I do take a deposit when someone places a custom orders. A large part of my business is making custom knives either based upon models I've done in the past, or to a customer's design. I started out asking 50% up front for a custom design, and give them a completion date when i get the deposit in hand, and try to update customers on the progress I'm making on their knives.
Right now my delivery time is quick enough that the customer isn't on a long waiting list. If they want a specialty steel, or unusual handle material part of the deposit goes to purchase what they want on their knife after the order is placed.
A lot depends on the customer. Some insist on paying everything up front. I would rather take part on a deposit, and do the same for everyone, so nobody can accuse me of playing favorites or moving one order ahead of another just because they are paid up ahead.
To tell the truth, I have had very good luck with custom orders. A serious customer doesn't complain about a deposit, nor do they back out once a knife is completed unless something real serious has happened in the meantime. Keeping delivery time short cuts down on those problems. I have had more problems with customers that want knives I have on hand, then back out after I hold something for them for several days, or weeks, and perhaps miss a chance to sell that same knife to someone else at a show or over the net.
I do give a lot of knives to friends for presents, or donate to local clubs, and even trade for other knives or equipment I am looking for. But, there are times when the bills have to be paid too, and you can't do that if this is your only income, and you find your table at a show is full of odds and ends of knives made for customers who backed out when payment was due, and let that dictate what you have available. Buyers at shows deserve a shot at your best work too.
madpoet custom knives
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