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Builders, how would you handle this deposit $$ issue?
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Author:  Rvsgtr [ Thu May 28, 2009 10:16 am ]
Post subject:  Builders, how would you handle this deposit $$ issue?
I realize the economy is tough but I have a bit of a problem I was hoping to get some advice on. I have a customer who sent me his 30% deposit about 6 months back and has since had financial problems and I have already returned half of his deposit in good faith hoping to keep him as a customer. He now is requesting the remainder. One time in the past I returned a deposit because of a customer with a serious, potential fatal illness and had no problem with doing it that way. Never had to worry with this before or since.

What would you guys do? I recently made a pretty big wood purchase for my small shop which included the top for this guitar along with brace wood, binding material, bridge and fingerboard stock. I don't want to be mean but I am trying to make this a business. Any help/thoughts would be greatly appreciated.

Thanks.
Steve
Author:  bluescreek [ Thu May 28, 2009 11:19 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I try and work with the client as best I can but after all we are a business. I usually charge a 10% restock fee. This is something that is clear up front .
Author:  Hesh [ Thu May 28, 2009 11:24 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Steve buddy if it were me I would return the remaining deposit.

Understandably this is a gray/grey area and what others may do may vary widely.

In my way of thinking, and in my experience selling high ticket offerings for 3 decades... there are already two strikes against consummating this particular deal in a manner where everyone is happy as a clam. The initial request for a return of the deposit and then with the following current request for the return of the remaining deposit I see a high likelihood that if the guitar is built for this client the remaining 5/6th of the funds due may just never happen.

These are tough times and even though I have yet to see anyone discuss what is happening to builders as a result folks are hurting and a guitar is not something that you can eat, usually...

So from my read of your description the costs that you have incurred, unless the top is a one off that would never sell to anyone else, are costs that could be recovered on another client. You have not started building this guitar either. Above all you want to live to build another day so any potential for an unhappy client in this day of the Internet is a risk that needs to be considered as well.

Anyway that's what I would do but I certainly understand that others may not agree.
Author:  John Mayes [ Thu May 28, 2009 11:24 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Steve,

Situations like this can be hard. On one hand you don't want to be hard hearted, but on the other hand you gotta have some rules to protect yourself, your family and your business. It's not good business to just refund peoples money when they change their minds, but it's also not so great to refuse when someones in a bind

Tough situation. What Ive done in the past is one of a couple things.

1 (the hard nosed aspect): Tell him you used the deposit money he gave for materials for the guitar he ordered and that you've already went out of your normal operating procedure to refund him partially, and that the rest is non-refundable. Tell him you'd be happy to push back the delivery of the guitar as long as need be to accommodate his finical situation.

2: Refund the money

I have a clause on my website that reads:

"Cancellation: If an instrument is ordered, and deposit is made there is a 5 day grace period in which you may cancel your order for whatever reason. No questions asked. If, however, you decide you want to cancel your order after the 5 days is up you will forfeit your deposit in it's entirety. "

I always have a customer look over my order/terms page before ordering so we are both in agreement on the terms. This leaves little room for wiggling. If it were me, and I really couldn't afford to do option 2 I would have no problem laying out option 1. It's business. Just because you are a one man shop doesn't mean you have to be a pushover. Although that's not to say we have to be mean or callous about things, but he is basically asking you to suffer because he doesn't want to suffer. If you want to fall on the sword then it may pay off in the end with a happy customer who comes back, and tells his friends about the experience, but it's never a easy choice.
Author:  jordan aceto [ Thu May 28, 2009 11:34 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
We have a whole nonrefundable deposit dealie, but if someone asks, and i have not purchased anything that i wouldn't use in the future i would probably just give it back. Sure it's the guys own fault, but at this point he is getting nothing for his money, and i would rather not have someone out there hating on me. It's tough times all around.

