When it comes to finding ways to protect or increase your revenue and therefore you income there is a vital question to ask:
To take deposits or not to take deposits in your business?
This is a hot topic across many industries; fitness, wellness, spa, salons, restaurants (Just recently we were asked to pay a massive deposit for a restaurant booking in November)
When it comes to thinking about taking deposits there are a number of reasons that it might work for your business. Here are four of the most important reasons
1. On average 1 in 10 appointments are cancelled or no-show
The data across appointment-based industries tells us that on average 10% of appointments are cancelled or result in a no-show.
Maybe you even feel it is more in your industry?
Cancellations are the more common than “no-shows”; making up 90% of these ‘bad’ appointments.
Charging a deposit increases a client’s commitment to their appointment and can reduce the number of ‘bad’ appointments.
Whether that deposit is a percentage of the total price of the booking, or a set amount, it will help to reduce cancellations and no-shows significantly.
2. You’re missing out on revenue
When a client cancels last minute or doesn’t show up for their appointment, you’re missing out on potential revenue. This is particularly apparent when you aren’t given enough time (or any time) to fill the appointment with another client.
Just last week I was at my local Pilates studio and one of the instructors received a message to say “Your next appointment has just cancelled” They tried to find someone else to take the spot and it was too tight timing.
On the flipside, you might be concerned that charging a deposit might deter clients from making appointments and could also lose the business money.
Ultimately, evaluating how many clients cancel or don’t show up compared to the number that don’t like being charged a deposit, or pay the full amount, may help you to decide if charging a deposit is right for your business.
3. Cover your costs in advance and manage cash flow
Depending on what your business model is you may have to pay for materials or goods in advance of an appointment
Taking a deposit helps with your cash flow. When you require clients to pay a deposit or for the full service in advance, you don’t have to fund those purchases personally.
4. Customise the deposit amount to suit your business
If you decide to use a system for deposits or full payments in advance, you can be customise your system to suit the needs of your business and your clients.
For example I had a dental client who charged a non-refundable deposit for Saturday appointments. She found this made a huge difference to her patient attendance rate on a Saturday. And if a patient didn’t;t want to pay a deposit, that was OK, they could book for Monday – Friday.
How might you customise your deposit system?
You might choose to:
1. Charge a percentage of the appointment value
2. Charge a flat fee or a set dollar amount
3. Take full payment for the appointment.
Most businesses find that if deposits are added, the likelihood of cancellations and no-shows reduces.
In tandem with taking deposits it’s important to have a clear cancellation policy. Stay tuned for my thoughts on that topic 😁
If you need to chat about how to implement a system to take deposits or any other money matters, please send me an email to email@example.com or click here and let me know.