Flat Rate Deposit

Karl B. Andersen

Karl B. Andersen

Joined
Jul 27, 2003
Messages
5,666
Here just over the last few days, I've been re-hasing my finance practices. Some customers don't want to pay any deposits. Some want to pay 1/2. Others pay in full right up front! Others like to pay as it goes along.
Really gets confusing.
In 10 years, I have never been asked to make a knife that I could not sell otherwise, so I'm not worried about getting stuck with a knife that I can't get money out of, but at the same time, I like to get some type of comittment from a customer. I think I am going to start asking for a "flat rate deposit". Doesn't matter if it costs 400 or 700 or a thousand. I am going to start requiring $200.00 from everybody. So when the time comes for finalization of the "deal", I'll know right away what was paid, as I will get the same from everyone and we're all on the same playing field.
Surely make bookeeping easy.
How does that sound to you as a customers/makers?
 
I'd recommend no deposits unless you need to purchace
exotics which you don't keep on hand.
 
This is a slippery slope, Karl. How many threads are there on BF about the perils of accepting money beforehand? :confused:

Go forward: Wouldn't you like ALL the money in payment once the knife is finished? Remember that deposit owns a piece of you now, whether you think so or not.

That said, I understand your point about one price, but isn't that an easy bookkeeping task? On the order slip you write the buyer's deposit. Done.

I'm in business too. I get edgy when a client pays me upfront. But, like you, I haven't had an incident. So, it's all about management and communication and timing.

Coop
 
I guess my point is that there are some customers that INSIST on paying some up-front money. It makes them feel better.
It's really bad business to say "no" to money.
I once had a very wealthy individual that told me if ever anyone wants to give you money, don't ask why, just TAKE IT!
Then, figure out what to do with it.
I'm just going to simplify my dealings.
I'm think I'm going to go flat rate and wondered if anyone else used the same principle.
 
Karl, deposits seem to work for some makers but have ruined others. If you and your customers are comfortable with a flat rate deposit, then by all means, put it into practice.

I personally, want full payment when the knife is finished and I will not make something that I can't sell if the customer backs out.
 
SharpByCoop said:
This is a slippery slope, Karl. How many threads are there on BF about the perils of accepting money beforehand? :confused:

Go forward: Wouldn't you like ALL the money in payment once the knife is finished? Remember that deposit owns a piece of you now, whether you think so or not.

That said, I understand your point about one price, but isn't that an easy bookkeeping task? On the order slip you write the buyer's deposit. Done.

I'm in business too. I get edgy when a client pays me upfront. But, like you, I haven't had an incident. So, it's all about management and communication and timing.

Coop
Click to expand...

Those are all excellent points. I just need to do something.
You're right. Bookeeping isn't all that difficult.
When I'm doing a "custom" knife I had just as well do "custom" financing.
I did see a good plan the other day,
"Easy financing available! 100% down - no payments."
 
Personally, I HIGHLY DISCOURAGE taking any deposits on orders. The exceptions I would make are very specialized pieces that would otherwise not be readily sellable, deposits for expensive materials, and any special circumstance where you have reason to believe the client may not come through when the knife is completed.

Again, in my opinion, when you accept ANY money from an individual, that person owns a piece of you, and you are fully obligated to that individual. In some cases you become that person's slave, at least until you deliver the item(s) ordered. If deposits are taken, and deliver dates are set, you have just trapped yourself. That means that regardless of what may happen in your life, or to you personally, you have obligated yourself to have that specific knife completed and delivered on the date you specified. It just places you in a bad position.
Imagine this: You have taken a number of deposits, with delivery dates being set, and then you either have a family emergency, or a physical injury. Either being an expensive situation, and you are unable to deliver the knives you promised. All of a sudden you are in a position where money is tight, and then you have to reimburse deposits. Not a good position. You would like to think that people would be understanding of your circumstances, but if you've already taken money from them, I'm here to tell you that NOTHING will matter.
With the way things are in the knife world today, I also think that if you make a blanket policy of requiring deposits, you'll be hurting your knife sales in a big way.....may people who would otherwise order a knife, will not do so if a deposit is required.
 
Understand that when you take a deposit, you enter into a binding contract. If someone wants money from me upfront, they are going to have to put down the full conditions of the sale in writing, so that I know what I am getting into.

You should talk to a lawyer about what is involved in taking deposits. It's not as simple as just requiring your customers to send you money upfront.
 
OK - never mind.
Forget I said anything.
In all seriousness, I respect each of your opinions.
That's why I came here this morning.
I have this list that keeps getting looooooooooooooooonger every day for knives to deliver at this year's Blade.
February to May is a long time without any income.
Could be worse - right?!!?
 
From my viewpoint deposits on knives using materials that are normally in stock at the shop are a problem waiting to happen...I hate them.

Exotic materials like rubies, diamonds, saphires, sterling silver are reasons to take deposits.

Exotic designs that may not sell in the open market also require a small deposit to cover holding that knife until just the right customer comes into the shop looking for such a knife if the original customer backs out.

In my case I never know when some sort of injury or problem will come up and delivery will be delayed beyond a reasonable length. When that happens I get severely stressed with regard to the inability to deliver and holding the deposit only increases that stress....stress is not good.

Customers do back out for many reasons, usually financial or family problems, then the problem comes to whether to return the deposit or not.

What determines whether the customer gets the deposit back is up to you and local laws. In our country contract law provides that a contract that runs longer than one year is void after that period unless agreed upon in writing up front. In other words I can hold a customer responsible to pay in full for the product only if I complete and am prepared to deliver the knife within one year of making the agreement. If I take longer than one year the customer can demand his deposit back at any time over one year and get it.

