Last week we discussed at length the importance of getting clients to pay us prior to the day of their wedding or other event. But there’s a lot more to be said about business finances, and I’d like to continue our conversation this week. Let’s start by tackling the months or even years when your business might be cash poor. This can happen regardless of whether you’re just starting out in the wedding and event industry or have had your business for decades. Nor does it matter how many clients you have: you can be cash poor even when you’re flush with jobs.
One of the worst feelings in the world is realizing you can’t pay your employees and/or vendors. Many years ago, when I was struggling with my own serious financial problems, I knew this feeling well. Slowly (very slowly), I learned what I was doing wrong. Here are the top three mistakes I was making. Please learn from them, so you don’t end up running a cash poor business like I did!
1. I thought nothing of doing wedding and event presentations and designs for clients before I saw a dime from them. I thought that was just the way our industry worked. It doesn’t. And even though I still struggle with this one, I now understand that every time I do this, I am taking a huge financial risk. Don’t make a habit of using your own money to finance potential jobs. Yes, it’s true that sometimes this risk will pay off. However, most of the time it doesn’t.
2. Long ago, I discovered that working with corporate clients can sometimes be difficult. Most corporations want to hold onto their money as long as they possibly can. Consequently, we, the small vendors, suffer. I have frequently had to wait anywhere from one to three months after completing a corporate job to get paid.
3. This last practice is by far the riskiest! In the past, I have been reckless and didn’t always have reserve cash available for emergencies. This meant I was always just trying to catch up and using whatever existing money was coming in for other potential jobs… (See #1 above. It was a vicious cycle!)
The very first step in fixing my cash poor business was identifying these three problems. Do any of them look familiar to you? I realize it’s hard to talk about money, but have you been or are you currently in a similar situation? Please share! How did you or how are you dealing with this dilemma? Have you ever gotten a job by showing your designs to potential clients before they gave you any money?
Be sure to check back later this week as on Wednesday and Thursday I’ll be sharing very specific guidelines to avoid the cash poor trap.
Check Out My Facebook Fan Page
PREVIOUS
George Bernard Shaw once said: “You see things and say, ‘Why?’ But I dream things that never were and say, ‘Why not?’” That quote embodies how Preston Bailey approaches every event.
Savannah (Pearls and Pages)
May 23, 2011
Thank you for the tips, Preston. Helpful advice for many I am sure! #2 really surprised me. But, when I think about it (having worked corporate) I can see where this could happen. Especially for something that’s “superfluous” like an event. Big biz could very well see paying for “just a party” could be last on their list of to-dos in the Accounting Dept. Very interesting tip I’m sure many of us wouldn’t consider. I tend to think, “Oh! Corporate party! Cha ching!” Hmmm…. hold a sec.
Just b/c it’s “corporate” doesn’t mean the invoice will result in payment asap. Great tip/reminder!
I think your personal experiences that you share really help so many of us. We really appreciate your time and effort and great care that you put into your blog each day, Preston. Thank you!
Keep on styling! xoxo Savannah
The French Bouquet: http://www.thefrenchbouquettulsa.com/blog
YOUR NAME
May 23, 2011
#3 is one I deal with constantly! I will have to take a closer look and figure out how to slow down the money going out.
Thank you Preston, as always, for your honesty and transparency. Love you for it.
Covesa
May 23, 2011
This topic is right ON TIME! I have a linen rental business where I rent chair covers, overlays, etc to banquet halls and they sell them as their own and mark up the price. They do not want to give deposits, they often wait until the last minute to book, and they want to wait 30 days to pay. The business is constant which is why I do it, but it puts me in a tight situation.
I also have clients who want to hire me, but in the meantime before our appointment they have dozens of questions. I hate to not answer but I also hate to answer and they don’t hire me. I had this happen earlier this year, where I made a suggestion on the reception venue, it saved her THOUSANDS and she booked it on her own, and never hired me! UGH!!!
Great topic! THANKS for your willingness to share.
Caryl Lyons
May 23, 2011
Great information as always Preston!! Number 1 is a bit scary. Do you make your clients pay a deposit for a proposal? How does that work?
I’m doing primarily corporate events and one thing that has help a lot is to take credit cards. Yes, it does cost a small percentage – but you receive the money so much quicker and my corporate clients like it because they don’t have to go through the purchasing process. It saves everyone time.
Caryl
crismarcuyares
May 23, 2011
Preston thank you, for this tips… I Have the same Cary’s questions: Do you make your clients pay a deposit for a proposal? How does that work?
