Setup Charge

[Liesl Dexheimer]

What's your opinion on setup charges? Do any of you charge a setup charge? Do you charge it on specific items but not all items?

I'm having a bit of a dillema with one of my customers in particular. I usually don't charge a setup charge on awards but am finding that with this customer I may be forced to. Whenever we do a job for them I end up with over a dozen emails back & forth. They want a price quote on a particular item, then they change their mind & want something else. Then I have to send proofs of the layouts, they they decide to add or subtract text. When all said and done I feel like I'm losing money because of the amount of labor involved.

What's your take?

[Dave Johnson29]

When all said and done I feel like I'm losing money because of the amount of labor involved.


They are the kind of customer you can do without. If there is a competitor in the area then tell the customer you are swamped with a big job and cannot get back to him in time and suggest the competitor. Also say that the award will not be ready before xmas 2011. I am serious about that, well maybe not the xmas thing but your competitors need the aggravation not you.

While you are wasting time with this company you cannot properly service the "normal" customers. If there are no "normal" customers at the time then do the job and suck up the aggravation as Customer Relations.

[Chris DeGerolamo]

We have a $30 setup fee to cover most setup, e-mails, phone calls etc. This varies though depending on the amount of work we have to do. If there is photo editing involved, we charge more. If the customer provides a CDR/AI etc., we sometimes charge less.

I do not like to turn away work...you just need to make sure that this job is worth your while with respect to money. If your customer does not want to pay for the 'headache', then defer them but only as a last resort. The last thing you want is bad word of mouth advertising.

[Liesl Dexheimer]

Thank you for the opinion but that's really not an option. They are a good customer as far as getting paid on time & we actually received them through a referral. They say we do great work & are well worth the money spent, that's why I'm thinking of charging a setup fee now. I don't usually like to do this because of the state of the economy but with them in particular I think they would accept it.

I was just wondering what everyone else's take is on setup charges. I see some large companies charging their customers & then others waiving it, sometimes even charging for proofs. It's kind of hard to bank it into the price because occassionally the project can take a different turn...

[Dan Hintz]

I head those types of problems off at the pass. I specify a setup charge (generally half and hour) in my quotes, but I verbally tell people the fee may be waived if the project does not require a lot of hand-holding to get it going. That way, I'm covered if the customer is a PITA, and the customer has the option of making the job cheaper by being easy to deal with.

[Doug Griffith]

If you are worried about losing this customer, log your time spent on what you said. At the end of the job, lay it out in front of your customer and tell them it is an ongoing thing. Also tell them it is outside the norm and you'll need to charge a set-up fee the next time around. That set-up fee will be based on the average time spent times your hourly rate.

[Liesl Dexheimer]

Dan, I definitely like your idea...never really thought of that before. Thanks for the input. :)

[Mark Winlund]

I suppose if you like working for nothing, then it's OK. My shop rate is $60 per hour, and that's it.... no exceptions. I go as fast as I can and don't do substandard work. One customer recently had me cut out puzzles in acrylic. The first one took a couple of hours because of the bad artwork (you all know what that's like). The next 50 of them took 11 minutes each. A month later, I got another order with completely different artwork (also required a lot of work). Of course, this time, he insisted that they should cost no more than $11 each, total. I refused, citing the prep work. He left in a huff, muttering under his breath. I guess he couldn't find someone who would work for nothing, because a couple of weeks later, he was back with the job.

Moral? Stick to your guns.... I'd rather be fishing than working for nothing.

Mark

[Mark Lincoln]

You also have simple customers I presume, the type that you spend less time than usual? Do you average out to a relative good return on time spent?

I learned sometime ago, some of my most problematic customers (not trouble per say, but just time consuming per dollar revenue) are often the clients that send more clients my way. The referred clients are not necessarily as particular or indecisive, etc. By not charging an extra fee, you may feel slightly behind this one customer but ahead in the long run.

I speak from a completely different industry. I understand the frustration from a problem customer. I just wanted to point out an alternate view of such a situation. Mind you if you deal with this often enough then I would strongly look at adding a setup charge. Otherwise, my suggestion is to look at how often you have it 'easy' vs 'hard' and decide if it averages out to what you shoot for as a median time spent per project.

[Dan Hintz]

I have a small problem with Mark's suggestion of averaging across customers... by doing so, you are punishing the good customers by raising their rates so the bad customers can get a less expensive ride. Averaging across the same (repeat) customer is more appropriate. If customer 'A' usually brings you easy jobs, don't ding them (too hard) on the occasional hard one. If customer 'B' is usually a PITA, don't feel bad about charging them a higher fee than customer 'A'.

By listing the setup fee and removing it on a job-for-job basis, you prepare the potentially bad customer ('B') for the worst and reward the better-prepared customers ('A') with a discount at the end. Win-win!

[David Fairfield]

I think of setup charges as a PitA tax. This tax operates on a sliding scale. If its a difficult job, or one I don't want to do, or the customer gives me grief, the PitA tax goes up.

[Martin Boekers]

[QUOTE=Liesl Dexheimer;1383623]Thank you for the opinion but that's really not an option. They are a good customer as far as getting paid on time & we actually received them through a referral. QUOTE]

Hmmmmm that wouldn't be the type of referral Dave was talking of would it?:p

Add to your sell sheet and post a sign that changes may incure additional fees. That way it leaves you open on how to charge clients individually.