If i had started work on something unusual that would be hard to sell to someone else that would be a different story.
Author:  woody b [ Thu May 28, 2009 11:34 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I've refunded 2 deposits over the last couple years. Both customers were local, and both lost their jobs after ordering a guitar. One has since found another job and re-ordered, with more expensive options.

FWIW, I love guitars. I DON'T feed my family by building guitars. I have a good paying full time job. My policy from my website is
Quote:
A non refundable deposit of $500 is due reserve your guitar. Very expensive options or extremely strange combinations may require a bigger deposit. If you change your mind for any reason within 10 days of me receiving your deposit I'll refund it no questions asked. After those 10 days the deposit is non refundable.


Yes, I got the idea from John Mayes, but I've got alot of ideas from John.
Author:  peterm [ Thu May 28, 2009 11:36 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I had that happen to me once and obviously not every case is the same...
Personally I'd have to evaluate the particular circumstance. How much time did you spend with this order? Did you have to buy supplies already? Did spend valuable shop time digging out woods to supply the customer with pictures, etc...?
You get the idea. Personally if the customer simply changes his mind I don't offer a refund simply because I can't afford to. I'm already a couple of years backlogged and the time required to email pictures, answers to endless questions, planning for a build are all part of the cost of building a guitar. But, if the customer is going through some serious hardship then that's a different story....
Author:  Mark A Thorpe [ Thu May 28, 2009 11:48 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
If you don't refund it, then what you keep is all you will ever make from this guy, but if you do refund it you will still have a customer. Someone who may come back but then again he may not, who knows. Times are tough, very tough I know personally. I would look at it like this, do I want to keep this guy as a customer or not?
Author:  Pat Foster [ Thu May 28, 2009 11:55 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Another option is to refund the deposit after you sell the guitar. He's not out his deposit, you get income from the sale, and you stand a bigger chance of getting that customer back when his situation improves.

This was one of the options I offered a customer in the same situation. He just couldn't get used to the idea that someone else would get the guitar he and I designed for him, so he asked for some time to get the balance and I agreed. It was some months, during which time I set it aside to work on another order, and he came through. Luckily for me, I didn't have a lot of expense tied up since it had inexpensive woods. He'll pick it up in two weeks. I'm glad I waited, and he is too.

Pat
Author:  Howard Klepper [ Thu May 28, 2009 12:08 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
You haven't said what your contract says about the deposit regarding refunds, how much the amount is, how much you spent on materials for this guitar, or whether those materials are ones easily used for other guitars. IMO all of that matters.
Author:  jmpbuffalo [ Thu May 28, 2009 12:20 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I don't make guitars for a living or even to sell (having only completed one so far) but I do run a small business. Under the circumstances I would suggest a combination of what the others have said. I would refund the money, less a 10% "restocking fee" (call the fee whatever you like) and let him apply that 10% to a future order if and when his finances improve. That allows you to be humane and gives him an incentive to do business with you in the future. You also get a small fee for your time, and since you can likely use the wood for another guitar you haven't lost anything. My $.02

