Milestone Payments Don’t Make Sense for Web Design Projects

Milestone payments should make you uncomfortable as a professional web designer.

If you’re an amateur or hobbyist web designer, milestone payments make more sense. If you’re a professional, though, I’m not sure why you’d agree to this payment arrangement.

This article will examine a few important reasons why I make this argument. And if I can convince you to drop milestone payments, I’m confident you’ll see a tremendous benefit to your cash flow.

What are milestone payments?

Just so we’re on the same page, a milestone payment structure goes something like this:

• Payment #1: 33% Deposit to Begin
• Payment #2: 33% Payment at Halfway Mark
• Payment #3: 33% Payment Before Project Goes Live

Any breakdown you want to come up with counts. It could be 50/50, 25/25/25/25, and so on.

You’ll see this arrangement all the time in our industry because it feels fair.

Notice I said, “feels.” I didn’t say it is fair.

Why clients love milestone payments

Clients love milestone payments because they get to keep their money in their pocket until a portion of the project is delivered (except for the first payment).

It feels safer for them because there’s less risk if you disappear – or just plain suck.

And in fairness to the client, this happens a lot. Web design agencies do disappear. And a lot of them suck. I’m certainly not disagreeing with those points.

The question is, “Does a milestone payment arrangement fix this problem?”

No, it doesn’t. The people who are going to disappear are still going to disappear, and the people who suck are still going to suck.

What does fix the problem? I’ll tell you later.

There’s another reason clients love the milestone payment arrangement beyond security, but I’ll tell you that later, too. I don’t want to spoil the punchline!

What about agencies? Why do they seem to love milestone payments so much?

Agencies start out offering milestone payments because they’re unsure of their abilities. They need more confidence, experience, and a track record of success.

And then, as they grow and evolve, they never migrate away from that payment structure. Old habits die hard.

Another reason they offer it is that they think clients will only sign the contract if milestone payments are in place. We often buy into the “risk mitigation” and “fairness” sentiment attached to milestone payments, and offering it to clients feels like the best thing to do.

Once again, *feels* and *is* are two very different things.

There’s one more possibility. Perhaps, deep down, some people feel like milestone payments will motivate them to follow through with their job.

Some people may know they lack focus and follow-through, so they offer milestone payments to protect their clients.

In that situation, milestone payments are a good option. But, again, I probably wouldn’t call you a professional if that’s what’s going on (no offense).

Now that we’ve outlined why it’s so popular let’s talk about why it’s so bad.

Why milestone payments don’t make sense for professionals

For professionals, milestone payments aren’t fair and often negatively impact both the business and the client.

To understand this, we need to establish a few principles.

The first principle is: Professionals do good work, deliver consistently, and deliver on time.

The second principle is: Trust is critical.

The third principle is: Timelines are important.

If you agree with those three principles, I don’t see how you can agree to milestone payments.

Milestone payments are supposedly a risk mitigation agreement. I think the need for this type of agreement is based on the assumption that you, the professional, may not deliver.

Here’s the kicker: It’s usually not the client who demands milestone payments. It’s the agency or freelancer who proactively offers this arrangement!

Back it up, Terry!

Could you think for a moment about what you’re suggesting when you do this?

If you offer milestone payments to your clients as a professional, you’re insinuating that you may not deliver. You’re saying, “We’ll set it up this way to protect you.”

Protect them from what? Professionals do good work, deliver consistently, and deliver on time. Remember?

Now, if the client demands milestone payments or is only comfortable with milestone payments, they’re saying they don’t trust you.

Why would you move forward with this relationship? Trust is critical.

As a general rule, you shouldn’t work with people who don’t trust you.

Milestone payments aren’t the solution to trust issues anyway. I said this earlier. The answer to trust issues is due diligence. You either have a solid track record or you don’t.

If you’re a professional and have a good track record, then there are no trust issues. If you don’t, you’re either not a professional, or they shouldn’t be signing a contract with you in the first place.

The third principle I mentioned was timelines, but this deserves a dedicated conversation.

Milestone payment arrangements derail project timelines & kill cashflow

While milestone payment arrangements may feel “fair,” there are unintended consequences that come along with them.

First, agencies prone to procrastination are freer to procrastinate under a milestone arrangement.

Why? Because the general feeling is, “The client hasn’t paid for this part yet, so we’re free to put it on the back-burner if more pressing needs arise.”

That’s a terrible thing for clients and something they may not have realized at the outset, but I see it all the time for various reasons (other clients are more demanding, new project opportunities are on the table, etc.).

Second, and most importantly, it gives clients too much leverage over the timeline and cash flow!

