5 reasons why you absolutely MUST have a cancellation/ late policy
Updated: Jan 22, 2020
Client no-shows are one of the most frustrating things a service business owner can face. They will book out time for an appointment (sometimes lasting hours), only to be sat twiddling their thumbs, waiting for their client who just doesn’t both to show up. No phone call. No explanation.
Not only is this incredibly annoying for the business owner, it can also end up costing thousands of pounds a year in lost revenue.
In this article, I want to show you how introducing a cancellation policy with deposits payable in advance, has reduced the no-shows and late comers of a client of mine by 90%, saving thousands in the last 6 months alone. I’m also going to give you 5 reasons why you absolutely must have a policy in place to protect your own service business:
A Quick Case Study
I have been working with a client (who wishes to remain anonymous for this) for the last 6 months, and no-shows were by far one of the biggest problems this owner faced.
I was initially only hired by my client to manage emails, write articles and perform other bits of general admin as the new business (still less than two years old at the time of writing) started to get busier.
My client offers a range of services costing between £20-400 and appointments lasting anywhere from 30 minutes to 4 hours and I quickly realised just how many people were not bothering to turn up to their appointments, which was losing my client hundreds of pounds per week.
Let’s look at an example of just one week at my client’s workplace:
• x18 appointments were booked in from Monday to Friday
• x6 of these appointments were between 2-3 hours long
• 7x appointments were no-shows, losing my client a total of £530 and 5 hours
Now for a two-person business (my client and one employee), this is an insane amount of money to lose in one week!
I worked out that over 6 months (including 5 months before I started working with this client), my client was losing on average £1,120 a month thanks to people not bothering to show up.
That’s £13,440 a year – crazy right?
My client had considered setting up a cancellation policy and charging deposits soon after the business opened. However, like many new business owners, they were scared it would put customers off and they would end up losing potential customers as a result.
However, once I showed my client just how much they were losing on average each month, and explained the following 5 points to them, we put a policy in place and no-shows (and lateness) dropped by around 90% saving them over £7000 in 6 months.
The policy includes taking a deposit upon booking, explaining to the customers our 24-hour cancellation policy (over the phone if they don’t pop in) and then on arrival, getting them to sign a document agreeing to the clear terms & conditions of our cancellation policy for all future bookings. We also have the policy clearly stated on the website.
Since introducing this new policy, my client has had ONE person out of hundreds of people not book (they were rude as soon as they phoned up so good riddance) because they didn’t want to pay the deposit and two existing customers moan about having to pay a deposit (funny enough….these two people were the worst offenders by far in not bothering to show up, which speaks volumes). They do however now pay a deposit and still book most months…..and they now show up to every appointment! How 'bout that?!
So, let’s look at the 5 reasons why you absolutely MUST have a cancellation/ late policy including a deposit (or even paying in advance) if you run a service business (hairdressers, beauty salon, tutor etc etc etc):
1. It shows them your time is valuable
Not having a cancellation policy can give off the impression that 1. You don’t need the money so it doesn’t matter if people don’t show up 2. You’re an amateur and desperate for clients.
Creating and adhering to a cancellation policy shows your clients that your time is very valuable and you’re serious about your business, which helps your clients trust you more. Your expertise, knowledge and time should be respected and having a policy in place will help make this happen.
Your clients will respect your policy and the ones that don’t (VERY rare), well you’re probably better off without them as they’ll more than likely be right pain the ass anyways.
2. Reduces late arrivals
Late-arrivals are a total pain and costly too (I have a real pet-hate about lateness!). Also, if a client shows up 20 minutes late to an appointment, forcing all your other clients to wait longer, this looks bad on you and can damage your reputation.
When I had my teaching practice, I introduced a cancellation policy after around 2 months. However, I failed to mention anything about lateness, meaning a had a few clients who would show up late, some of them consistently! My clients would book an hour slot for their singing lessons and assumed that they would still get their full hour, even when they rocked up 10, 15 minutes or even later to their lesson. Whilst I would let this slide when my business wasn’t that busy yet, it was frustrating waiting around for clients and then finishing late because of them.
As I became busier, I had to add a new clause into my policy, to include lateness.
I can honestly tell you now that when I added the following clause, 99% of them started to miraculously arrive on time every single week, and those that didn’t, did not expect their lesson to last the full hour and respected the fact that they had agreed (and signed) to my terms:
“If you arrive late, your lesson will still end at the scheduled time. Such loss of time will not be made up at another time.”
Now obviously, there may at times be genuine cases for lateness, and if you’re able to accommodate your client (i.e you don’t have another client booked in straight after), it might be worth doing so but let them know that it’s strictly a one-off.
3. Holds them accountable
If your clients know they are financially responsible for no-shows or lateness, I guarantee you, they will be much more likely to show up and show up on time. No-one wants to pay for a service they didn’t receive.
If you have no policy in place, you will lose a substantial amount of money and time, especially as you start to get busier.
Just because someone decides they are too tired to make your appointment does not mean you should lose income. You could have booked someone else in their place if they had given you enough notice so when they don’t, cover yourself (even if it’s not the full amount) by forfeiting their deposit.
5. Makes business growth a lot easier
Because how can you expect your business to grow if your diary is constantly riddled with gaps from people not turning up?....
No-shows and late-comers waste a lot of your time. Time that you could be spending working on your business strategy, marketing and networking etc.
Remember, your time is precious!
How much should I charge in advance?
This is totally up to you and depends on the type of business you have. Some business charge a %, some charge a flat rate for all their services (many beauty therapists do this) and some even charge the full amount in advance (many coaches and tutors do this).
If you don’t want to charge the full amount in advance and your services vary greatly in cost and/ or time, I would recommend you charge a % or a tiered rate (less confusing which is especially handy if you have multiple members of staff with varying mathematical skills!). For example:
Services costing less than £50 = £15 deposit
Services costing between £50 - £100 = £25 deposit
Services costing between £100 - £200 = £50 deposit
You get the idea....
The point is, if you have a service that could potentially bring you in £200 and the client lets you down, it’s better to still have pocketed £50 than a tenner…or nothing at all.
What about genuine emergencies?
While emergencies or other exceptional circumstances do happen, they are rare. As business owners, we may decide to let certain clients off. We are human after all and understand what it’s like when something happens that means we can’t be somewhere.
Just be aware that some clients will try and take advantage of this so keep your eyes peeled and don’t get fooled. If your client has had 5 grandmothers die this year alone, they are probably taking you for a ride.
Building a business is tough enough without having to constantly fight a losing battle with no-shows and latecomers. By creating and adhering to a cancellation policy that is fair to both parties (e.g allowing them to cancel free of charge with 24 hours’ notice), you are helping to ensure the success of your business by protecting your revenue and building even more trust.
Get in touch if you want more info about creating your own cancellation policy.