How should I calculate my Non-Refundable Deposit?

So let’s talk about a common wedding industry pitfall: Not gettin’ that paper upfront.

The legal term for taking a payment that is non-refundable in the event of a cancellation is called a Liquidated Damages Clause, or LDC for short. So, with an LDC, you and the client are agreeing up front that, if the event is cancelled, your damages, or the harm you will be caused, will be exactly equal to the amount of money that you have accepted from the client up until that point. Read more about the law behind Liquidate Damages Clauses here.

A big pitfall is a weak LDC. That is to say, it does not adequately protect you from the risk of cancellation. I have worked with clients where they take only one up front payment, and it was the same amount, regardless of whether the contract was $1000 or $20000. That is an example of a weak LDC. Why? Because your likely not going to see any more money out of the client, so the less money you take in during the duration of the contract, the less money you will have should the event be cancelled. Need more convincing about this?

So what is the optimal way to handle payment? Calculate multiple installments based on your OVERALL RISK throughout the duration of the contract.

Let’s break that down. First, what do I mean installments? Installments mean taking money from the client at 3 or 4 different times during the duration of the contract.  There is no law that says you have to take money on the day of the signing and the day of the event. Obviously, the more times you take money from the client, the more you will have if it the event is cancelled. 

Second, how do we calculate those installments? The amount per installment should be based on your OVERALL RISK that you have at ANY GIVEN POINT during the DURATION OF THE CONTRACT. This means looking at the AMOUNT OF TIME AND MONEY you have in the contract, while KEEPING IN MIND your ability to REBOOK the date.

Look at it this way, ONE DAY AFTER YOU SIGN the contract, you have very little risk. You theoretically have spent no time or money on the client. The likelihood of you getting another job for that date is probably pretty good. Or at least as good as the one you just signed up, right? But, the DAY BEFORE THE EVENT you have the MOST risk. You’ve got nearly all of your time invested, and the chances of you booking another event for the next day is about the same as me regrowing my hair. The more and more risk you have, the more money you should be taking in. Figure out where your risk is, and spread the payments out accordingly.