We’ve all been there. Your schedule is full for the next two weeks, your field techs are ready to go, and things are looking food for your monthly ledger. Until a cancellation rolls in. And then another.
If a customer cancels well in advance, you can fill their slot with another job. Last-minute cancellations are another story.
When your customer just doesn’t show up or they cancel within three hours of your scheduled arrival, you’re probably left high and dry. While you can’t avoid all last-minute cancellations, you can try to mitigate them.
Having a last-minute and no-show cancellation policy is one way to limit the number of cancellations you receive. When your customer has a financial investment in keeping the appointment, they’re often more motivated to make it work. Here are some things to know about whether you need a cancellation policy, how they work, and the best way to communicate a new policy to your customers.
Identifying Solutions to Cancellation Costs
At least one study found that contractors with higher cancellation rates actually had lower prices. Researchers attributed the trend to the fact that businesses with a lot of cancellations reduce their prices in attempt to attract more customers and make up for the lost revenue.
Of course, lowering your prices means your field techs and workers need to complete more monthly jobs to break even -- let alone bring in a significant profit. It’s not a great solution.
Here are a few possible solutions to recouping last-minute cancellations that make more sense:
Charge a deposit up front. Customers who have already paid for 10-20% of the service up front are probably less likely to cancel their appointment at the last minute. Even if they do cancel, they’ll probably rebook with you instead of a competitor as long as you still agree to apply their deposit.
Charge a last-minute cancellation fee. Like a deposit, fees give customers more skin in the game. Customers who give at least 24-hours notice give you the chance to fill the slot with another person, so why shouldn’t they be rewarded with waived fees?
Blacklist customers who cancel. This is an extreme option, but putting customers who have cancelled last minute more than once on a “Do Not Book” list could spare you future trouble. Letting customers know about this policy may motivate them not to cancel without proper notice.
Evaluating Local Laws and Standards
Before you institute a last-minute cancellation policy, you may want to check out the state laws where you operate. Local standards/customs could also be a factor. This is particularly true if your solution is an up-front deposit. Here’s why:
In some states, it is illegal to ask for sizeable down payments. In California, for instance, you can only as for 10% of the total project cost or $1,000 (whichever is less). This applies to landscapers, painters, and any job that falls under the general scope of contracting work.
Some states warn consumers against companies who ask for up-front payment. It’s not illegal to ask for a deposit in North Carolina, but the State Board of Examiners of Plumbing, Heating and Fire Sprinkler Contractors actually warns consumers to be wary of “... any contractor who pushes for part or all of the payment in advance, or with any contractor who needs payment in advance to purchase equipment for the job.” You may unintentionally make yourself look suspicious if you ask for a financial deposit.
As CEO Today points out, you may want -- or need -- to offer some exceptions to your last-minute cancellation fees. If your customer cancels because they live in a flood zone and they’re busy sandbagging the perimeter of their basement, maybe offer them a no-cost reschedule instead. Unreasonable policies do your reputation no favors and they could even be fought against in court in extreme cases.
You may want to evaluate the competition. Just because your competitors don’t charge for last-minute cancellations doesn’t mean you shouldn’t. But it’s worth considering what customers in your area are used to. Being the first company in town to enforce this rule may mean handling it gently or rolling out the policy with a lot of notice and transparency.
Considering Long-Term Customer Relationships
Deciding how to respond to an appointment cancellation also has a lot to do with your relationship with that particular customer. Have they been loyal to you for years? Are you hoping to expand to their neighborhood and eager to earn their referrals? It might be worth it to forgive the cancellation fee.
When we talked to some of our Housecall Pro customers about this, a lot of businesses admitted they forgo cancellation fees when the customer has been around for a while. Here are some things to consider about last-minute cancellations and maintaining relationships:
You may want to waive your cancellation fee one time in an attempt to salvage the relationship. If a customer is a no-show, you could email them and say “We typically charge a $30 cancellation fee, but we value your business so we’re able to waive it this time. Would you like to reschedule?” This lets the customer know you still want to work together and it’s a good faith gesture that could lead to future appointments.
