[Tom Edgerton]

This is tricky, especially since the community isn't that large, and our business runs on word of mouth.

While I haven't faced this (yet), my instincts tell me to try and assess how far into the project you are, and negotiate a kill fee based on actual work done, not just the arbitrary deposit percentage. For example, if you're a third of the way in, tell them you need 33% to cover work to date. That way, you reimburse them a portion of the deposit and look like a good sport, but you don't lose everything you have in it and wind up with nothing, to Stanka's point.

Something like, "While I don't want to profit from your situation, I feel I need at least a portion of the deposit to cover my work to date; how about __% instead of 50%?" (In a negotiation, the person who says a tangible number first defines the parameters of the discussion.)

Anyone?