Joe
Author:  John How [ Thu May 28, 2009 2:10 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Ya gotta say what you'll do up front and then stick to it.
My policy is to return the deposit on the sale of the instrument to someone else.
Author:  Alan Carruth [ Thu May 28, 2009 2:29 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
What John How and Howard Klepper said: if you did not say anything about keeping some of the deposit up front, then you have to return it all, ASAP. You have not started the guitar; your only investment is in material that you will be able to use later on another instrument. Maybe you wouldn't have spent that money right now, but that's not the customer's problem. It always hurts to send money back to people; it usually seems to happen just when you need it yourself. I've found, though, that it all works out in the end. Remember, if somebody is satisfied with you and your product, they will tell their friends. If they are not satisfied, they will tell EVERYBODY. Do you need that sort of publicity?
Author:  Jimmy Caldwell [ Thu May 28, 2009 6:15 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
A happy customer tells his best friends about the experience. An unhappy customer tells everybody that will listen to him about the experience. Something to think about.
Author:  Bobc [ Thu May 28, 2009 7:44 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Steve IMHO you have everything to gain and nothing to loose by refunding the full amount. This customer may or may not come back but he will have nothing but good to say about you. Besides your investment is minimal and won't spoil. [:Y:]
Author:  Rvsgtr [ Thu May 28, 2009 7:50 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Sorry I guess I should have foreclosed much more information prior to starting this thread. Up front I tell my customers the deposit is basically non-refundable unless there are extreme circumstances as it protects any materials I may have to buy. I do not use a signed contract. Never have. Maybe one day. So far no problems. My problem is that I am not a "hard-nose", though would like to be. I'm not concerned about losing the money but rather having a domino effect if people hear I'll just give it all back. I really hope to have the business again one day just don't want to lose what I have. If it weren't for all the people I know locally who are enduring the same hardships through these tough economic times I would keep it. But I have been well blessed the past several years.

Thanks guys for all your responses. You've given me plenty information to help me decide what to do.

SR
Author:  Mike_P [ Thu May 28, 2009 7:57 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
if you discussed the build via email then there is an electronic trail and effectively a contract...

skipping that issue, there is once concept that is agreed upon in all courses in economics/business...word of mouth advertising is the most powerful of them all...

others have already covered the concepts of special materials and such so the decision is now in your hands...
Author:  Kelby [ Thu May 28, 2009 9:46 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Two issues: (1) Are you contractually obligated to give him a refund? (2) Assuming you aren't contractually obligated, then are there other reasons to give him a refund anyway?

Issue 1: Contractual duty. Your post suggests that you orally agreed that the deposit was non-refundable "absent extreme circumstances." The oral agreement is a contract. (Contrary to popular wisdom, a contract does not have to be in writing to be binding.) The question is whether losing his job constitutes an "extreme circumstance" that would render the deposit refundable under the terms of your verbal agreement. You could argue it either way, but losing a job sounds like an extreme circumstance to me. Especially given that the whole purpose of the deposit is to protect you from the whims and fancies of buyers who simply change their mind after you already bought materials -- not exactly the case here.

Issue 2: Other reasons to give him a refund. There are plenty. Good business practices suggest that you want to go out of your way to treat your customers well. If you give him the refund, odds are pretty decent that he'll come back and re-commission the guitar later when he gets back on his feet. (You might even be worth following up with him 6 or 8 months from now to see if he's ready to go forward.) Even if he doesn't re-commission, he'll almost certainly give you good word-of-mouth advertising. There are other possible reasons that relate to just being a nice guy, but those are really up to you.

It's important to remember what it must feel like to hand over a large chunk of cash to a guy you may or may not know well in order to buy a guitar that you've never seen or played. That takes a great deal of trust, and inherently involves a significant level of fear and anxiety. It creates a lot more anxiety than buying a Martin you have played and heard from Guitar Center with their 30-day return policy. The way builders (all builders, not just you) respond to these kinds of issues affects Joe Public's willingness to commission a custom guitar rather than buy a Martin. The more horror stories people here, the more Martins people will buy. The more stories people here about Luthiers going above and beyond the call of duty, the more guitars everyone here will sell.
Author:  Dave Fifield [ Fri May 29, 2009 6:51 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I decided not to take any deposit money at all. I figured I would always be able sell elsewhere or add any specially purchased materials to my stash for later. Even if I had to route out an inlayed monogram or undo other personalized stuff and replace it with something else, I'd still not lose anything (except a little time) on it eventually. As an amateur builder with an electronic engineers salary to prop me up, I have the luxury of an extremely limited production rate and no requirement to actually make any money on any instrument. An added benefit of not taking any deposit is that I can't really be held to a rigid schedule. If someone pays a deposit, they will want a start date. No deposit = no hard dates.

