What a deposit is for
A deposit is not profit and it is not a loyalty test. It exists to cover money you spend before you get paid anything else: materials you order, product you special-order and cannot return, subcontractor mobilization, permit fees, and the schedule slot you just took off the market.
Size it to that exposure. A job where you order $9,000 of cabinetry up front has a completely different deposit than a job where your first week is nothing but labor.
The ranges most contractors land on
For small residential work — a day or two, minimal special-order material — many contractors take nothing up front and invoice on completion. Chasing a deposit on a $900 job costs more in friction than it protects.
For mid-size projects, a deposit in the range of ten to thirty-three percent is common, sized to cover material orders and mobilization.
For large or heavily custom projects, the deposit usually stops being one number and becomes a schedule: an initial payment, then progress draws tied to milestones, then a final payment at substantial completion with a small retainage released at punch-list sign-off.
Several states cap what a residential contractor may collect up front, and some require deposits above a threshold to be held in a separate account. Check your own state's rules before you set a policy — this is one of the most commonly regulated parts of a residential contract.
Draws beat deposits on anything long
On a project running more than a couple of weeks, the deposit matters less than the draw schedule. What protects you is never being far ahead of the money.
Tie draws to observable milestones, not calendar dates: rough-in complete and inspected, drywall hung, cabinets set, substantial completion. Milestones are verifiable, so they generate fewer arguments than "the 15th."
Write the payment terms into the contract with a due window — net seven or on presentation — and a stated consequence for non-payment, usually the right to suspend work after written notice. A suspension right you never wrote down is not a right.
Say the number without apologizing
How you present the deposit changes the response more than the number does. Explain what it buys: "The deposit covers the material order and locks your slot in the schedule. Once it clears, I place the order and we start on the 14th."
That framing makes the deposit a step in the project rather than a demand for trust. Put it on the proposal itself, not in a separate conversation, so nobody is surprised at signing.
When the customer refuses
Some pushback is reasonable, especially from someone who has been burned. Offer a structure instead of a discount: a smaller deposit with a materials draw on the day the order is placed, or receipts provided for the special-order items the deposit covers.
Flat refusal to fund materials on a job with a large special-order component is a different signal. So is an offer to pay entirely in cash on completion, an insistence on skipping the written contract, or a request that you start before any paperwork exists.
You are allowed to decline the job. A contractor who never walks away from anything ends up financing strangers' renovations at zero percent.
Protect the deposit after you take it
Receipt every payment in writing, with the date, the amount, the method, and the remaining balance. Keep deposits for unstarted work identifiable rather than spent, both because some states require it and because refunding a cancelled job cleanly is worth far more in reputation than the deposit was in cash.
And write your cancellation terms in the contract: what is refundable, what is not, and what happens to material already ordered. That clause is what turns a cancelled job into an accounting exercise instead of a dispute.
The short version
- Size the deposit to your real up-front exposure: materials, permits, mobilization.
- Small jobs often need no deposit; mid-size commonly run ten to thirty-three percent.
- Check your state's cap and any trust-account requirement before setting a policy.
- On long jobs, milestone draws matter more than the deposit size.
- Write payment terms and a written-notice suspension right into the contract.
- Present the deposit as what it buys, on the proposal itself.
- Offer structure, not discounts, when a reasonable customer pushes back.
- Receipt every payment and write clear cancellation and refund terms.
Common questions
What is a normal deposit for a contractor to ask for?
On mid-size residential work, ten to thirty-three percent is the range most contractors land in, sized to cover material orders and mobilization. Small one- or two-day jobs often take nothing up front. Large custom projects usually replace a single deposit with an initial payment plus milestone draws.
Is it legal for a contractor to ask for 50% up front?
It depends on the state. Several states cap residential deposits at a percentage of the contract price or a flat dollar amount, and some require deposits above a threshold to be held in a separate account. A fifty-percent deposit is legal in some jurisdictions and a licensing violation in others — check your state's rule before you set a policy.
What should I do if a customer refuses to pay a deposit?
Offer structure instead of a discount: a smaller deposit with a materials draw on the day the order is placed, or receipts for the special-order items the deposit covers. Flat refusal to fund materials on a heavy special-order job, an insistence on cash at completion, or pressure to start before paperwork exists are all reasons to decline.
Should the deposit be in the contract or the proposal?
Both. Put the deposit and the full payment schedule on the proposal so nothing is a surprise at signing, and repeat it in the contract with a due window and a written-notice right to suspend work for non-payment.
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