Do I like deposits....definitelly not! Do I take deposits...under protest. Why do I take deposits...my business manager (wife) forces me to do it in some cases.
 
I'm going to deviate from the thought in this thread a little....not to be negative, but to shed some light on the deposit-taking thing.


I require a deposit whenever possible to cover materials. I can't afford to make knives otherwise. *shrug*

I'm not sitting on a $5K nest egg to draw from for supplies, etc.

Also, I want a commitment from the customer.

It's my reputation on the line, not theirs.

Make sense?



Anyway, I haven't really had any issues come up with requiring a deposit.

Of course, I don't make $1000 knives, nor do I use ivory, mammoth...not even that much damascus. And my turnaround time is decent enough to keep money coming in...sometimes even before it rolls out! :D



Like I said, my position may be a bit different from the rest.


I think good communication is more important in a deal than whether or not the maker requires a deposit. Good communication during the process cuts down a lot on the problems.


Just my 0.02, YMMV
 
Karl,

Many people who pay upfront (deposit or in full) feel that this may move them ahead on your schedule. Even though you tell them it won't.

Once someone has given you a deposit many will feel free to check on the status of the knife...like every other day!

Easily one of the best business decisions I ever made was not taking deposits.

Why? Because very few makers deliver on time. Not a knock, just a fact of the business.

Les Robertson
Custom Knife Entrepreneur
www.robertsoncustomcutlery.com
 
Good thoughts, Les. I will weigh them carefully.
I also liked Daniel's response:
"I think good communication is more important in a deal than whether or not the maker requires a deposit. Good communication during the process cuts down a lot on the problems."
 
Just make your business practices clear, obvious, objective, including on your web site. Include something like "Please do not insist on a deposit, this policy is for your peace of mind and mine." Having the policy clearly written will strengthen your position.
 
Karl B. Andersen said:
I have this list that keeps getting looooooooooooooooonger every day for knives to deliver at this year's Blade.
February to May is a long time without any income.
Could be worse - right?!!?
Click to expand...
OK, we're at the heart of your problem. It sounds like these buyers aren't even ready to PAY until Blade?

Tell them you will be happy to make and deliver at Blade, but will require payment when the knife is finished. Like in April.... Tell them you cannot stall an order. First in--first out.

Coop
 
Maybe my opinion won't matter as much as some of the above well regarded makers, but as a "consumer"... even the little guy's opinion should resonate. I have had several dealings with custom knife makers... after my first one, which was a complete disaster, it's a wonder there was more in the future. My first ordered custom was paid in full per maker request. I didn't know any better at the time. I got jerked around more than a puppet with a spastic puppet master on crack. Delivery almost a year later than initially promised. Shoddy job on the grinds, probably from me "pestering" the maker once a month about when it was going to be done. Some of you might be shocked if you knew who I was talking about... he seems to be well respected now. Too bad, I'll never order from him again.

Second custom went very smooth. Third attempt was again a nightmare. Was set to order three knives at the same time. No special materials, only the request for one of the sheaths to be a left-handed one, which I was assured of being no problem. Things go to hell when maker decides to require 50% deposit, which wasn't initially brought up. Order cancelled despite alleged claims of starting project. Maker has subsequently gone bye bye in the knife world. I wasn't the only one getting dicked around.

Bottom line? us customers expect more of the maker when there is a deposit involved. It's not a good idea, and I automatically eliminate any maker that requires a deposit.
 
As a knife "buyer", this has been an interesting thread for me.

I had never really though about all the senerios that have been mentioned.

I am the type guy who does not mind giving a deposite or even paying up front.... and in most cases would rather do that. If I have checked you out enough to want to buy a knife from you.... I figure you are not gonna screw me... on purpose anyway..... anything unexpected can happen & that is understandable , IMO anyway....;)

Also, I am not gonna be breathing down your neck asking is it done yet ...as long as it somewhere close to when you said it would be finished. [ 2 or 3 weeks close ] OR there has been comminication explaining any major holdups. No problem.

NOW, I reazlize one of these days I may get the "short end of the stick.." :D .... IF I have mis judged someone and I do... oh well, in the big scheme of things.... probably worse has happened.

NOW.... all that being said. There are some people I would not give a "red cent" to untill I had the knife in my possession...... :D ..... PERIOD

That is one way BF helps out a lot IMO. There is nuch good info out there to check people out with .... :thumbup:

Anyway, thanks for the interesting thread men. I hope it was OK to post this here from my perspective as a "buyer".

Thanks,
chuck
~~~~~~~~~~~~~~~~~
 
SharpByCoop said:
OK, we're at the heart of your problem. It sounds like these buyers aren't even ready to PAY until Blade?

Tell them you will be happy to make and deliver at Blade, but will require payment when the knife is finished. Like in April.... Tell them you cannot stall an order. First in--first out.

Coop
Click to expand...

Thanks, Coop!
Good thinkin'.
I new I came to the right place.
 
Karl,
I also fall in with the "no deposit" crowd. As another poster already stated about himself, I too am "no big deal" in the world of custom knife buyers. Still, I have had experience buying custom knives both from folks who do require a deposit up front as well as those who don't. All other things being equal, I tend to have far more expectations in terms of progress and keeping to a schedule with makers that have my money. For those who don't have my money, I am much more relaxed about when they complete the job. Granted, once a maker starts a job, I don't want them to drag it out for a year under any circumstances. But I am much more flexible about when they can start the job.

IMHO, you are busy enough making knives that you should not put yourself in the position of feeling like you have to immediately answer to every query about the progress of some knife, or a timetable about when you will start. Can you honestly say that you would have the time to do this anyway? And if not, what aspect of your personal life or business will suffer because "something" has to give and there are only so many hours in the day?

Chris
 
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