Because I always give 3 proposal to my clients, but they have many questions about the design, and the best way to answer it is making a design presentation, but we know that it take time and spend my own money … it’s a big risk… thanks you are my design guru
Mary M
May 23, 2011
We made the mistake of presenting a ‘sample’ to a bride, before signing a contract or giving a deposit, who promptly evaluated it (including taking photos so she could ‘show her mother out-of-town’) and decided it wasn’t really what she wanted. Came to find out later, that she had a ‘friend’ that worked in design copy what we did and we never got the job, the credit, or the financial compensation for the original concept. NEVER, EVER AGAIN will we ‘show’ until we’re given at least a signed contract and deposit first.
As for Corporate work, we’ve come to accept one of two solutions to getting paid… with a signed contract… either be patient and wait the 30(+) days, or accept a check on the ‘day-of’. Recently began to re-think the PayPal option too.
YOUR NAME
May 23, 2011
It’s amazing how you answer or ask the questions I need on the very day that they are relevant. I am at a point now where i needed to know those three things. i think they are going to make a big difference in how i do business going forward. It is encouraging to know that someone whom i admire greatly has made some of the same mistakes that I have. It helps me to feel that I am not isolated in what is happening an that a lot of the issues are industry wide. It let’s me know that I am a part of something huge and not apart from what’s happening in the industry. Meta
Kristen (Parties by Kristen)
May 23, 2011
I am so guilty when it comes to #1. I am transitioning from a non-profit event career with part time wedding planning to full time wedding planning and other events part of the time. Because my business itself is new, I am definitely cash poor and right now am struggling when it comes to getting leads and clients. I thought that it would help me spark interest in potential clients and make them more apt to sign on the dotted line because they were getting something extra for free. Now, I don’t think I will be doing this anymore. Those little inspiration boards can take a couple of hours to put together and after reading this, I see how that’s not the best use of my time. Thanks so much for what you are doing to give back to the industry!
Ebony Peoples Events & Design
May 23, 2011
Preston, thank you so very much for the tips and advice. Next month (June 8th to be exact) I’ll be taking a step out on faith to run my business full time. I am super excited! Your blog has definitely helped me get my business up and running in the right direction. You are amazing and I definitely value and appreciate your encouragement, insight, and advice! Thank you
Kristi Richardson
May 23, 2011
Preston, thank you for sharing your experiences for the rest of us to learn from. I have learned the hard way on several big money issues with growing a business. (I did a lot of it backwards and it has taken me 5 years to get back on my feet)
One reminder to better manage cash flow is to control inventory.I love to design different looks and it’s easy to order extra items because you are working on this design.
I also charge for sample kits. That way if I send them to clients and they do not make a purchase it covers the cost of shipping and t the materials. If they place an order, then I credit the cost of the kit. It works out to be a small discount, but well worth it for everyone’s piece of mind.
I wish everyone continued success with their business.
Kristi
Kim Eibrink Jansen - Events of Noosa, Weddings of Noosa, Australia
May 23, 2011
Hi Preston, I have been a Wedding Planner for a very long time and have come across the issues you mention above and have some advice as to how I have dealt with these issues – No1 & No3 – I have built my reputation in the industry to be able to charge for initial consultations. However what I offer in these consultations is as much advice, knowledge, tips and ideas so then if the bride & groom are just using me for all of this then I am more than happy to give it to them! However if they then want to use me to then plan their Wedding I use the consultation fee as a deposit for my services. It is win/win for everyone. To eliminate No2 – I had decided long ago to specialise in being a Wedding Planner. We don’t deal in Corporate Events so we dont have this problem. It was such a great decision – I dont have issues with receiving payments HOWEVER I enjoy planning Weddings so much more than Corporate and as they are so incredibly different we are renowed as “The Wedding Planners” which has given us the title of Wedding Planner of the Year 2011 in Queensland & Top 3 in Australia. Thanks Preston for bringing up such great topics as we all get in these pickles over our business lifetime. Keep up the amazing work – we are all blessed to have you to learn from. xoxoxoxoxo
evelynmozingo
May 24, 2011
I have been in such a similiar instances. The floral and event business is so hard. No one wants to pay for expertise or time. My mom has been in the business for almost 60 years and she has every tale ever told. I am just tring to make a difference and it is so hard. I have read a lot of Preston Baileys books and have bought 2 of them but never did I realize that he ever had problems. Nice to know that I am not in this alone.
Angela
May 24, 2011
Need to know the tips you use now to reserve cash…. I seem to always just find myself reinvesting into the business all the time.
Kristen
June 6, 2011
This is excellent advice. Being sure to secure payment as early and as nearly in full as possible is so important to small business’ in general and especially in our field. That aside, reserve cash is very helpful to have when a projects’ overhead exceeds the revenue mid-job. It can be difficult to talk money but it is a very important conversation to get used to having.
- Kristen
Founder
Venue Scout, Inc.