If you know anything about agency work, you know that the client is more likely to be responsible for timeline delays than the agency.

Clients are notorious for:

• Not giving timely feedback (delaying progress)
• Being wishy-washy with their decisions (delaying progress)
• Scope creep (stuffing more features into an already tight timeline)
• Failing to provide key content (delaying progress)
• Not green-lighting launch (delaying “completion”)

Well, guess what? A milestone payment arrangement punishes YOU, the agency, for these setbacks.

And even more outrageous is the fact that if a client burns through cash on other things after signing a deal with you, they can take advantage of the milestone payment arrangement to delay what they owe! Or, they might just delay things because they “got busy” and had other priorities. That’s common, too.

Knowing they can’t pay or are busy focusing on other things, they can use any of the above tactics to prevent the project from reaching the next milestone. Whether they do this to avoid payment or distraction doesn’t matter, it still sucks.

Don’t you think that’ll never happen? I see it all the time! Especially with agencies and freelancers who build sites on the lower-priced end of the spectrum.

If these issues happen with multiple clients simultaneously, it can put your entire business in jeopardy. You need cash flow, but your projects are stalled, and you cannot collect payments because the ball isn’t in your court.

Next thing you know, you’re chasing new projects for new money, putting you deeper into “project-to-project” life.

This is what I meant when I said the arrangement isn’t fair. It’s not appropriate for a client to put you in this position, and an intelligent professional would never agree to this leverage mismatch.

A better payment arrangement (how to ditch milestone payments)

Now that we’ve determined milestone payments aren’t a good fit for professionals, we need to discuss alternatives. I want to give you something that you can immediately transition to. And, in doing so, you’ll see the following benefits:

1. Much healthier cashflow
2. You’ll hit your timelines more often
3. Better project efficiency
4. Less drama
5. More satisfied clients

We offer three payment options at our web design agency.

1. Single Payment (Discount)
2. Timeline Payments (Full Price)
3. Extended Payments (More Expensive)

I can do an entire article on why these options make the most sense. Still, for this specific article, you only need to know one thing: All three arrangements ensure that we get our money according to a specified payment schedule unrelated to the project’s progress.

We have all the money right at the beginning if they pay in full.

Timeline payments work by taking the project total and dividing it by the length of the timeline. For example, if it’s a 3-month project, it’s three monthly payments.

Extended payments work by taking the project total, adding anywhere from 10-35% extra, and then dividing by the term of the arrangement (whatever suits the client best). This could be six or even 12 monthly payments in some cases.

Since there’s added risk in the Extended Payments arrangement, the client must pay extra to offset that.

In any case, we’re getting all the money upfront or getting a guaranteed monthly payment.

I think you should adopt the same model. I want you to enjoy the same benefits our agency enjoys and for your clients to have a better experience!

Answering Objections

With all that said, I know people will have their objections, so I’ll answer as many as I can below.

“But, Kevin, this isn’t fair to the client if the agency fails to deliver!”

It’s perfectly fair because if the agency fails to deliver, the client can still fail to pay. They would need to be able to show the agency’s failure, but they’re still more or less in the same position to be protected. What they can’t do is sabotage the timeline on purpose because if the agency can show that it’s the client who is derailing the timeline, the client is legally obligated to pay. That’s a huge distinction!

“But, Kevin, clients would never agree to this.”

There are three main reasons why a client wouldn’t agree to this:

1. You dropped some red flags during the sales process and made them cautious.
2. You have no track real track record to prove you deliver.
3. The client is lazy and doesn’t want to do due diligence or simply doesn’t trust anyone.

If you’re good at communicating properly during the sales process and have a solid track record, then clients will agree to this arrangement all day long! If the client doesn’t trust you, you don’t want them as a client anyway.

People tell me that clients will only pay monthly if those payments are attached to milestones. Well, guess what? 100% of my clients are on contracts entirely unrelated to milestones.

People tell me that clients won’t pay upfront for a project. Well, guess what? 60% of my clients pay upfront.

The people who can’t get clients to sign these arrangements are doing something wrong and blaming it on “The client doesn’t want to.” It’s pure nonsense.

“But Kevin, this means we’re 100% responsible for delivering late.”

Does it?

If the client derails the project, you’ll miss your timeline. But you can clearly show that this was on the client, not you. So, same situation as before. The only difference is that they’re legally obligated to pay you still.

If you fail to deliver and the timeline is missed, then yes, you’re 100% responsible for that. Congratulations, you’re a big-boy professional who will suffer significant consequences for not delivering.

Let me remind you: Professionals do good work, deliver consistently, and deliver on time.

Be a professional, and you won’t have to worry about being at fault.