7.
Re: But I have to charge... May 6, 2008 5:37 PM
Here is some advice for you that worked for me when I had my computer consulting business for 10 years...
If the job requires an outlay of cash from your own pocket for materials, get that amount as a deposit up-front just in case. So for instance:
If my customer wants a new file server for his business and my quote is as follows
Server $2500
Hub $100
Wireless Router $50
Installation and Configuration (25hrs@120/hr) = $3,000.00
Subtotal: $5,650.00
Deposit: $2,650.00 (roughly 50%)
Balance due on completion: $3,000.00
My cost out of pocket for this job upfront (upon contract signing) is: $2,650.00 - require this as your down payment.
Balance due upon completion is: $3,000.00
Your exposure? Well if the customer backs out you have to give them back their deposit but can charge a "restocking fee" or something similar. You then return the goods to the manufacturer for a refund or use them for another job if possible. The manufacturer may charge a restocking fee so this is why you charge one as well and use it to pay the manufacturer's fee.
If the customer refuses to pay the balance because he doesn't like the completed project, you have at least broken even and can take the matter up with a claims agency or lawyer. You haven't really "lost" money in this case except for the installation charges, which is really 100% profit unless you are paying an employee to do the installation for you. Your employee makes (hopefully) significantly LESS than $120/hr though so your loss in this case can also be "absorbed".
If all goes well then the customer will be happy and pay you the balance upon completion and they are also happy because they didn't have to pay the entire amount up front. They also have the reassurance that they wouldn't have to pay you in full until the job is done professionally and to their liking.
Rich
