Within your event rental business, there are basically four ways to deal with the cost of damages:
- Eat them as a cost of doing business (perhaps raising your prices to account for this)
- Collect a security deposit before the event that is only returned in part or in full depending on damages that occur
- Charge your client to repair or replace damaged or missing items after the event
- Charge a Damage Waiver fee aka Equipment Protection Fee up front (usually 10-13% of the rental total) and then “forgive” damages that occur at the event
There are many pros and cons of each of these options. But I want to talk about the bigger picture for a minute.
Damages are a reality in every event rental business. You should certainly have a Loss Prevention Plan in place so your staff knows how to properly handle your pieces. Your Damage Policy should tell your clients exactly what to expect if pieces are damaged or disappear at their events. But regardless of perfect planning, accidents happen.
When you plan for and expect damages to occur, you don’t have to take them personally.
As you develop your Damage Policy, take a minute to consider how you want your collection to be maintained. Does every piece have to leave the warehouse in pristine condition? Is “like new,” “excellent used,” or just regular “used” your standard? Will you be repainting every item before it leaves the warehouse? Or is “patina” part of the charm of your collection? Is a chipped plate acceptable character or must it be thrown out?
Your staff should know what is allowed and what isn’t; nothing should ever leave the warehouse if it isn’t up to your standard. They also need to know exactly what to do in order to get the piece repaired or replaced in time for the next order.
Whatever standard you land upon, be sure you’re communicating it to your clients too. You can only deliver on your promises if you’ve managed expectations from the beginning.
You’ll also need to define normal wear and tear versus damage. If a white linen couch has to be cleaned after every use, no matter how careful everyone is, the cleaning should probably just be assumed and included in the original price. Broken chair legs or wine stains, however, don’t happen naturally and should be considered damage. Tables that return from a dessert display with sticky sugar residue may be able to be wiped down. But if they need to be refinished, you’re talking about a different story. Setting guidelines up front for what’s normal and what’s damage is an important step in clarifying your Damage Policy.
Once you’ve taken the time to establish a Loss Prevention Plan and a thoughtful Damage Policy, you’ll want to consider how you’ll deal with the expense of Damages in your business. Here are some pros and cons of the options listed above
Absorb the Cost
Pros
- Justifies raising prices (generally by approximately 10%)
- Generates goodwill by allowing you to tell clients they don’t have to worry about damages
- Preserves goodwill with clients (their last experience with you is being happy at their event, not paying fees after the fact)
- Saves staff time communicating with clients about damages and charges after the event
Cons
- Can be an uncontrollable expense
- Clients may not take as much care if they don’t feel like they’ll be “on-the-hook”
Hold a Security Deposit
Pros
- You don’t have to chase the payment for the damages after the event
- Can be a tool to build trust in the sales process when you explain that you only cover your costs for damages, it is not a place you make a profit
Cons
- You still have to communicate about damages to the client and justify the portion of the deposit that you’re keeping
- You have to issue the refund of the security deposit (all or part); this means that every single order has an extra step involved (regardless of whether or not there were any damages)
- Some clients may argue that the damages aren’t their responsibility
Charge Client after the Event
Pros
- You can keep your rental prices lower
- Can be a tool to build trust in the sales process when you explain that you only cover your costs for damages, it is not a place you make a profit
- Damage expenses are covered and don’t become an uncontrollable cost
Cons
- You have to communicate about damages to the client and justify the fees
- Some clients may argue that the damages aren’t their responsibility
- The last experience your client has of your company is charging extra fees (not being happy at their event); you must be careful to make even assessing damage fees a positive experience
Charge a Damage Waiver
Pros
- You can keep your rental prices lower
- Potential profit center if your damage expenses are lower than your Damage Waiver Fee
- Preserves goodwill with clients (their last experience with you is being happy at their event, not paying fees after the fact)
- Saves staff time communicating with clients about damages and charges
- Still allows you to have “exclusions” so if major damage occurs, the client is responsible
Cons
- Must be careful not to advertise this as an insurance policy (for legal reasons)
- People can feel “nickel and dimed” by tacking on extra fees
- Potential for miscommunication or disappointed expectations; must be extremely clear with client about what will be “forgiven” and what damages they will be charged for
We’re eager to hear more about how you deal with damages. What is working in your business? What are your challenges when managing damaged or missing items? Hop on over to Instagram and let us know.