Consider applying cancellation fees or lost deposits to future jobs. Charging a cancellation fee now helps you mitigate the immediate sting of lost revenue, and letting the customer apply the fee to a future job could help build a long-term relationship even though things started off rocky. As with waiving fees, you may want to have a limit on the number of times you offer this to a customer.
Focus on more reliable customers. You always have the option to let last-minute cancellers go and focus your energy on more reliable bookings. Don’t work so hard to win over one customer who already cancelled on you once that you miss an opportunity to book something with another customer who is a better long-term prospect.
Displaying Your Last-Minute and No-Show Policy
There are lots of ways to tell customers about your cancellation or deposit policies. The most important thing is that you do it. Customers have a legal right to be aware of the costs associated with cancelling or entering into business with you -- plus it will just make you look shady to hide the fees.
You can notify customers about a new last-minute cancellation fee or required deposit in a few ways:
Incorporate it into signed contracts. This method is ideal. When the policy is introduced, you may even want to highlight the section so that customers are more likely to see it.
Send an email to your current contacts. If you have a long-term relationship with a customer, they probably haven’t cancelled a lot at the last minute (or they wouldn’t still be around). Still, stuff happens. You want all existing customers to be aware that should they want to cancel in the future, the new rule will apply.
Update your website. If someone new lands on your site and asks for an appointment, will they be aware of your policy? Make sure your terms and conditions for booking an appointment are always up to date.
Worried about how to ask for a deposit politely or how to word your cancellation policy? Here are a few suggestions to get you started.
Asking for a deposit:
“Thank you for choosing [Company Name] for your [industry] needs. We require a deposit of [X%] at the time you book your appointment. This deposit allows us to secure your time slot specifically for you and prepare for your appointment.”
Adding a cancellation policy to your TOS:
“Please note that if service is cancelled with less than 24 hours notice, we are unable to access the home upon arrival, or we are turned away at the door, a cancellation fee of [$X] applies. The fee will be charged to the credit card on file.”
Working to Prevent Last-Minute Customer Cancellations
If you can prevent the majority of your last-minute cancellations, you won’t have to worry so much about charging customers for them. Automatic reminders and other communication can offset your cancellations and eliminate frustration on both the client and provider sides.
Here are some ways to reduce the number of no-show and last-minute cancellations your home services business experiences:
Text your customer when the appointment is confirmed. Notifications via text are easy for customers to find and make it simple for them to add their appointment to a calendar app.
Set up reminder texts. Even if the appointment is confirmed, some customers will forget until the night before. Software like Housecall Pro makes scheduling and dispatch more streamlined, and notifications are a big part of it.
Keep customers informed if you’re running late. If your tech is on the way but the customer is tired of waiting, they may call and cancel. Let your customer know the new anticipated arrival time so they don’t cancel out of frustration.
Make it easy to contact you. If phone calls always hit voicemail or you don’t check your voicemail, you don’t really have a leg to stand on when a customer swears they tried to cancel but couldn’t get a hold of you.
Last-minute cancellations are annoying. In some cases, they’re not worth addressing. It might pay off to just focus on the next customer and turn down appointments from chronic cancellers in the future. However, if last-minute cancellations become a costly nuisance it may be worth rethinking your policies.
Sign up for Housecall Pro today to gain access to our scheduling and communication tools. Our online booking app makes it easy to communicate expectations with customers and book new appointments around the clock (so those cancellations won’t hurt so much).
Housecall Pro is rated the #1 software to run your HVAC, Plumbing, Electrical, Carpet Cleaning and other home service businesses. Our features allow you to schedule and dispatch jobs, get booked online, send invoice and receive payment within minutes whether if you are in the office or out in the field. This comprehensive software can help you grow revenue by 30% in one year and save up to 500 hours a year. Join all the other successful home service businesses who have already started and try Housecall Pro for 14 days free today.