Official Luthiers Forum!

One other caution...

In these days of the Internet, it is far easier for a luthier to get a bad reputation from one bummed out client (whether the client is right or wrong) than to get a good reputation from a dozen happy ones. So whatever your policy is going to be re. refundable, non-refundable, etc., make absolutely certain that the potential client understands the policy.

Personally, I look forward to the day when I can just build instruments one at a time that I want to build, and then offer them for sale to a list of potential buyers each of whom puts down $100.00 non-refundable to be on the list. There might be a number of lists based on styles of guitars and general price points, but I'd love not to be dealing with unrealistic expectations, anxious clients who desperately need this next instrument to finish up their album or go on the road or whatever. I'd like not to be building custom instruments specified out by the clients and rather be building them to my own capricious taste.   "Hey, you're at the top of the jumbo list, and I just finished this one. It's $7,500.00.   Want it?"

And I don't ever want to be living on customer's deposits...I know too many luthiers who do...

And what is keeping you from this, Rick?

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Howard Klepper
http://www.klepperguitars.com

When all else fails, clean the shop.

Howard, it has a lot to do with the current business model I have at this time where most of what we do is "to order", though much is without deposits as we have some very solid dealers who order from our catalog menu.   I think there will be a "next phase" to my career where I return to a one man shop environment at least part time and make one-offs and very limited edition instruments without much help from employees .   Actually I'm starting that now, building some instruments "for myself"...that is instruments which have no clients waiting, calling, wondering, specifying, did I say calling? I'm doing these primarily off-hours.   

These instruments will be available, should someone want one of them, but they'll tend to be what I myself want to hear, feel, and play next. I'll try out new things, and I won't be worrying whether "the client" will like it or not. I'd like to build three or four instruments a year this way for a while. I'll have a couple such instruments, a guitar and a uke, up at H'burg.

One thing my guitar building style allows for is easily interchangeable necks. I could build a guitar body and then put a generic neck on it for a potential client to try.   If the client loved the sound of the instrument, then he or she could get me to make a customized neck with whatever trim level...woods, purflings and bindings, inlays, tuners, etc...the customer wanted. It would allow building a custom instrument in two stages.   

Since I only build part time and have a sometimes overly active day job, I can't accurately give "completion dates" to clients.  As a result, I'm not comfortable in taking deposits at all.  When it's getting close to a time where I'm about to start working on an instrument, I contact the client and make final plans.  To date, no one has canceled an order at this point, nor have I had any returns so I'm lucky.  Especially since everything I do is custom.

If I had a commission that I decided to take that was truly outlandish, I might consider taking a deposit as a sort of insurance, but by-and-large I've found my particular niche market (high end custom open back banjos) to be made up of a very solid and reliable bunch of people.  I also have a dealer who has been great in happily taking anything I send him in the way of instruments I build "for me" (but I don't send him anything that isn't good and marketable).

I guess I'm on the same page, albeit a much smaller level, as Rick on this one.

Dave

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Unless of course your accounting system is on a cash (rather than accrual) basis.

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Actually from a cash basis, Income tax standpoint ( or even a manufacturing/accounting standpoint) the Invoice generation is still NOT the trigger for sale recognition. It is completion of the transaction/contract. If you deliver the guitar and then Invoice the customer two weeks later the sale was NOT the two week later date but rather the date the guitar was delivered/accepted. This, again are the types of things the IRS looks for to "catch" "mistakes" that people make on their returns...it's a recognition/timing type error. They always want you to recognize income as soon as possible so you owe the tax... like I said this is much more complicated than I can explain here...

just when you thought you understand...let me say this...if you have a system of accounting that is DIFFERENT from the "norm" but it more accurately and consistantly recognizes/reflects income you can convince an IRS agent that it is appropriate.

One of the biggest problems most Luthiers have isn't recognition of income but rather how to properly compute income because of a poor inventory valuation system..."cost of goods sold". Many don't track their purchases (or can't...you bought 50 tops for one price and put them in with the other 150 tops already in inventory) acurately or correctly when computing the CGS for the sale...in other words their real basis in the item sold is unknown.

Isn't this FUN

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Dave Bland

remember...

"If it doesn't play in tune...it's just pretty wood"