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How To Negotiate Upfront Payments
October 14, 2020
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How To Negotiate Upfront Payments

The ebb and flow of finances is one of the biggest hurdles of being a small business owner. It can be difficult to juggle bills while waiting for your customers to pay you. If you can relate to this, it’s time to consider asking for upfront payments.

Upfront payments are a type of transaction in which a customer pays for part or all of a service before you complete it. While it can be stressful to negotiate your first upfront payment, it’ll become easier in time.

Keep reading to learn how to successfully negotiate upfront payments from your clients!

Benefits of Upfront Payment Terms

There are numerous benefits of negotiating payment terms upfront, including:

  • Builds Trust: An upfront payment can build trust between you and your customers. It shows you as a service provider that the client is serious about your work. It’s a guarantee that upon completion, you’ll receive the full payment.
  • Improves Cash Flow: Cash flow can be a huge issue, especially if your services translate into many long-term projects. With upfront payments, you won’t have to worry about late payments or the stress of not getting paid at all.
  • Covers Out-of-Pocket Expenses: Most projects come with expenses like supplies, software, and labor costs. If you receive partial or full payment upfront, you’ll be more likely to afford these expenses, and have additional working capital to spare.
  • Shows Confidence: By asking for upfront payment, you position yourself as a confident professional who understands industry best practices.

How to Negotiate Upfront Payments

If you’re new to negotiating upfront payments, rest assured that it’s not that difficult. Believe it or not, most customers won’t mind paying you upfront. Once you start negotiating upfront payments, the process will come naturally to you.

Present Yourself Professionally

The reality is, we live in an information age. This means that a client will likely do their homework and research you in advance. For this reason, it’s your responsibility to create a professional online presence.

Make sure your social media profiles and website are professional, displays positive reviews, and include your contact information.

In addition, you may benefit from creating a presence on as third-party websites like Google, TrustPilot, Yelp, and Angie’s List. Also, ensure your LinkedIn profile clearly conveys what you do and why customers should hire you.

When you communicate with a potential client via phone or email, it’s your job to reinforce your professionalism. Respond promptly and explain how they can benefit from your services. Your goal should be to convey why you’re the best provider. A professional presentation may be all it takes to convince them to pay upfront.

Know The Worth Of Your Product Or Service

Most clients are perfectly fine with paying providers upfront. Not only does this show them that you’re a true professional, it also provides them with an upfront cost. Typically, they’ll prefer to know the cost upfront rather than receiving an invoice that’s higher than they anticipated.

Therefore, it’s essential to know the worth of your product or services. After all, you want to get paid fairly and avoid missing out on jobs because you’re too expensive.

Conduct research and determine what your competitors charge. You can do this by visiting competitor websites or attending industry networking events.

Next, consider your business budget and Ask yourself how much money you need to generate each month to cover it. You don’t want to charge them a price so little that you can’t afford your budget or put yourself in a financial bind.

On the other hand, you don’t want to charge so much that potential customers turn to your competitors instead. It’s all about finding a happy medium.

Determine A Value Ahead of Time

There’s nothing worse than a prospective customer asking you how much you charge and you not knowing the cost. This makes you appear unprofessional and inexperienced. Once you know the details of a prospective project, determine the amount of money you’ll charge as soon as possible.

Sit down and consider how much you want to charge them and the price they’d pay if they went to a competitor. Would your rate cover your expenses and time adequately? Can the price allow you to meet (or even exceed) your business goals?

After you select a price, create a written proposal that includes a summary of the project and price breakdown. At the end of your proposal, include your invoice payment terms.

State whether you’d like partial or full payment upfront, the payment methods you accept, and the payment deadlines. Email the proposal to the prospective client and note that you’ll gladly answer any questions they may have.

Thoughtfully Negotiate Payment Rates

The key to getting paid upfront is thoughtful negotiation, which revolves around flexibility. You may want your client to provide you with 100 percent upfront payment. However, they may not feel comfortable with this, especially if they’ve never worked with you before. In this case, you may have to settle for 50 percent upfront and 50 percent upon completion.

In addition, you should be flexible with the types of payment you accept. Some clients like making online payments, so you should consider accepting payments through PayPal, Zelle, or other platforms.

Other customers are more old fashioned, and may not be comfortable entering their financial information online. Inform these clients that you’re more than happy to accept a check if they prefer.

Lastly, give prospective customers time to make their upfront payments. Don’t expect them to pay the amount on the day they sign your proposal. Instead, give them a few weeks to submit their payment.

Of course, this time frame may be shortened if there’s a deadline that must be met. It’s also a good idea to set up a recurring payment system that works well for customers who hire you for ongoing work.

Upfront Payment Contract Described

Provide Reassurances For Long-Term Work

Even if you have a great online presence and appear professional, your clients and customers will still want reassurance.

First, guarantee that you’ll complete their project on a date you both agree to. Put this deadline in your proposal so they have written confirmation.

You can also offer a money back guarantee or create a refund policy. This way prospective clients will know they have nothing to lose.

In addition, communicate with them throughout the entire project. Inform them of milestones and ensure they always know what’s going on with their project.

Lastly, make every effort to maintain a professional relationship. Any time you send an email, read it over a few times and correct any spelling or grammar mistakes. Also, try to respond to their inquiries as soon as possible.

Conclusion

If you’re a small business owner, negotiating upfront payments can greatly enhance your business. With upfront payments, you can protect yourself emotionally and financially.

You won’t have to worry about customers disappearing without paying. Instead, you’ll be able to build trust, improve cash flow, and ultimately set yourself up for success.

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Frequently Asked Questions

What is an upfront payment?

An upfront payment is a type of transaction in which a client pays for part or all of a service before the project is started.

Will customers be willing to pay upfront?

Contrary to popular belief, many clients won’t mind paying for a service upfront. In fact, some prefer it because it helps them avoid unwanted financial surprises.

What are the benefits of negotiating upfront payments?

When you negotiate upfront payments, you build trust, improve cash flow, and can cover out-of-pocket expenses.

Editor’s Note: This post was updated for accuracy and comprehensiveness in October 2020.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].