How to Recoup Lost Revenue from the Pandemic

It’s no secret that the pandemic has caused trouble
for catering and event businesses across the world. With live events put on hold and headcounts plummeting, many companies are finding their
profit margins taking the brunt of the impact. 

As we approach the road to recovery and look ahead to the “new normal,” many industry professionals are finding themselves wondering how to make up for lost time and recoup their losses to break even in 2021. While the prospect might seem grim, rest assured that there are ways to protect your business from future loss and increase profits without going overboard.

Let’s start with a key strategy to safeguard your interests and prevent additional loss of revenue.

Say goodbye to “deposits”

This isn’t to say you should start work without accepting payment upfront. Instead, this is a mindset and verbiage change that will protect your time and assets.

Due to the pandemic, there are caterers around the country facing lawsuits because people wanted their deposits refunded. It gets murky in a legal setting, as the term “deposit” is technically a financial term that refers to money that is held in a bank. The money you receive to start work is not an escrow; it’s there for you to spend as capital. By law, using the term “deposit” is factually inaccurate and puts you at risk of losing your hard-earned money.

That’s why we need to stop calling it a deposit. Remove the word “deposit” from your vocabulary entirely. Instead, use the term “payment.” Your contract and sales materials should refer to a payment schedule, which outlines the terms and deadlines for a first payment, second payment, and so on. This will protect you if a client tries to sue you, as they cannot claim to have paid a deposit.

Say hello to Quantum Meruit

Quantum Meruit is a Latin phrase that means “what one has earned” and refers to the actual value of the services rendered. In law, the theory holds that a person (the client) should not be obliged to pay, nor should the other party (your business) receive, more than the value of the services. 

Simply put, it ensures fairness when you’re asked for a refund. Many clients will want all of their money back without understanding how much work you’ve already spent on their project. With a Quantum Meruit clause in your contract, you guarantee that you will receive payment for all services rendered and that your clients will receive a refund for the excess.

If the time comes for a refund, you will need to tally the hours you’ve spent on the client from admin and sales to planning and production. Everything needs to have a dollar amount. Be clear about each item to ensure you are giving them a reasonable value of services. This is the fairest way to go about refunds, as it guarantees that you are compensated for your work but doesn’t make your client feel like you’re holding onto their money with no return.

Get comfortable with upselling

If you want to increase sales efficiently, you need an upselling strategy. You can always increase prices, but you risk pricing yourself out of the market (especially in this economy). You can take on more clients, but you may end up spreading yourself and your team too thin. But, if your prices are stable, upselling will earn you more money without overcharging or overworking to recoup lost revenue. 

If you think about it, we’ve been upsold our whole lives as consumers. Every time you’re offered an added warranty on a product or asked if you want fries with your meal—that’s upselling! It gets a bad reputation, but in reality, it’s a great way to enhance client experience while increasing revenue per sale. The key is to have products and services that complement one another so you can draw your clients into an experience rather than selling individual items piecemeal.

Strategic selling involves increasing your competitive advantage by strengthening your ability to communicate your uniqueness, value, and competitive differential to a customer or prospect. To be successful, you need to ask qualifying questions of clients to help you get to know what motivates them. What can you offer them to make their experience better but cost little to no money for you to provide? 

Develop a company-wide sales plan that includes upselling and teach your team to make it a habit. Find clarity on your offerings, as upselling can harm you if you have complicated offers that end up confusing customers more than they help. And the best part about upselling? You can do it throughout the planning process by offering upgrades and add-ons as opportunities arise along the way.

It has been a challenging year-plus for the catering and events industry at large. However, the hurdles we face are often learning lessons in disguise, so keep your mind open and stay hopeful. We’ve made it through the worst and are still standing. Imagine where we can go from here.