CRAFTING-When Should You Require a Deposit?
Sooner or later when you make and sell handmade items, you will run into situations where you should really get a deposit. A lot of sellers are weary of asking for one and only really start requiring them after they have been burned. Just ask me why I started requiring deposits. It is always better to start out the right way and avoid expensive lessons if you can.
Here are some recommendations for when you should require a deposit, how much of a deposit you should request, and how to accept the payment.
Can you really resell the custom item? – A lot of times sellers can justify not taking deposits because they figure that if they lose contact with the buyer or the buyer changes their mind they can just finish the item and sell it to someone else. The important thing is to be realistic.
The only way to be certain is if you have sold similar items frequently in the past. More than likely you will have no idea if it will sell, or even how long it could take to find a buyer. You are better off getting a deposit up front, completing the item for the customer, and then selling the finished piece to the customer that requested that you build it.
How much of a deposit is necessary? – The most common is 50% up front. That should cover your materials and is what customers expect to pay to get a project started.
For commissioned pieces – You should require a deposit for any item that will be custom made to order. Whether it is a new design that you came up with just for the customer or the customer sent you a sketch of what they want you to build, get a deposit before getting started.
For custom variations – It is a good idea to request a deposit before making anything other than what you normally sell on your website or shop. This goes for even minor changes. If a customer need an inscription, get a deposit, if they need a custom color, get a deposit. Even color changes or adding a little extra color is enough to warrant requesting a deposit. That custom variation may only appeal to that particular customer and you may not be able to resell it if the deal does not go through.
For large orders – The key difference between a large order and a single order is how much you will have to spend on materials to get started. If someone offers to purchase a large quantity of one of your regular items it is a good idea to require a deposit up front if you have to make them. If you have them in inventory you can just be paid up front and ship them out.
Deposits for less expensive items – Whether you really need to ask for a deposit on less expensive items is up to your market. For $20 items you can usually just get paid up front. Once you start getting closer to $200 items, doing deposits may be necessary. It also depends on how you accept the payment. There is no problem taking a deposit on a $50 item if you let your customers pay online with Paypal. If they had to send two different checks or money orders, they would probably opt to just pay up front.
Can you take deposits on Etsy? – You can do commissioned work and still take deposits if you sell on Etsy and other venues and marketplaces. There is not necessarily one specific way to do it though.
Some sellers set up listings for the full amount and choose “other” for the payment option. This keeps the customer from paying in full up front and allows the seller to email a Paypal invoice for 50%. After completion the seller gets an invoice for the final amount before shipping.
On other venues I have seen sellers setting up two listings, each would be for 50% of the price. Be sure to put something to the effect of “Custom made for Sharon” in the title just to make sure that only that person buys the item.
How you take deposits will really depend on what options for payments you can use on your specific venue. What you want to avoid is making sales outside of the venue and breaking their seller rules by avoiding the seller fees. Be sure to ask the best way to take two payments on your particular marketplace.
How about on your personal site? – With your own website you can request deposits a couple ways. The first is through mail, either by check or money order, ideally a USPS money order. The downside is the customer will have to mail two payments and of course there is the mailing delay. The preferred method is to just use Paypal. You can get an instant payment, get started right away, and get paid right when you are finished. Learn How to Send a Paypal Invoice
What about being paid up front? – Usually if you request a payment up front for something you do not already have made, you will want to just ask for a deposit. A deposit is a very fair way to operate both for you and your customer. A lot of customers would not feel comfortable paying 100% up front for an item that is not built and is coming from someone that they have never met. Sometimes you will send out a deposit request and the customer will opt to just pay you in full. Maybe you have a great reputation or they just like the convenience of making one payment. If they make that offer then let them pay you up front. You will not be out anything if they change their mind and by paying up front they are also much less likely to make any changes.
My personal experience – Originally I did not require deposits for custom orders. I thought it would turn away customers. I felt like they were trusting me to make them something nice so I would give them the benefit of the doubt. It was probably only a couple projects in that I was building something and the customer stopped communicating. I actually still have that half finished project sitting in storage. It is never going to get finished because I could never sell it for what I have invested into it. I just can’t bring myself to throw it away though.
Anyway, from that point forward I have always asked for deposits on everything. I build everything to order. Not once has a customer ever balked at paying 50% up front and knock on wood, none of them have backed out of a project that is under way.
I highly recommend going the deposit route right from the start for anything other than pre-made, ready to go orders.