ep. 011 • How Accepting Deposits Could Be Jeopardizing Your Business

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Chelsea Stevenson: Welcome to the Hennapreneur podcast. The exclusive podcast of its kind, dedicated to giving you an honest look at the reality of making a living as a henna professional. I'm your host, Chelsea Stevenson, professional henna artist and business strategist. I teach budding henna artists and seasoned henna pros alike how to build vibrant, profitable businesses doing what they love. I went from being the girl who could barely piece together a fluid design to being owner of the most celebrated henna boutique in my city. And with years of experience growing my own business and helping others to do the same, I'm here to spill all the tea on what it takes to be a bonafide hennapreneur. Our show starts in just under 60 seconds, but first, here's a quick shout out to my sponsors.

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All right, let's get to the show! Hey, hey hennapreneurs! Today I want to talk to you a little bit about one of the mistakes that you may be making in the language that you use surrounding your business and how that mistake could be placing your business in jeopardy. So let's chat about something that is brought up very, very commonly in the henna community and that is payment when we're accepting payment from our clients, right? Let me back up. This weekend I had the opportunity to spend the weekend with approximately 50 different henna artists and over that time I was there observing, observing the way that we talk about our businesses, the way that we discussed the operations of our business. Just listening to the henna artists who were present. Um, listening to their experiences and trying to do my best to be able to share insight whenever possible with them in ways that would benefit their, you know, that would benefit them when- once they went home.

And, um, one of the things that I noticed while in that space is that we are not very, as a community - and I say this and this is not just limited to the group of artists that I had the pleasure of spending time with this weekend, but I also am referring to the henna community at large - I see a trend even in, you know, on social media, in Facebook groups, on our websites, things like this, that we have a tendency to discuss our businesses with language that can actually place us in jeopardy and can be detrimental to our businesses. And so one of the things that came up this weekend multiple times was the concept of charging a fee for your services prior to actually rendering those services. And the language that was used, consistently, around that fee was the word "deposit". Deposit.

And so if that word catches your attention, if you find yourself saying, "Yeah, I charge a deposit for my clients." then this episode is for you, my love. Because in your business, charging a deposit could actually be a problem. So this is the thing, it is super, super important for you to be aware of the language that you're using surrounding your business. Because language has power. And I talk with my students about this a lot. We have to be very specific in the language that we use and more so we need to be specific with the language that we use when it's relating to the monetary exchange that we have with our clients. Because not every monetary exchange is the same. And so I want you to understand, and this may be new information to you, this may be like, "What are you even talking about, Chelsea? What's the problem with taking a deposit?" Well, when you request a deposit or a booking deposit or even if you say this is a nonrefundable deposit, you actually have- depending on where you live, depending on your local legislation, you may be placing your business at a disadvantage when it comes to the possibility for any disputes over any payments that were made, right?

So let's say for example, right, you are approached by a client, um, and that client wants to hire you to service a henna party or let's say you are approached by a client for bridal services and they want to hire you and, um, this party or this bride, what have you, this is, I don't know, let's say it's a month and a half out, okay? So, because you are a super business savvy hennapreneur you know, "Okay, this booking, I'm available. I'd love to service this booking, but because it's so far out, I definitely want to have a contract in place. And I'm gonna require this person to pay X amount of the total cost of services up front because I want to do that, you know, to secure the date. Just to make sure that my time is being respected." Perfect. Wonderful.

So you reach out to the client, you let them know, you send them the contract, you, you know, give them a dollar amount that they need to pay in order to secure the services. And um, it's documented within your contract as being a deposit. Nonrefundable, even. It doesn't matter. It's documented as being a deposit. Well, fast forward to the week of the appointment, right? And all of a sudden your client has really bad news. Something has gone wrong. The guest list isn't right. Something's off with the wedding, whatever. And it looks like there's not enough of a need to hire you for the length of time that they booked you for initially. And so your client, or would have been client, is writing you to let you know that, "Hey, I don't actually need your services anyway. Um, because it doesn't make sense for my budget anymore. And so I don't require your services. Um, and since we haven't actually done business yet and since you haven't actually rendered any services yet, I'd really love it if you return my deposit." Now, depending on where you live, again, this depends on your local legislation, depending on where you live, the term "deposit" may actually require your business to return whatever monies were paid to you in order to secure the booking, even if there was a cancellation.

So you can, you know, all day long say, okay, yeah, I want to have the a nonrefundable deposit. But just because you've said it that way, it doesn't mean that you change the way that the law works where you live, okay? So if you live in an area where the term deposit is specific to something that must be returnable to that person, to that customer, to that client, then it really doesn't matter what your contract says because the legal system in your area requires something different. So again, I mentioned the importance of language, right? And sometimes in our business we know that there's a concept that we have in mind and we want that concept to be present in our business, but we simply don't have the vocabulary. We simply don't know what is the right way to speak about our business and that's okay. No one comes out of the womb knowing that, right? You have to learn it over time.

