Long Lead Times And Deposits


From original questioner:

I have a customer I've done work for in the past and we both walked away from as expected. Me, happy with the pay, him happy with the job. It was a remodel done to his offices, bathrooms, break room and examine rooms.

Now he wants us to come in and do the last room, an exam room. The job wont come through my shop for another 4-5 months. We bid it back in December, and even negotiated with him for being a repeat customer, now 5 months later, he still expects the same price. I can deal with that, but he's less than happy about putting down a deposit for a job 4 months out. By the same token, he wants to hold on to my bid which will be 11 months old by the time the job is completed...the hold up on both the start and install of the job has really been dictated by them, his office manager plays a big role in this.

On a job like this I typically get 33% front, 33% a week prior to installation, and balance when we're done. What's the general experience you guys have with this scenarios?

From contributor Ji

Simple-hit the guy with a 5% non-refundable retainer, 30 when you actually start the job and standard terms.
"Our mission is customer satisfaction"

From contributor Le

One or the other.

Either he puts a down payment towards the current pricing structure or he takes the chance that the price might go up in that time frame.

You can't have it both ways. It sounds like you have already given them a good deal by allowing the old price to stand.

Business is business.

From contributor De

What Leo said. You can contract it and give me money and you can have that price or we can re bid it next year and prices could go up.

From contributor Jo

thanks for your input guys, i was starting to think i was out of line or going nuts..haha.

From contributor mi

Keep in mind, your customer can not go out and obtain another bid based on older pricing for materials. Any new bids from a competitor would be at current pricing. If you are going to honor the old price, stand your ground on the other terms, or at least be sure they work for your operation. When customers start messing around with my terms, I start asking them what they want to surrender.

From contributor ZD

Have an honest heart to heart with the client.

Most people are understanding - especially if they are business types.

From contributor Jo

Zdraft,that's what i tried to begin with,and how our conversation ended Wednesday.I'm suppose to pick up a check Monday(tomorrow),or i move on to the next client.we'll see,

From contributor Da

It seems to me that you are right in principle, but what does the quote/contract say? I'm guessing it doesn't say anything, or you would not be asking the question. So, at the least, you've learned something for the future.

At this point, with no clear answer in writing, you have to decide if you want to do the job for less money than you'd like, and possibly strengthen your relationship with an "advertiser" and potential future customer, or sever ties. You have far better understanding of the impacts than any of us.

From contributor Jo

alright so monday has came and went.
this is how it went down.
customer,"the lead time is too long to justify the deposit,but if you PROMISE me youll leave me a slot( 4 weeks long) on your schedule,i promise ill let you do the job at the price at that time".
me,"sorry, whats to say you wont change your mind all together,sell the business/building(mostly remodeled) or flat out get someone else,we all know changing our mind is a basic right we all have"
customer," well i dont feel comfortable giving out a deposit because you will have no incentive to do the actual job"
me,"other than the balance and keeping my business and personal name in good standing ,you're right i wouldn't"
until this point we were having a very light hearted conversation.
at that point,he felt like I didn't trust him,which confused me.so he asked again if id hold an open slot or he would find someone else,that's when i said he was, as previously stated, very free to change his mind.......
bare in mind,we (my dad and I) built the original cabinets we took out last summer in 1982,and we did so for the only reason that he no longer like the red oak look all in tact...haha.
finished the job no issues 30 years ago ,finished again 1 year ago, and he has an "issue" ...

From contributor De

My impression? 33% is too steep for a retainer. 10% is more realistic and would probably make your customer a lot more comfortable and you could have avoided the whole situation. There's a difference between a retainer and a deposit. A retainer holds a spot, a deposit is used to actually purchase materials. Asking for a deposit for materials 4 months in advance makes you look desperate for cash, which despite the history between you two is why your customer is uncomfortable.

From contributor Zd

I respectfully disagree with Derek.

10% Means that if he finds someone who is 20-25% cheaper in 4 months- then he's still ahead by walking away from his deposit - while you are turning clients away to hold his spot - and i'm pretty sure that 10% will go little way to paying for your loss of business.

Stick to your guns, respect your business and the obligation you have to your guys and family to keep it profitable.

Maybe settle for 20-25% deposit, other than that - don't waste your time and find a client who appreciates your skills and reputation.

From contributor Ji

I agree with Derek. 33% is to high for a retainer.
If he can find someone 20-25% less, four months later, obviously your not keeping your business competitive in your market.
Who's turning away clients? Maybe you need to adjust your staff level or schedule to accommodate more than one job at a time.
And your getting four months to ramp up or down. I'll take that all day long.
If a customer ditches over 10-15%, four months down the road, after placing a retainer, there's bigger issues between you two than money.

From contributor Jo

well,i'm sticking to my guns..
i feel like i negotiated with him enough to not give in anymore.
4 months to ramp up or down,,we're running full bore now and were gonna doing his on pretty much overtime which i don't enjoy paying,much less on a job i had been beaten out of 10% right out of the gate in an effort to keep an "existing" customer.i feel comfortable he will not find either the quality we provided or professionalism we did in,oh well so be it.
i know there is different opinions on the matter,and everyone runs their biz as they see fit,but every market/area is different...
thanks for your input.

From contributor Da

Side question. Does OT really cost you any money?

My opinion, in a manufacturing environment, not generally. 50% of the actual direct labor costs is typically less then the associated overhead, which is "free" on OT.