Vita's Tip In 10: How Much To Collect As A Deposit?

Hello, hello, friends! Welcome back to another episode of Vita’s Tip in 10! Today's episode is all about a crucial aspect of your window treatment business – deposits. This topic was inspired by a question from one of my former LuAnn University students.

Which, by the way, if you have not checked it out, you absolutely have to - the registration for Systems Driven Operations will go live after the Luann Live conference in November.

If you have known deep down in your heart that you could be running a more efficient and more organized business, that requires less effort while allowing you to make the same amount of money or increase your revenue and net income - this class is for you. Don’t miss out on the registration window!

So, back to today’s topic. Lisa Brock from Brock Custom interiors, my former student, reached out seeking advice on the ideal deposit percentage for window treatment projects. Thanks, Lisa, for this fantastic idea, and let's dive right in!

Now, Lisa's question revolves around what deposit percentage to take for projects. At Vitalia Inc., we've settled on 50% down and 50% upon installation. The question then arises – why 50%? Why not 25%, 75%, or even 100% upfront? Let me break it down for you.

Firstly, 25% is a definite no-go for us - and it probably should be for you, too. Why? Because it doesn't cover our cost of goods sold. Let's use a simple example. If the retail price of an order is $1,000, and the cost of goods sold is, let's say, 40%, that's $400. If we were to collect only 25%, which is $250, it doesn't even cover our costs, leaving us in the red. So, the minimum deposit should at least cover your costs associated with fulfilling the project.

Now, 50% is a more standard and widely accepted deposit percentage in the industry. It's a default choice for many businesses, and I initially adopted it without much thought when I started my business. I initially bought my business as a franchise, and it’s likely that I was trained to take 50% by someone else.

And, as I reevaluated my processes, I realized that 50% makes financial sense. It covers our costs and allows us to run a well-maintained business.

Here's the interesting part – why not 75%? There's no hard-and-fast rule against it. If you feel comfortable, have the confidence to ask for it, and it aligns with your business strategy, you absolutely can and should go for 75%.

Financially, collecting 75% makes perfect sense. Why leave money on the table when you could have it working for you? The faster you can get that money into your pocket, the quicker it can start generating returns, be it through investments or interest.

Now, why did I choose not to go with 75%? Well, this decision is a bit more sentimental and perhaps illogical. As much as I am a planner and systems-driven, there are times when feelings guide my decisions. My friend Julie Murphy, who is in one of my Mastermind groups, found this amusing, as she knows me as someone rooted in logic. She recently heard me say that I had based something in another conversation on a feeling, she was like, “Oh, thank God!”, and I thought that was really funny. Maybe it just allowed her to not always have a black and white logical reason to do everything by the book in her business.

Sometimes, you just have to go with your gut.

So, here's my sentiment behind the 50% deposit. After completing a project, I want to feel that the income I'm collecting on the back end is essentially pure profit. At our gross margins at Vitalia Inc., that 50% goes beyond covering costs; it contributes directly to our gross margin dollars. It's a feeling of satisfaction and accomplishment – the job is done, all costs are covered, and now every dollar collected is adding to our profitability.

So, there you have it – a mix of financial reasoning and a touch of sentiment guides my decision to stick with 50%. It's about that sense of accomplishment and pure gratification.

Now, here's the thing – there's no deposit police out there. You get to decide what works best for your business. However, always ensure that your deposit covers your costs and contributes positively to your business's financial health.

Remember, the deposit you choose is a reflection of your business strategy and financial planning. Don't be afraid to ask for what you need, whether it's 50%, 75%, or any other percentage that aligns with your goals.

That's a wrap for today's episode of Vita’s Tip in 10! I hope this deep dive into deposit percentages has shed some light on this crucial aspect of your window treatment business. If you're looking for more tips on mindset shifts, CEO strategies, or digital project management tools, I can help!

You can join my Systems Driven Operations class at LuAnn University - registration opens in November - or opt for my VIP Experience. It’s a two-day in-person intensive where I share all my systems for immediate implementation in your business. There are only a few openings left this year, and prices will be going up in 2024. If you've been contemplating this, now is the time to lock in the 2023 prices.

Reach out, and let's schedule a conversation. And in the meantime, I will be working on my next episode of Vita’s Tip in 10. See you next Thursday!