Small Business Owners: Should You Require a Deposit?

Nov 10

Should a small business owner require a deposit to secure their services?


Let me set the stage for you:

You’re a hairstylist and you’ve recently booked a client for a cut, color, and style appointment this Saturday. The whole service is going to take about three hours, and you’re expecting to make roughly $180. You’ve turned away other clients for this block of time; you’ve shown up at your salon, tidied up, made sure the products you need are stocked, and you wait. Five minutes before your client is supposed to arrive, she texts you to say she had to cancel last minute. You, as a business owner, scramble to Facebook and Instagram to post about your last minute opening in hopes you can fill it and make some of the money back you are losing. I mean, this is your livelihood, right?! You turned other clients down expecting that you would be doing business with the client who booked your Saturday morning time slot.

Another scenario:

You’re a photographer. You book a session with a client on a Saturday evening: your prime time! You’ve invested time and money to prepare for the session, and then your client decides on Thursday that they’d rather go with someone who offers sessions at a little bit cheaper of a price. You know it’s too close to Saturday to book another client for that spot, and you’re frustrated because other people inquired about that exact time and date and you had to turn them down.

Raise your hand if something like this has ever happened to you…Hello– this girl, right here!

Things like this happen pretty commonly, and when you are running a business that is founded on you exchanging time and services for compensation, getting stood up and cancelled on, especially last minute, is detrimental to your livelihood.


So, what do we do? How do we make sure we protect ourselves financially and communicate that our time truly is money, and when time is misused or wasted, we can’t run a profitable business?

Cue the retainer (or deposit. I’m not going to go into the specifics of this legal wording, but I’m going to encourage you to check out the LawTog’s article about it here because it’s quite important). When a client wants to secure your services for a specific date and time, it’s important that everyone understands that if that time and service are not utilized, it means you (the business owner) are missing out on compensation, and compensation is essential to any business—duh!

To protect yourself from potential loss, it’s important that you have a policy in place for collecting a nonrefundable retainer (or deposit) to secure your services for a specific block of time. When I schedule weddings and portrait sessions, I charge a set fee (somewhere between 30% and 50% depending on the type of service I’m providing) to book me for a date and time. I communicate that this fee is nonrefundable unless I were to cancel the engagement. If a client is unable to make it, he or she will not receive a refund, because I am likely missing out on filling their spot and receiving full compensation. The client’s initial payment is applied to the total service charge, so I just make the remaining balance due at the time of the session (or for weddings, three weeks prior the big day).

Not only has this protected my business from loss, it also lets clients know, in a polite way, that my time—just like theirs—is valuable. If someone cancels, I still have to fill that spot in order to stay profitable.

I encourage all small business owners who offer services and time in exchange for money to consider requiring a nonrefundable fee to book your services. When someone wants to book with you, send them your policy and an invoice they can pay online. Consider using invoicing tools like PayPal or Square, or if you want a really helpful organization tool—Calendly.

What you do IS valuable! Yes, you love it, but love doesn’t pay the bills, and I’ve found most people respect and understand that. I’d love to hear your thoughts on this or any tips you might have for other business owners– sound off in the comments, y’all!

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