Mary has a growing floral shop in Portland and books up her weekends over 8 months in advance. Because she stops taking additional weddings once she's booked, any of the weddings that are cancelled or changed take a toll on her bottom line. That's when her soon-to-be married client Sarah called and said they couldn't afford the proposal that they had agreed upon and wanted to cut it down to 25% of the cost. Is Mary protected from a major hit to her business? That all comes down to how she handled her deposits.
A. Don't Book The Weekend Until You Have The Deposit
As we were growing Twisted Willow, there were three KPI's (key performance indicators) that we used to measure our success every week. One of those was weddings booked in the past 4 weeks. Growing a business, it's so tempting to claim a "win" whenever a bride says they're going to book with you. If you're going to be successful, you've got to require more than just a verbal confirmation. So we had to set a structure for ourself: the only time we could claim another client was to have their deposit. Be sure your team understands this. And even ensure that your clients know this. You have "limited availability" that weekend and the first clients to book get the date.
B. Call Your Deposit A Retainer
Adjust your terminology to indicate that what they are paying for is simply saving their date. If, per chance, they make it to the wedding, this "retainer" goes towards their final cost. If you do a 50% deposit typically, that may be too high of $$ to keep if they cancel so you can write a retainer clause into the contract stating that $1,000 (or whatever) of the initial deposit is the retainer and won't be reimbursed. Be sure you clarify this in the meeting!
C. Set Your Retainer (Deposit) At An Amount That Makes The Final Payment Easier
Once the client has paid you their retainer, that money can no longer come back to them. So, if a client needs to adjust their desires based on a financial need, the retainer is water under the bridge and they are only looking at what they have left to pay. We experienced this with a client once. At Twisted Willow, we have a $500 deposit and an 85% minimum guarantee (based on the original proposal). The problem was the client had a proposal of around $4,500. So, while she was contractually bound to paying 85%, we had only received 11% - for those not good at math, that's 74% difference that she had to make up. As we say in Arkansas where I grew up, that's a long row to hoe. For most clients that isn't an issue - but it makes sense that we would run across a client where it was. She said she couldn't afford it and had to majorly cut down what she was wanting - well below our minimum.
We should have let her know we couldn't service her event and kept the $500 for the time invested / money lost for the weekend. It would have cost us too much to sue for breech of contract to recoup any money (and she wouldn't have even had it). At the very least, we should have given her back her money and sent her on. But we did the worst thing...we kept the event. It turned out this was probably our smallest wedding of the year AND we had the worst experience with the clients during and after of any clients we've had. That always seems to happen when you're trying to help someone, doesn't it?? Taking a step back though to put ourselves into their shoes: they were sold on an incredible $4,500 wedding florals dream and ended up with a little over $1,000 of flowers. Had we provided a higher "entry fee" to the wedding they were imagining, we wouldn't have left them dreaming about an event they couldn't afford.
So the goal is to have the client pay, up-front, an amount that provides them with an easier route to payoff. If a client doesn't have financial issues with the proposal, they won't have issues with paying a larger amount up front. We're currently looking at raising our deposits (soon to be called retainers) to $1,000. Our average event is around $4,500 so $1,000 still may be too low for us. But the principle is the same: help clients have an easier route to payoff and you'll have less issues. Many of our florists who use Curate actually have a 50% deposit.
D. Weigh Out Your Cash Flow Needs
If you need your cash flow to be more consistent throughout booking season, you might want to have a higher deposit. Be sure that you aren't shorting yourself though! If you accept a 50% retainer and have a 33% COGS, then you're going to have to run your business off of the final 17% of profit left. With wedding florals, you can't buy all your supplies up front so it definitely matters when your cash is coming in.
Only take clients that can afford you. Be sure that you check you contract for all details of how your deposits / retainers work. Have a system that automates some of these steps. As a company that does event rentals and florals ourselves, we have built Curate.co so that clients can make their retainer payment and sign the contract directly from the beautiful proposal - whether they're in the consultation with you or viewing it from their phone.