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Hiring people to sell is dangerous. Effective salespeople are money-printing machines. If they didn't know that about themselves, they wouldn't be effective salespeople. So there is a serious adverse selection problem here: the most effective salespeople have their pick of who to work for. The hiring pool for salespeople is full of --- dominated by, probably --- salespeople who are much better at selling you on why you should keep paying them despite them closing no deals than on selling your customers anything.

You should learn how to "sell". That means a bunch of different things depending on how you decide to sell and is a basic business decision you should make early on. Make the decision such that your team can do the sales work. Hire sales when you have your process proven and nailed down.

37signals really got hiring right: you should (generally) hire a role after you've figured out how to do it yourself and doing it over and over again is becoming a material drag on the company.

If you feel like you need a deposit to start a project, don't do the project. In 14 years of consulting, including software development projects, I've never taken a prepayment. I can't remember a real problem I've had. I can, however, think of a lot of clients I've said "no" to because they didn't seem to have their shit together.

No offense but on the pre payment thing you sound like someone who was fortunate enough to have a vast network of clients you already knew and trust. Which is not the case for most.

I've never asked for a pre-payment, but I've figured out a small project to do for them and made clear that at each milestone they're welcome to walk and I'll support their new person with whatever documentation they need though I won't offer "support" in the sense of hours of my life training people unless I'm getting paid, which is usually not a big deal. They don't seem to have a worry about paying you to train the new person, but do seem to worry that your emotions about being let go will impact the timeline.

Their real worry is that you'll suck and delay things, by making clear that you understand that such things happen and will help as you can if it does you improve trust. And you should really be doing that anyway ethically. And realize that sometimes you're just not the right person for the job and to help them find the right person if you want to build a strong network.

Things were pretty lean when we started, but sure, that might be true.

I've taken plenty of pre-payments. I agree that you shouldn't "need" one, but there's absolutely nothing wrong with requiring one. It sends the same message as a high rate, and gets everyone in the habit of paying for service / collecting payment for service from day one.

Otherwise, agreed on all points

I'd just say this: our current business has sharply better cash flow than Matasano's did (Matasano also didn't require pre-payments, but it did work primarily with larger firms, where this business works exclusively with startups), and our business would not be possible with prepayment. I only see downsides to prepayment, and my bias is to assume the need for them comes from accepting clients you should be rejecting out of hand. But I concede that this may be a quirk of my own experience.

> our business would not be possible with prepayment

Not exactly sure how this is possible. Any mature business will split up a project into milestones. Whether payment is due at the beginning of a milestone or at the end, makes little difference to the business overall.

I prefer to charge new clients at the beginning of each milestone, starting work after they pay. Existing clients I'm happy to charge after the work is completed, because there's a working relationship there already.

Before I started doing this, I had payment issues several times a year. Since I started doing this, I haven't had a single payment concern and have never had to even think about it.

The problem is how to know which clients are trustworthy before the first project. For small shops, even one missed payment can mean a lot of trouble...

For new clients, I always do 50% up front. There’s no way I am doing a month of work on a handshake and a signature.

As far as I know, doing this is utterly routine among big-ticket consulting firms.

Oh, I guess they just call it a retainer. I guess I've never bothered.

No, I'm not talking about a retainer; in fact, a retainer is almost the opposite arrangement, where you take payment up front for a bucket of hours to be used (or lost, gym pricing style) over the period of engagement.

“Discovery” fee, of around 10%

Then paying 30% at three intervals during the project

Which is routine -- charging 50% up front?

Working for a month without prepayment, invoicing, and then waiting 3-6 months to get paid.

I fully understand that people starting out in consulting work don't want to do this, or can't. That's OK. But I don't think it's a good idea to build this constraint into your practice as a principle; it will keep you from growing your business.

The way Jeremy and I started Matasano --- it's probably more accurate to say the way Jeremy started it, since he's ultimately the person who founded Matasano, back when it had its original name, for his cat --- was to do "serious" consulting projects on the side while working a full-time job. I don't think he was taking prepayment for those projects, and if he was, I sure didn't see any of that money. So that's one way to maybe start consulting without depending existentially on up-front payment.

I also understand that there is a class of client --- one I think people new to consulting believe is much easier to acquire --- that can't reasonably be trusted without prepayment. I agree that's a thing, too. If you need these clients to boot up, that's fine, and I'm not dragging people for taking them. But here's a constraint you should build into your practice: your mid-term goal should be to say no to these clients, full stop, not trying to find a way to fit them into your pipeline.

Also: I can only tell you what's worked out for me and the weird group of people I know. I feel pretty confident about this stuff as business advice but I could obviously be wrong. I'm not going to waste everyone's time tediously disclaiming that though (this one tedious disclaimer excepted).

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