has already paid will see them take a more active interest in how everything is going.
They’ll provide (useful) input rather than obstruct the project.
Your cash flow will remain healthy
A client who books and cancels is a client that costs you money.
You’ve already spent time advising them in the initial communications.
You’ve designated time in your schedule for them and you’ve (maybe) made plans for the money.
Financially, the cancellation may have left you in a tight spot you hadn’t envisaged.
Request a deposit or upfront payment, however, and you can keep your cashflow healthy.
You may need to buy certain materials or equipment to provide your service.
You might have to hire a freelancer or contractor.
You could have other expenses you need to cover.
All of this could put you out of pocket, but now you’ll have the money to meet your expenses (or at least cover part of them until the next payment).
Discount for payment upfront
Customers can see payment upfront as an inconvenience, especially if they’ve got to pay a large sum of money all in one go.
For them, it can be as much of a risk for them to pay in advance as it is for you to not ask for the payment first. They’re scared of paying but not receiving the product or service to their satisfaction (or receiving it at all).
You can, however, make the deposit to their advantage.
One strategy is to offer them a discount for paying in advance. If they pay in full, they can receive a package, course, etc. for less than if they were to pay in instalments, for instance.
Note, however, that if you’re going to follow this strategy, you can’t allow (too many) reschedules.
To remain profitable and efficient, planning is essential. A change in schedule can throw a real spanner into the works.
Customers don’t always realise this.
If they wish to re-schedule, it must be at your convenience.
You’ve given them the discount and saved them some money (at your expense). Don’t let them mess you about by chopping and changing.
A few final words
Maybe you have your reservations about asking for an advance payment.
I can tell you now, though, it’s perfectly normal. A lot of businesses do it.
It’s a way to protect yourself, financially. The client is still just a prospect until they put some money down. When you take that deposit, you transform them into a paying customer.
Time is money.
You can engage in consultations with the customer; agree to provide the service; and see them walk away when it’s time to move forward.
Worse still, you can provide the service and suddenly be tuning in to radio silence when it comes to collecting payment.
All of that is time is you could have spent on a paying client.
Make that small request — and have a big impact on your business.
For the better.