Cash flow and revenue
To say that cash flow has been tight over the last 16 months would be an understatement for most wedding vendors. So today as we move closer to the lifting of restrictions and we focus more on bookings for 2022/2023 weddings I want us to look at how we can get the cash flowing again inside our businesses. Grab your free download for this episode Increase your income with these 5 ideas
Contracts Deposits and Retainers
I highly recommend if you haven't going back and listening to ep048 with Your Legal Fairy Godmother Heather Stanford Gould. In that episode we talked all about contracts and it was a really good episode. If you haven't adjusted your contracts in the last 12 months then stop with this episode and go back to that one first. What we spoke about was so important for you and your clients.
The difference between a retainer and a deposit is also an important one. Deposits need to be protected by law until the point at which the service or product is provided therefore asking for deposits isn't a great way to get cash flow going. However, a retainer is a payment to reserve your time and allows you to begin the necessary work for a client so in this episode I'll be talking about retainers.
There are 2 ways you can introduce retainers either as a fee on top of the package price great idea if you want to raise your prices or work out what you want to charge, I suggest 20% of your top package in this episode. and have that as the retainer price that is included in your package price meaning in effect you are lowering your package price.
Ensure you make it very clear to potential clients that you have a non refundable retainer fee and whether it is shown within the package cost or it is extra to the package pricing. Part of the Society of Professional Wedding Vendors Code of Conduct is that you be clear and transparent with your pricing, nobody likes a nasty surprise cost being added down the line because the original pricing wasn't explained clearly.
Get cash flow moving with payment plans?
Let’s look at payment plans there are two ways I'd suggest looking at them but of course you can do your own thing. The very important thing to remember is payment plans should be no more than 12 months and shouldn’t incur interest, if they do you need to speak with the FSA because you’re getting into loan and banking territory there. I'm no financial advisor so do speak to your accountant before implementing a payment plan.
Example your contract says cancellations 6 months before the wedding with incur 50% of the fees being forfeited by the couple, a cancellation 3 months before the wedding will incur 75% of fees being forfeited by the couple and any cancellation in the final month will result in 100% of the fee being forfeited
So you need to make sure you have the right money in your account at those cancellation points. Go back to your legal fairy godmother ep048 for more details
So taking our example of £300 retainer and a £1500 package based on a booking 18 months out for the wedding date 7th Jan 2023 they book and pay the retainer in July 2021. The retainer is a separate fee it is paid at the time of booking I would suggest a 14 day cooling off period after which that money is non-refundable. That money is then part of your cash flow.
We now need to start collecting the £1500 for the package cost.
You will need to have taken £750 by the time 6 months before the wedding date. So divide £750 by the months between the month after they book and 6 months out which would be July 2022.
Not including this month as they paid their retainer, that leave 11months months
£750 Divided by 11 = £68.18 per month starting 1st of August
If they were to cancel after July 2022 and before October 2022 they would need to forfeit the money they had paid so far.
Then you would require a one off payment of £375 3 months before the wedding which gives you the 75% should they cancel after that date and finally another £375 the month before the wedding.
Doing this you are ensuring you have all of the money you are owed at the point of cancellation in your bank.
Summary: retainer paid in booking month followed by a payment plan, amount required at first point of cancellation divided by the number of months between booking date and that first point, excluding the booking month. followed by one off payments at the remaining cancellation points to cover the money they would owe at that point if they cancelled.
You need to have £1125 in the bank at the 3 month mark to cover the 75% divide the £1125 by the number of months between the booking month and 3 months out from the wedding don’t include the booking month use this number or 12 months whichever is shorter remember we can only do payment plans for 12 months. In our example the number of months is 15 so we use 12.
£1125 by 12 = £93.75per month starting on the 1st of August
Then a final payment of £375 would be due the month before the wedding.
This way is the simplest and easiest and requires the least amount of effort on both parts, as you are doing the 12 payments then collecting one final payment rather than 2. with 18 months until the wedding you will actually hold 75% of the total fee by the 6 month cancellation point so if they were to cancel you would owe them the 25% back.
Build a contingency pot for those odd cancellations I would suggest keeping a third of all payment plans for the first 6 months to a year in this pot that would give you a good contingency fund. It would depend on how many bookings you have, you just want to make sure you have some money in a pot that could cover cancellations should they happen.
I would also recommend having all payment plans set up for the 1st of the month. This means you just have one day a month where you need to sit down and just check that all clients on a plan have paid their payment. If you use a book keeping software like Fresh books you can set up an automatically recurring invoice that they can pay instead of requiring them to set up a standing order this can make it much easier when it comes to tax season and for keeping track.
The advantages of payment plans is that you will have more regular income. But your clients also spread the cost too.
Alternatives to get the cash flow flowing
Finally look at other revenue streams that give a quicker return on investment,
could you do a work shop of your craft, this works well for photographers, florist especially at Christmas and Easter, cake makers, stationers,
Could you offer one on one guidance, higher price tag,
Could you do a small video course and sell it on your website or have different video lessons people can buy?
If your trade doesn’t lend itself to that do you have a hobby that you could help others with facilitate a craft day around it start a club around your craft topic
These are all smaller money makers but can just help relieve current pressures and if you can do a 2 hours work shop on an evening during the week then as we open up you’ll find people are really eager to get back to being out but some will want a bit more structure around it than going to the pub a smaller more intimate setting and learning a new hobby or improving a hobby they have might be just what the doctor ordered. The free download increase your income with these 5 ideas elaborates on this and its a guided brainstorm session to help you dig a little deeper to uncover where you might have extra opportunities. So head to bit.ly/5wiyi to download that.
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