Marty

[Belinda Barfield]

I'm with Dan on this one. When doing residential stone countertops I learned that a clearly defined contract is the only way to go. I don't do a lot of complicated jobs. I'm not as expensive as Mark. I charge $35.00 per hour for design time - not set up. Most people seem to understand the concept of "design" better than the concept of "set up". As Dan said, this hopefully encourages customers to do as much of the prep work as possible. I do my best to estimate how much design time will be necessary. I keep a log of the time spent in the job file.

I had one of "those" customers like yours, Liesl. It started out to be a simple project, engrave five custom award bases. They provided the font, logo in appropriate format, two week lead time . . . piece of cake, right? Wrong. Twenty five proofs, multiple phone calls, and one shouting match between the two people who were trying to agree on the design, and I got the go ahead to do the engraving - one day before the awards ceremony. My time cost them more than the granite bases and engraving.

I also charge a fee to expeditea job.

[Chuck Stone]

the customer has the option of making the job cheaper by being easy to deal with.

Can I vote for you? :p

[Viktor Voroncov]

Just got mail from customer (CC to another 20 e-mails) - tender for making one standart stamp PAID, best price win :)
DELETED IMMEDIATELY AFTER READING :mad:

[Ross Moshinsky]

Customers always come around like this. Hopefully for you, they are few and far between. I find most of the time they mellow out and start to trust you. Sometimes between the 10 proofs and 5 item changes and 6 text changes, I totally screw up the order because I can't keep track of the changes. I know that's my fault, but I don't keep a change log for 4 plaque orders. If that happens it's a bit harder to gain their trust or it may take a bit more time.

If they do begin to trust you, they give you a price point and they let you pick what you want. A lot of our customers do that with us at this point. Some still like to come in and see stuff. When just about any customer walks into the store the first three things I typically say are "Hi" "How much were you looking to spend?" "When do you need it?".

When they tell me how much they want to spend, we find something in their budget. If they are in between two items, and decide later they want to change items, I may or may not do it for them. As far as I'm concerned, once they walk out the door, the item is sold and no changes can be made, but sometimes it doesn't make a difference to me if I haven't run it and it's a stock item. I try to do the right thing by the customer, but I'm not going to turn a normal job into a rush job because one part was in stock/local vs a part in California. Now my 7 day lead time is 2-3.

As far as text/proofs go. If the person is a real pain, you can charge for the proof. Plenty of ASI people charge $25-30 for a proof. I give proofs to certain particular customers because I don't want them to walk out unhappy so its better for me to send out a couple emails and make a client happy on a $500+ order. That is what I'd do with them. This will lead them toward the "I trust your judgement" world because they will want to avoid the $25-30 charge most of the time. Once you they trust you, life becomes a lot easier and more profitable.

One last comment: If you constantly bend your rules for customers, they are no longer rules. For example: When we bought the business, there was a pretty strict 2 week turn around policy. The old owner was a bit of a jerk(good clients though) and had old machines. He would turn away customers all the time because of turn around. We always take every customer. Same day, 3 days, 3 months, it didn't matter to us. We bought better equipment and became more efficient. The only issue is, the customers that gave us 3 weeks, have now turned into customers who barely give us a week. Example, this week we got an order for 150 trophies on Tuesday and they needed it Friday. That's a tough turn around not for the labor but the ordering. Making sure you have every part for us is a problem because we stock A LOT of stuff but when you do that, you may think you have enough, but you fall 4-5 short. We set up our business to take any order, but at the same time our long term customers who used to give us 3 weeks, now give us 3-5 days. If you give them an inch....

I'm rambling, but my point is, setup some rules like others have said, stick to your guns but recognize situations that call for flexibility, and get some money for your time. The best thing you can do IMO is gain another trusting customer so you can take control of their order. That way you can buy products you like or that you make more money on or that you can get easily, and just run the jobs at your discretion.

[Julie Nickerson]

I would suggest figuring out how much your time is worth and charge appropriately for each customer. Not all of them are the same.

I have a customer that orders annual sublimated awards. The first year they ordered from me they wanted me to do the set up for proofing in word document. I done it, they had changes to make, I done them, it went back and forth for a while. I don't sublimate using word. I had to redo everything in corel. I didn't charge a set up fee, kicked myself in the butt for that one. The next year came around and the emails started in August, they didn't need the awards until October. The same thing started with set up. I told them that since it requires my time to send them off a proof in word document and that there would be emailing back and forth and that takes my time to, that I would have to charge a set up fee. They weren't too crazy about that but they wanted to make sure that everything is right and they paid it. The next year after that they just sent me what they wanted and didn't want no proof before the job is done because they didn't want to pay the set up fee. I done the job, delivered the items (which next time I"m charging them for) and one of the awards was wrong. Their mistake, not mine. So they said that they were going to require proofs again. I again reminded them of set up charges and they said that they are willing to pay. They are a PITA customer but they are a loyal customer to and I hate to turn work away.

To the PP who has customers who wants awards in 3-5 days. Most of my customers are like that and some don't understand and get mad that I can't possibbly stock everything that are in the catalogs. I'm seriously considering charging a fee for fast turn around time. It is stressful getting these orders in and done in a short amount of time. I usually tell customers 2 weeks from time of order. I usually get things done in a week. Kind of like under promise and over deliver. Now most are waiting until the last minute before they order and usually not getting what they want because I don't have it in stock.

[Liesl Dexheimer]

Thank you to everyone who responded to my question. It was nice to hear that some of you have experienced the same type of problem. I will definitely be charging a setup fee for this particular customer in the future. Hopefully everything will go smoothly, I know they've been happy with our work so at least I have that on my side. :)