Dave F.
Author:  walnut47 [ Fri May 29, 2009 3:22 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Many years ago I ordered a resophonic guitar from Tim Scheerhorn and paid a $500 deposit on a $3,500 guitar. He had about a 3 year wait at that time. When my time came up I had just spent the guitar money I'd been saving up on dental implants for my daughter who got hit by a car driven by an underinsured driver. I didn't tell Tim my sad story other than that I was not in a position to purchase the guitar. I did not expect to see my $500 again. But I was surprised a few days later by a $500 check in the mail from Tim.
I already admired him for his guitar building, but now I admire Tim Scheerhorn as a human being too.
Walter
Author:  Jeffrey L. Suits [ Fri May 29, 2009 7:46 pm ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Rvsgtr wrote:
I realize the economy is tough but I have a bit of a problem I was hoping to get some advice on. I have a customer who sent me his 30% deposit about 6 months back and has since had financial problems and I have already returned half of his deposit in good faith hoping to keep him as a customer. He now is requesting the remainder. One time in the past I returned a deposit because of a customer with a serious, potential fatal illness and had no problem with doing it that way. Never had to worry with this before or since.

What would you guys do? I recently made a pretty big wood purchase for my small shop which included the top for this guitar along with brace wood, binding material, bridge and fingerboard stock. I don't want to be mean but I am trying to make this a business. Any help/thoughts would be greatly appreciated.

Thanks.
Steve


His deposit was spent on materials for his guitar; that's fairly cut & dried. If you haven't used the entire amount, you might consider returning the remainder; I realise this may be horse-already-out-of-the-barn, territory. Times are tough, but you can't take the fall for everyone.
Author:  MRS [ Sat May 30, 2009 1:04 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
I would refund it. In the end you could lose more then its worth. He may pass the story on and you could lose business of future customers as well as any repeat business he may required from you. In reality you can not claim a lose on the materials purchased since they can be used and most likely will be used on future projects. I understand it may be tying up money you could have used for something else but thats a fact of running a business.
Author:  David R White [ Sat May 30, 2009 6:53 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Steve, I would change your deposit policy to being clearly non-refundable. Saying it is only refundable in extreme circumstances opens the door to different interpretations. This could lead to you getting sued (and losing) if you don't refund, and if you do refund customers may look at it as your obligation rather than you going beyond your responsibility.

That doesn't in any way change your ability to fully refund when you think it's the right thing to do.
Author:  Frank Cousins [ Mon Jun 01, 2009 2:22 am ]
Post subject:  Re: Builders, how would you handle this deposit $$ issue?
Kelby wrote:
It's important to remember what it must feel like to hand over a large chunk of cash to a guy you may or may not know well in order to buy a guitar that you've never seen or played. That takes a great deal of trust, and inherently involves a significant level of fear and anxiety. It creates a lot more anxiety than buying a Martin you have played and heard from Guitar Center with their 30-day return policy. The way builders (all builders, not just you) respond to these kinds of issues affects Joe Public's willingness to commission a custom guitar rather than buy a Martin. The more horror stories people here, the more Martins people will buy. The more stories people here about Luthiers going above and beyond the call of duty, the more guitars everyone here will sell.



Think the trust issue can never be understated - I would guess that the vast majority of purchases are from either amateur or semi pro players who have saved and thought long and hard - and made sacrafices to be able to afford a commission - the fact they chose YOU is in itself a great compliment considering the competition and maybe by taking the less hard-nosed line you will hopefully maintain that loyalty and trust already established - Its tricky because I dare say there are plenty pros out there for whom such cancellations hit the pocket hard in an industry that is always close to the edge financially. Anyway its not easy, but if you consider the cost on 1 add in a guitar magazine for 1 month versus the cost of word of mouth positive experience, then you could argue its worth returning and put it down to the marketing and advertising budget - the customer endorsement is worth a great deal more as well. And when they get back into better times, yours is most likely the first door they will be knowcking on.
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