Taking Deposits?

Mike The Money Maker said:
Mike..why not get paid for something you like to do anyway?

Your logic seems a little backwards to me and you need to do an "About Face" because you are under estimating your time and worth...

This is simple...Figure out what your costs are for each knife then require a deposit on one knife at a time based on that figure. Complete one knife at a time and request payment in full after the completion/delivery. Then do the same for the next knife. Deposit, completetion,payment in full. If the customer likes the first knife then he will pay for the next one also.

As I stated before your time, materials and talent are worth more than you think...if you make even just one knife for this gentleman get paid for it based on what other like makers are getting paid...not what he thinks the final price should be. Pay yourself fairly but but nicely.

Deposits keep most customers intersted and are non refundable. My deposits are based on cost of materials plus the time to get those materials together and an estimated cost on the wear and tear of tooling material. This usually works out to a required deposit of around 23% to 35% of what I figure the end customer price shall be. Then I get paid for my craftsmanship and design execution on delivery. If I know a client is going to be forced to wait a long time for his piece because I am backed up at the shop I lower the deposit to than 23% or a little more that 1/5th of the total price of the piece. On the other hand if the customer requests alot of special add ons and needs the piece very soon then he pays a premium on the deposit and the final price point.

You will have to work out your own rework and warranty issues and the costs associated with them also...usually small one man shops get killed once in a while in this department.

Talk about all your agreements in verbage then make sure everything is down on paper and signed/dated...this is your contract and the clients...very important anytime money or value is involved to resolve any dispute later on.

Hope this helps...again" 'do not be afraid to pay yourself nicely.

Mike The Money Maker
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He is not against getting paid, he is, very wisely against taking deposits. Deposits have ruined more knifemakers over the past 40 years than any other single thing I know of.

The ONLY reason for taking a deposit is for a knife design that is so far out that no one else will buy it.

If he were driven to work 10-12 hours a day like Dozier or D'Holder it would still be a mistake to take deposits.
 
A. G. Russell said:
He is not against getting paid, he is, very wisely against taking deposits. Deposits have ruined more knifemakers over the past 40 years than any other single thing I know of.

The ONLY reason for taking a deposit is for a knife design that is so far out that no one else will buy it.

If he were driven to work 10-12 hours a day like Dozier or D'Holder it would still be a mistake to take deposits.
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This brings up another question" 'what are the real reasons deposits or earnest money have ruined more knife makers over the past 40 years but I am still kicking after more than 31 years in the buisness? Sure some years have been lean but that seems to do with the cycles of the economy and changing customer taste.
 
I've been doing this full time for over 16 years, have done quite well and with no other source of income. I have not and will not take deposits. If I had a deposit on each of the many (too many) orders I have, I would go completely insane.
 
AG Russell is one of the most respected people in the knife industry and knifemakers would benefit from listening to his advice. But, I have to ask has the problem been “taking deposits” or poor business ethics that have ruined knifemakers.

When I ordered a Harley built like I wanted it I had to pay a deposit. When I ordered a couch and chair with the upholstery I wanted I had to pay a deposit. It seems that whenever you order something specially made for you, you have to pay something up front. In this regard I have to disagree with AG and say that poor business practices have ruined more knifemakers. Taking deposits just rises to the top of the pile of problems.

Being a successful “knifemaker” is much more than making a good knife. You must also be a good businessman. There are a lot of great craftsmen out there making good knives. Unfortunately not so many are good at the business of making knives.

Whatever you do, hobbyist, part time or knifemaking full time practice good business ethics. Don’t misrepresent your work, don’t take money up front unless you keep good records and are sure you can reasonably deliver the product.
 
DWinkler said:
Being a successful “knifemaker” is much more than making a good knife. You must also be a good businessman. There are a lot of great craftsmen out there making good knives. Unfortunately not so many are good at the business of making knives.

Whatever you do, hobbyist, part time or knifemaking full time practice good business ethics. Don’t misrepresent your work, don’t take money up front unless you keep good records and are sure you can reasonably deliver the product.
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I'll agree with that.
It comes down to business pratices and ethics for me as well.
Sometimes I find myself "torn" between two blades laying on the bench - one has a deposit on it, and the other is just one that I want to build! Then I need to remind myself, "Karl! You're in this for the long run, you just got the electric bill, you've got customers waiting, and this guy put his faith in you! Finish his knife!"
So, I work on the one with the deposit and stay honest to my craft.
What I'm currently doing is working on one knife a week that is for a customer. Make sure I get one of those out a week. The remainder of the time is spent on "other" knives.
Personally, I don't care about the cost of the knife, I've recently changed my policies to just take a hundred bucks on each knife. That way I still have a considerable balance at the end that is due! But, I at least get SOMETHING!
I have had customers insist on paying me quite a bit up front, but then I find myself feeling as if I'm working "for" them! That doesn't feel good.
I work for me.
 
Well said Dan! It really comes down to good business practices. Some guys just can't handle deposits and dig themselves such a deep hole, they can't get out.

Personally I want to be paid in full when the knife is finished and if the customer doesn't come through, I have no trouble selling to someone else.

