Why is it so important to get money for production in advance? You avoid the cost of delays.
Pretty straightforward, except there are so few creative businesses that get paid well enough in advance to avoid the pain of delays. I wish I could specifically state why this is, but I cannot. What I can say though is that most creative business owners do not fully grasp the cost of the delay until it is too late. Mostly, creative business owners undervalue both project risk and systemic risk when it comes to delays.
Say what?
Project risk is what you think it is. When there are delays, your chances of failure for the project increase and you may not be able to do what you want to do for the price you originally quoted, if at all.
Systemic risk is more subtle. When you have to have to work harder for a particular client (who caused the delay), that leaves less time for your other clients who have been good actors (and did not cause a delay). Less time is less time and now your ability to perform for your “good” clients just took a hit. Remember, unless you are paid for BOTH systemic and project risk when there is a delay, you do not have the money to pay for the added stress you have just placed on your creative business.
Of course, you are who you are and you will pull it all off in the end even if you do not get paid for the extra risk. But there will be a price, a big one. Every year, I see creative business owners at the end of their season walking around like the living dead, catatonic from the effort of completing their projects without being compensated for the cost of delays.
When I ask a creative business owner what happens when a client is late in paying, changes their mind about an important design element, or is slow to decide critical path issues, what the cost to the client is, inevitably I hear crickets, or worse, ten, twenty thirty percent of their fee as an additional expense. No wonder there is no blood left. The clients have sucked it all out.
How to contemplate the real cost of delays? Ask yourself what the project would cost if the client came to you right after the delay and had to get done in the reduced time frame. What would you charge, first to get the project itself done and then to make sure that none of your existing projects suffered? Yes, two separate numbers.
When you do this work you will find very quickly that the number is an exponent of what you originally charged and you should not be afraid at all to charge this new number now since there is no difference between that situation and the one you currently face.
One more thing. You do not want your clients to cause delays and want to actually punish them for doing so. The numbers you calculated above are NOT punitive, they just keep you at the same risk profile as when you originally took the project. They get you back to even. You want to create a disincentive to act this way and need a punitive fee to do it. I like fifty percent of the new fee added to your calculated number. If you originally charged $100 to do the project but were delayed, the cost is now $200 plus a $100 penalty or $300 to finish the project.
The whole point is you do not want the delays in money flow and/or decision-making. If clients can understand the pain they will cause AND the pain you will cause them, likely is that there will be respect on both sides. Explained in this context at the outset, there will likely be mutual agreement and no thought by the client that they could ever be the bad actor you describe to them.
Of course, none of these triggers are likely in your contract and/or process now, even though they will be tomorrow (right?). What to do then?
Be willing to walk away if the pain is too much. You bringing your creative business to the edge, literally, because of a client’s bad behavior is pointless. Pointless, because you are hired to do great work, to inspire and transform. If this becomes impossible, why would you finish other than ego? You might say this would cost your reputation and provide sympathy for the client you left hanging. On the other hand, you would have the wherewithal to live to fight another day and garner the reputation that you, your art and your creative business are worthy of respect. The days of martyrdom are long gone, live to the truth of what makes you and your creative business the force that it is, if only to change the world, one client at a time.