So I want to talk to you about the word deposit. The definition of the word deposit is: "A returnable sum payable as a first installment on the purchase of something or as a pledge for a contract with the balance being payable later." Did you guys notice that first piece? It's a returnable sum that's payable as a first installment on a purchase. Returnable, that's the operating word here. So if you're using the language "deposit", then you're likely opening up your business for complications. Say that client comes back and says, "Hey, I actually don't need you after all. I found someone cheaper or my guests aren't coming or there's been a change of plans and we've moved the date." Whatever that is, when you use the word "deposit" in your contracts, you're talking about a returnable sum. And in most places, if you use the language "deposit" your business then, yes, becomes responsible for returning those funds to that client. Which means that the time that you've blocked off of your schedule that you've been planning, perhaps you hired a babysitter, perhaps you made other arrangements, perhaps you took time off of another work, perhaps you had to make shifts, perhaps you whatever. And you were counting on that money and it's gone. And what you did collect, you now have to return.

So how can we improve that, right? How can we improve this language? I want to introduce a new word to your vocabulary. I want to introduce a new word that will change the way that you discuss your business and the way that you receive payments. Long be gone the days that you accept deposits from clients. From now on, I would love it, I would love it if I could hear that you accept a retainer. Now, “retainer”, that word is often used when you're dealing with a service. Um, often you'll hear about legal services, web design services, services that are requiring a length of time for you to do work with them, right? They'll offer a retainer. You'll pay a retainer for that service. Now what's a retainer mean? Right? Because again, we want to pay attention to the language that we're using. A retainer, the definition of the word retainer is: "A fee paid an advance to someone in order to secure or keep their services when required." There's no mention of return. There's no mention of a portion of an installment. This is a fee that's paid in advance of the services being rendered to someone in order to secure their service. Meaning: "I'm paying you to secure your services to secure that date on the calendar to make sure that you're available to lock myself in or to keep those services." And that could be like a monthly retainer if you're working with someone long-term. Can you guys see how that shift in language can protect your business so much more?

I mean, by definition the deposit is, it's an amount that's intended to be a first installment for the purchase of your services, but then it's otherwise intended to be returned in the event that you actually don't render said services. Right? And that's without regard to what that- the reason for the change might be. A retainer, on the other hand, that's an amount that's paid in advance. That's to hold that date, to reserve your services for a specific engagement, for a specific time frame. And so in the event that that person now changes their mind and they're no longer interested in your services, well, they lose their retainer.

The retainer is- I mean, the retainer is there to maintain your time. The retainer is there to protect your time. The retainer is there for you to block off that time on your calendar and you did that and if they want to make a change, well, the retainer is lost. Of course this is going to depend, again, on your local legislation where in most places in the United States, this is what applies. If you're working with a deposit and that client requests their deposit in return because the services were not rendered, then in most places in the US that client, or would have been client, is entitled to receive their money back and you're just out. Sorry. But in most places, if you change your language, if you speak about this in a different way, if you use the words "retainer" or "booking fee" or "service fee", noting that, you know, of course there may be variations that may be present based on your business's refund policies and such like this. But when you use this language, it changes the meaning of what you're saying and it changes the implications of what you're saying to a way that can secure your business that much more versus leaving you open to lost wages, lost time, and a whole lot of frustration.

So as a rule of thumb, I believe that the terms "retainer" and"non-refundable retainer" are the best suited words for you to use in your contracts, um, and for you to use with your clients and for you to use in general when you are discussing the acceptance of payment for services that are going to be rendered in the future. Anytime you're talking about that advanced payment, let's use these words. Let's use vocabulary around our business that's going to support our business, protect our business. This is important. So, I don't know what language you're currently using to describe the monetary exchanges that are required to secure a time on your calendar, but I hope that you'll adopt the term "retainer" into your vocabulary and that you'll make any changes on your website, on your contracts and so forth to reflect that as well.

Now of course I'm going to give you the full on disclaimer, I am not an attorney at all. This is not me giving you legal advice and I do strongly encourage you to follow up with a local attorney to your area so that you can assess what the best languages for use in your own contracts. But I'll tell you based on my own experience as a henna artist who's served in multiple states in the US and who has had to do that research and come to those answers for my own business, this has been the most solid and the most option. This type of language has been the most secure option for business across the board. And so because this is something that I'm very specific about in my own business, I thought that it was a great opportunity to share it with you had an hennapreneurs as well because I don't want to see you falling into the trap of the deposit and losing that time and losing that money and, and losing that sanity over it. Okay?

With that, if you have questions, if you have questions about the differences between deposits and retainers or if you have questions honestly about henna contracts and, um, you know, how to best assess- how to have discussions like these regarding payment for services and such with your clients. You're welcome to ask. Come pop on over into the Hennapreneur group on Facebook. The Hennapreneur Community is very, very excited to welcome new members all the time and I would be more than happy to give you some additional feedback regarding any questions that you do have because as always, I'm here to see you winning. All right, so I'll let you go. I'll talk to you guys later on this week.

Bye bye.

Hey babe! I wanted to give you a quick thank you for tuning into the show today. That was super cool of you to hang with me all the way until the end. Of course, I've got all the links that you might need from this episode inside of the show notes that you can find at hennapreneur.com/podcast.

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