Retool Your Terms Before You Reboot Your Business

The Live Events business is back, but it definitely isn’t back to our old normal. 

Expectations on both sides of the deal have changed, and I would argue that the news is all good. Have you retooled your policies to take advantage of these changes?

As we enter 2023, buyers are less focused on pandemic risk mitigation and are more in tune with the effect of supply chain shortages on your availability. The risk may have shifted to a new priority, but the basics of negotiations and setting boundaries still apply.

You need to be prepared with win-win strategies that protect everyone.

Sound impossible?

It’s not… as long as you proactively plan your terms.

Here’s how innovative leaders have taken control of the Terms and Conditions conversation.

Think of negotiating philosophy as a bell curve. At the extremes are;

1. Treat all pricing as intractable and negotiate one item at a time.
2. Treat the total price as the only negotiating point.

Fortunately, there’s a third option: The Middle Ground.

In between itemized control of price or the broad sweep of gross revenue are a myriad of negotiating points that you can tailor to the situation and the buyer.

How to Leverage Your Middle Ground to Get Paid Sooner

The middle ground is a good place to be IF you learn how to leverage it. The middle provides you the opportunity to show clients how they can manage their preferences while you preserve your boundaries.

Great deals are made in the overlap between what the customer wants and what the seller wants.

Example: Managing Deposits

Sellers: You want money in-hand AND security. You don’t want to return deposits.

Customers: They want a service that’s worth their money. They don’t want to pay for something they can’t use if they have to cancel.

The goal is to figure out how it’s worth it to the customer to give you money, how it’s worth it for you to accept the money, and how to make the transaction work for both sides.

This requires making strong, mutually beneficial choices on pricing and terms.

Focus on terms that benefit you AND your client.

• Start by putting the customer first. Reduce their cash at risk by requiring smaller payments over time.
• Then, reduce your fiscal risk by securing payment for work as it is performed. Don’t ask for money for work you’re eventually going to do. Ask for payment as you complete incremental components of the job.

Both parties are trying to reduce risk. While it may seem difficult to offer prices and policies that accommodate both client and company risk reduction, it is possible.

Here are three payment models you can consider implementing as you restructure your pricing to best accommodate the new competitive future that lies ahead.

1. Timed-Value Deposit

This is a variation on what we’ve traditionally done with a percentage-down approach, but percentage-based deposits need to be left in the past. They’re weak and susceptible to recall and renegotiation. They feel unsubstantiated to the customer.

In a timed-value-deposit model, we connect deposits to tangible work and deliverables. Your standard pricing will have a portion of nonrefundable amounts to reserve the capacity the client needs. Essentially, they’re pre-paying to have the equipment set aside for their use, making this deposit for the equipment nonrefundable.

The work is then executed by prepping the order. As the work is done, cost is incurred and the buyer needs to pay.

In this model, it’s crucial to connect each payment to the specific job component in terms the customer can understand. The closer the money owed correlates to the work you’ve done, the less pushback you’ll get.

If you want to give your customers more choice in refunds, you can offer different pricing tiers that offer lower prices for higher nonrefundable amounts. Hotels use this approach regularly — they give multiple pricing tiers with varying levels of refunds. Tier your own pricing with this in mind.

2. Pay-As-You-Go Model

In the pay-as-you-go model, we break the project into each value-added component. The customer makes go/no-go decisions by making payments for work along the way. At any point, they can take what they’ve paid for (the design, the pitch, etc.), shop it, and have someone else deliver it.

A pay-as-you-go policy might look something like this:

Rather than making these items value-adds (or free), we put a number to each component of the project. It’s not more money for the job — it’s moving money around. It shows the customer exactly what they’re paying for. Then, we group payment dues in a way that aligns with the start date of each component.

Customers benefit from this model because they risk smaller amounts in logical increments. Plus, they don’t have to worry about having the money up front — especially if their cash flow is low.

You reap benefits as you’re paid up front, you have no fiscal risk on completed work, and it’s harder for someone else to quote on your design.

3. Progress Billing

The progress billing model is commonly used in other industries — particularly construction — but we don’t often see it in live events. With progress billing, the customer commits to the entire project, like a full-service design production. They pay at the completion of each stage.

For example, you might collect payment at each of these progress points:

1. Completion of design
2. Start of project management
3. End of project management
4. After producing a video
5. After generating slides

Progress billing relies on a series of bills and payments. Both parties continually audit each other and the business managers constantly communicate. Typically, there’s also a percentage of the payment held back (potentially in escrow) that isn’t released until final sign-off.

While this approach can be legalistic and take a lot of administration, it holds up well in conflict resolution that an escrow agent can help mediate.

Which System Should You Use?

The best model for you depends on the kind of business you have. If you have various aspects to your business, you may even need a different system for each.

Cancellations are normal, but with a well-implemented model, they become less of a problem. Get clear on what you do and use the right terms and conditions for those types of projects.

Example: Unclear or Evolving Scope of Work in Last-Minute Orders

An increasing number of event projects are coming to market with less notice. Last-minute (whatever that means to you) requires a different negotiating strategy.

One of the issues plaguing Operations teams, and the Staffing desk in particular, is last-minute project requests with an undeveloped scope of work. The customer has a job and dates, but has not made the multitude of decisions that will complete the order.

You could wait until that process is complete, but that only makes the pain in Ops worse and postpones the confirmation (and payment) process.

The Win-Win scenario works here as well.

Build as You Go (With Limits)

The first step in a last-minute inquiry is to establish a mutual understanding of baseline needs. In order for you to offer availability, you need some reference of a scope of work—at least covering the minimal talent needed for the event.

The buyer also needs a budget range to help them tighten up their request. If you can find the intersection of basic needs and minimum budget, then you have the basis for a reservation, which should be the goal for both parties.

If the buyer is unconcerned about your sense of urgency to make a reservation, don’t hang up the phone. Simply explain that you cannot hold any resources or guarantee any pricing without a reservation—even if only on the baseline needs. They can choose to move on, and you do not need to obligate yourself to anything at this point.

However, let’s assume your buyer does understand that they need to act quickly. Then take these steps:

1. Affirm that the buyer finds you qualified to meet their needs.
2. Affirm that for a limited scope of work, you have availability on those dates as of this moment.
3. Affirm that there is some room to expand the scope of work, add finishes, or increase the audience size within limits.
4. Affirm that the buyer understands they are reserving a minimum scope of work and price. The project cost will not shrink, and the amount of available expansion will be limited by the initial order.
5. Explain the next steps.

The Next Steps on Incomplete Scope Orders

1. Provide an immediate invoice for project design and technical planning, plus 50% of all event labor (per the baseline quote). This will secure project development and allow the best available show crew to be booked while the project evolves.
2. Secure a credit card or bank draft authorization, so you can draw payments per the schedule.
3. Set a schedule for completing the design, with deadlines for major changes.
4. Set a date for a final project review before the job is prepped. (Pro tip: Try to get as many of the show crew on this call as possible.)
5. Set a schedule for payment of the balance of the order (as it evolves) approximately five to seven days before the event loads in or the trucks depart (whichever makes the most sense at the time).
6. Explain that the final invoice for onsite additions and changes will be presented within two business days of the event close.
7. Remind them that you will be taking payments automatically.

All along the way, reassure your Operations team that they have the most up-to-the-moment information with only a small amount of potential changes. Also, be prepared to tell your customer No or No, but... on several occasions in the coming days. While almost anything is possible with money, it won’t buy time.