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they’ll depend on your client relationships or the project type. But there are billing strategies that will serve you better, in certain
instances, than others.
Collecting money up front
One strategy you may not have considered is to require full or partial
payment for your services up front.
Want to weed out clients who aren’t serious? Require some payment up
front. Want to avoid hounding bad clients for months? Require payment
up front. The amount of time you have to spend collecting outstanding
payments are hours out of your valuable week.
In short, there’s no need to be afraid about asking for a deposit for a
professional service. A common model is to charge 50% up front, and the
remaining 50% upon completion.
“We do for this for residential,” Byrom says. “If it’s someone that we work
with all the time, then we don’t. But if it’s someone like, ‘Hey, we have a
little boundary survey for our property.’ If we’re going to take a project on
like that, or even if it’s like a new client that we’re unfamiliar with, a lot of
times we’ll say like 50% up front. Because it’s just the unknown.”
Michel agree that he’s a fan of collecting a retainer via credit card in advance.
“Especially if it’s boundary staking type of work, get a retainer or get that credit card number before invest in that,” he says. “You run
into situations where someone says, ‘oh, can you please state this boundary for me?’ And then they find out, oh my neighbor’s fence is
two feet on my property. They should pay for that. And then all of a sudden you’re in a looper. You’d never get paid for that. So you got to
take that retainer head time, and you’re going to weed out a lot of undesirable clients.”
Again, if you have pre-existing clients that you trust, this method is probably not necessary. But there’s no reason you can’t charge some
clients a deposit and grandfather other clients into your circle of trust.
Time & materials vs. lump sum
You have two major options when it comes to how you bill: lump sum, or based on time and materials. There are cases to be made
for each type.
Time & materials:
● Makes sense when scope is unclear
● Makes sense for almost all construction projects
● Guarantees you’ll get paid for the time and effort you put in
Lump-sum:
● Makes sense for boundary and topo work
● Makes sense if you have a client who wants a firm number, without any surprises
● Inspires you to become more efficient so that you can benefit from higher profit
“In general, we try to do percent complete. I look at percent complete is the more efficient we can be,” says Byrom. “I like to be able to
say, Hey, let’s become more efficient. How do we do this? And then use that to become more profitable. because if you’re doing T&M,
then your billing rate is basically what your profit’s built into. So you’re going to have to make sure that billing rate is at a rate that’s
right.”
Michael says that many clients, such as landowners and farmers, prefer to avoid the headache and confusion of T&M. Instead, they
want a straightforward number.
“If you have a farmer that wants to subdivide a piece off a quarter section, they don’t really care that you charge this much an hour and
it’s going to take this much. Do you have an estimate? Just tell them it takes $5,000. This will be done. And that’s where they want to
hear. They don’t want to hear oh, here’s my hourly rate and blah, blah, blah. Just add it up. You figure it’s going to be $4,000. So you tell
them $5,000,” he says.
Overcharging slightly in cases like these isn’t sleazy, it’s part of the process of mitigating your risk. Some clients you’ll clock in under the
lump sum number, but others you’ll spend extra time on.
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