Latest / Cash Flow Conversations with Fexingo: Working Capital, Receivables, and Small Business Finance / How a Photographer Used Revenue Sharing to Smooth Cash Flow
Transcript
- Lucas: So Luna, I've been looking at a really interesting cash flow fix from an unexpected corner — wedding photography. Luna: Wedding photography? That's seasonal, project-based, and usually feast or famine. I'm curious. Lucas: Exactly. Most wedding photographers charge a flat fee per event — maybe three to five thousand dollars for a full day. But their income is lumpy: they might have eight weddings in June and one in February. And they're always chasing the next booking. Luna: So what's the alternative? I've heard of subscription models for photographers, but weddings are one-off events. Lucas: Right — a subscription doesn't fit. But one photographer I came across tried something different: instead of a flat fee, she offered clients the option to pay a percentage of their total wedding budget. A revenue-sharing model, essentially. Luna: Wait — so she ties her fee to how much the couple spends overall? That's a bold move. How does that even work in practice? Lucas: She proposed a 6% share. So if a couple's total wedding budget is fifty thousand dollars — which is actually around the national average in the U.S. — her fee would be three thousand dollars. That's right in line with what she used to charge as a flat rate. But for bigger weddings, say a hundred thousand dollar budget, she'd get six thousand. And for smaller ones, maybe twenty thousand, she'd get twelve hundred. Luna: So the clients who spend more pay more, and those with tighter budgets pay less. It's almost like a sliding scale based on ability to pay. Lucas: Exactly. And here's the cash flow angle: because her fee is a percentage of the total budget, and couples often book her months in advance, she can ask for a deposit based on the estimated budget. Then, as the wedding approaches and the actual spending becomes clear, she adjusts the final payment. That gives her a predictable stream of deposits throughout the year, instead of a few big checks after each wedding. Luna: But isn't there a risk that clients underreport their budget to get a lower fee? Or that the budget changes dramatically after they book? Lucas: Those are real risks. She mitigates them by asking for a good-faith estimate upfront, and then verifying key costs — like venue, catering, and floral — which are usually public or shared with vendors. She also includes a clause that if the actual budget exceeds the estimate by more than 10%, she gets a true-up payment. And she builds in a minimum floor: no matter what, her fee is at least one thousand dollars, so she's not left with nothing if a couple dramatically scales back. Luna: That floor is smart. But how do clients react? I imagine some might feel nickel and dimed if they think they're being watched. Lucas: Surprisingly, she says most clients love it. They feel like they're paying for value rather than a fixed price. And because her fee is tied to their overall spend, they see her as an aligned partner — someone who wants the wedding to be great, not just to get through the day. She's even had couples increase their budget because they know a portion goes to her, and they want her to do her best work. Luna: That's a fascinating incentive alignment. But what about the cash flow smoothing? Did it actually help her avoid the slow months? Lucas: It did. Because she now gets deposits based on estimated budgets, she had a steadier inflow. Before, she'd get a big payment after each wedding, then nothing for weeks. Now, she's receiving deposits from multiple weddings at different stages — some booked six months out, some three months out. Her bank account doesn't spike and crash the same way. She also started offering a discount for early payment: if a client pays the full fee 30 days before the wedding, she gives them a 5% discount. That incentivizes early cash and reduces the collection lag. Luna: So it's like a win-win: clients get a discount, she gets cash earlier. That's a classic dynamic discounting move, but applied to a small service business. Lucas: Right. And the numbers worked. In her first year using this model, her average fee per wedding actually went up slightly — from three thousand dollars to about three thousand two hundred — because she attracted higher-budget clients who liked the transparency. And her cash flow variance dropped by about 40%, meaning fewer months where she was scrambling to cover rent. Luna: I can see this working for other event-based businesses too — caterers, florists, videographers. Any service where the client's total spend varies widely. Lucas: Exactly. Event planners especially. But there's a catch: this model only works if you have a way to estimate the client's budget credibly. If you're a caterer, you know the per-plate cost and the guest count. For a photographer, it's more abstract. She had to get comfortable asking couples about their total budget, which some found intrusive. But she framed it as 'helping me tailor my coverage to your day' — which made it feel collaborative. Luna: That's a good lesson in communication. The model itself is clever, but the way you sell it to clients is just as important. Lucas: Absolutely. And I think there's a broader point here. A lot of small business owners default to fixed pricing because it's simple. But variable pricing — especially revenue-sharing — can align incentives and smooth cash flow in ways fixed pricing can't. Luna: Yeah, if today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Lucas: Yeah, we keep the show free because listeners like you chip in. It really helps us keep digging into stories like this. Luna: Alright, so back to the photographer — did she face any pushback from clients who preferred the old flat fee? Lucas: She did. Some couples wanted the certainty of a fixed price. So she offered both options: the traditional flat fee of three thousand dollars, or the 6% revenue share. About 60% chose the revenue share, and those were typically the higher-budget weddings. So she essentially segmented her market: budget-conscious clients got the fixed price she used to offer, and premium clients paid more but perceived higher value. Luna: That's a smart way to avoid alienating anyone. And it also gives her data on which clients prefer which model. Lucas: Exactly. She can now predict that a couple with a budget over seventy-five thousand dollars is very likely to choose the revenue share. That helps her tailor her pitch. And because the revenue share clients tend to have bigger budgets, she's actually earning more per wedding on average. Luna: So what's the downside? There has to be a catch. Lucas: The biggest risk is transparency. If a client doesn't share their actual spending, she could be underpaid. She relies on trust and the fact that most wedding costs are visible — the venue, the dress, the caterer — but some couples might not want to disclose everything. She's had a few clients who were uncomfortable, so she offered a hybrid: a lower flat fee plus a smaller percentage on certain items like catering and floral. Luna: So it's customizable. That makes sense. Not every couple is the same. Lucas: Right. And the other risk is cancellation. If a wedding is called off, she's left with nothing but the deposit, which might only cover her time spent so far. But that's true under any model. She handles it by having a clear cancellation policy: if the client cancels more than 60 days out, they forfeit the deposit; if less than 60 days, they owe a percentage of the estimated fee. Luna: That seems fair. So overall, would you recommend this model to other small business owners? Lucas: I'd say it's worth a pilot. If you have a service where the client's total spend varies by a factor of two or more — like a wedding, a renovation, a corporate event — revenue sharing could align incentives and stabilize your cash flow. But you need to be comfortable talking about money openly, and you need a mechanism to verify the budget. If you can do that, it's a powerful tool. Luna: And it's a great reminder that the standard pricing model isn't always the best one. Sometimes a little creativity can solve both cash flow and client satisfaction. Lucas: Exactly. And that's what this show is about — finding those creative solutions. Thanks for listening.