Also, there is a big difference between doing this as a hobby, or doing it for a living. Everyone is different, You should do what works best for You.
 
A. G. is totally rite. It is not poor business that has ruined the knife makers he is talking about. They have used the money takened for deposit and found that they had to slide the orders aside for orders that paid new money. after a time, they are up to their necks in angry customers, and have to hide. Most of the deposits were for full or nearly full payment. I have known some these makers.
I do not take deposits except for odd ball knives, and then only enough for material and belts. You can sell most of these knives later.
If you have too many orders, stop taking them. Most of the customers will come back later if you explain your situation.
A. G. knows more about the knife bus. then all of us put togather.


You can never have too many orders, you just have to work hard and do them in order. Don't put your favorites ahead of thr ones that don't lite your fire.

Bob Dozier
 
Man o Man, There is some of the best advice Ive ever heard coming from the biggest names in this business right here with us on this thread. Thanks guys!

Personally I dont like to take deposits on knives. There are the exceptions to the rule though. I make some that will take 2 - 3 months or more to complete so I do take a hefty deposit to live on and buy materials and shop supplies while Im working. I try to concentrate most of my day on his project and to prove to him Im actually working on it I email progress pictures to him. This has worked good for me on the big ticket items. I still take orders on hunters and such but discourage deposits.

Good thread
 
This is a good thread Bruce. With A.G. and Bob D. signing in, lots of long term experiance for those that are interested :thumbup:
 
Dan has a point. Most but not all ruined makers were very poor business men. Some others were dishonest and a few ran into disaster prolonged illness. Merl Siguine invented the knifemakers heart attack and the knifemakers broken leg but these were not enough. Too many orders ruined him because he took deposits and could never catch up. Ruined by success?

Think about your family, if you die and owe thousands in deposits, how can they refund the money? Why should your customers lose their money?

In addition to the ruined makers there have been others who found themselves near ruin and then have had to work for years to work their way out of the bind.

Keep yourself free. Save as much as you can. Pay cash for everything. If you have to borrow, do it from a bank, not from your customers.
 
A. G. Russell said:
If you have to borrow, do it from a bank, not from your customers.
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Amen to that one!

Thanks for all the advice and insight here folks! It's really interesting to me as a guy "just starting out" to hear the voice of experience.

-d
 
There is a simple two word phrase that is the real key to success in this business.

UNDER PROMISE - OVER DELIVER

I so not think this needs to be explained, but if there is anyone who does not understand I will be happy to do it here or by email (agr@agr3.com)
 
To me, deposit is like a loan and you have to pay it back by finishing the knife, I hate being in debt and don't have any loans or hire purchase except my mortage. I stopped taking deposits a while ago and its been the best move I made in knifemaking.
 
You did the right thing. If he likes your work he will be back. Have a great day in what ever you do in life. -------:thumbup:
 
Wow, what a response from all the guys that I respect...thank you all!

I suppose it IS an important topic, and I've heard what I needed to make up my mind. However, I will not rag on those that do it a different way....being a rugged individualist, as most here are, we do what blows our hair back the best.

I've bought the desert ironwood from the gentleman that wanted the knifes. It was a fair price. I agreed to start with a template for the tacticals (something new for me), and he is free to come by anytime and look at the work. We agreed that he is under no obligation to buy anything.

One sticking point, though.......if it (they) turn out better, or take more time, or take more supplies than I figured, then he wants me to stick to *his* price, $200, and not the current market.......or maybe I want to keep them, say....

Which means I learned this:

"It's a tough business being a knifemaker." but a great hobby.
 
This point of view is from someone that purchases custom knives, not someone that makes them.

I have no problem with giving a deposit, but when I do I feel that I have entered into a contract with the maker. I will expect that the delivery time given to me is accurate. It doesn't have to be dead on, but none of this promise it in two months and take a year stuff. Many makers don't seem to understand that. They think they can take deposits, or full payment in advance, and then deliver the knife whenever they want.

In all of my purchases, I have only given a deposit twice, and both times the knife arrived ahead of the estimated delivery time. That is why I have no problem giving a deposit. If a maker were to ever take my money and then not live up to their end of the deal, I am sure my opinion about deposits would change.
 
A. G. Russell said:
There is a simple two word phrase that is the real key to success in this business.

UNDER PROMISE - OVER DELIVER

I so not think this needs to be explained, but if there is anyone who does not understand I will be happy to do it here or by email (agr@agr3.com)
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Thanks for your book. ---------:thumbup:
 
Keith Montgomery said:
This point of view is from someone that purchases custom knives, not someone that makes them.

I have no problem with giving a deposit, but when I do I feel that I have entered into a contract with the maker. I will expect that the delivery time given to me is accurate. It doesn't have to be dead on, but none of this promise it in two months and take a year stuff. Many makers don't seem to understand that. They think they can take deposits, or full payment in advance, and then deliver the knife whenever they want.
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The problem is not just with knife makers, it's all over. My ex employer would take a deposit to install cabinets or some other work and when he got the money in his pocket his priority was then somewhere else. He alienated everyone. Very bad business practice in general.
 
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