Intro:
Do you feel like you were meant to have a kick-ass career as a hairstylist?
Like you got into this industry to make big things happen?
Maybe you’re struggling to build a solid base and want some stability.
Maybe you know social media is important, but it feels like a waste of time because you weren’t seeing any results.
Maybe you’ve already had some amazing success but are craving more.
Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer.
Cutting and coloring skills will only get you so far, but to build a life long career as a wealthy stylist, it takes business skills and a serious marketing strategy.
When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists.
I’m Britt Seva, social media and marketing strategist just for hair stylists, and this is the Thriving Stylist Podcast.
Britt:
What is up and welcome back to the Thriving Stylist Podcast.
I’m your host, Britt Seva.
And this week, we’re talking about the chargeback crisis that is costing stylists thousands.
This is really interesting.
So if you don’t know what I mean by chargeback, I want you to imagine this.
You go have a meal at a restaurant and you eat your entire lunch and you pay for it by credit card.
And a couple weeks later, you call your credit card company and report it as fraud or say that you were dissatisfied with the meal and you asked to be refunded the money.
Oftentimes, the credit card company will fight to protect the consumer on that and the restaurant will lose out on the cost of the lunch you ate and enjoyed.
Now, I know most of us listening to this would never do something like that.
I can’t say that I’ve ever done something like that.
However, it happens.
And the reason I’m recording this podcast right now is I’ve had a series of DMs over the last few months that make me think that this is going to be a common trend that we see over the next couple of years.
So, if you’re listening to this and you’re like, oh my gosh, that’s so wild.
Like, I’ve never had that happen to me before.
I’m good.
Watch out.
Because the DMs that I’m getting are people saying, this is so weird.
I’ve never had this happen before and now it’s happened twice.
Here’s what I think is going on.
We all know the economy is a little bit shaky right now, and in some cases, a lot bit shaky.
And desperate times call for desperate measures.
And I think a lot of good people can get, I don’t know, I don’t even want to say tricked or manipulated, but can kind of get comfortable doing some unsavory things that they wouldn’t normally do.
Let me share a story with you.
I joined my salon team in 2008, which was the start of the Great Recession, which was from 2008 to around 2012.
It was when we saw those foreclosures happening, and it was the most recent economic recession, you know, except for the one that we’re in right now.
So I was in the salon for the first three or four years in an economic downturn.
So I remember the clients at that time feeling quite desperate and being nervous about how much they spent.
There was a client who came in and got essentially the works.
It was like she got her roots touched up, the full head of foils cut, blow out, and she saw more senior stylists.
So her bill walking out just for services was easily 400 or 500 bucks.
And this was years ago.
So probably the equivalent of 600, 700 bucks now.
I mean, she really she got a lot done.
And then she was like, OK, perfect.
I’d like to buy the shampoo, the conditioner, the mask and a styling product.
Like she took a whole retail bundle and she goes up to the front to pay.
And she’s like, Oh my gosh, I can’t believe this.
I left my wallet in the car.
I’m going to leave my purse here and let me just run back to the car and grab my wallet.
I’ll be right back to pay.
And the receptionist was like, Yep, no worries, no problem.
Client leaves her purse at the front desk, walks out to her car and never comes back.
So about 20 minutes goes by and my receptionist calls me.
My office is downstairs.
And she’s like, Hey, I think something weird is going on.
Can you come up?
I come up.
Purse is there.
She’s like this client left.
She left without paying.
Now she’s not answering her phone.
We can’t get a hold of her.
But she left her purse here so we know she’s coming back.
First thing I did, I grabbed the purse.
I look inside and this is like a straw bag, not the kind of bag somebody who just spent $700 or $400 or whatever on their hair would be carrying.
And inside is a pair of gas station glasses.
I’ll never forget what was inside, a pair of gas station glasses, sugar-free Reese’s peanut butter cups.
And a little like notepad, like almost the kind like a kindergartner would get as a prize at the dentist or something.
That was it.
And I was like, we just got scammed.
And to top it all off, wouldn’t you know, the client left her purse at the front desk, but of course took that entire bag of retail with her.
And in the moment, I was frustrated, and my poor receptionist was really disappointed in herself.
But I said, you know what?
This is nobody’s fault.
This woman came in with an agenda.
She knew exactly what she was going to do from the moment she called to book that appointment.
And I said, this is disheartening and frustrating.
And we put pieces into place to make sure that that never happened again.
But also I said, imagine the desperation in a woman who is at the place where she is going into a salon, talking to a human, knowing that she is going to steal food off this person’s table at the end of the service.
I’m not trying to justify what that client did, because I think what that client did was heinous and disrespectful and disgusting.
However, I also think that was the act of a desperate person.
And I think that we are in a time where we’re going to see that desperation creep up again.
I think very few people are bold enough to do what that person did.
But what I’m finding is at scale, clients are not feeling bold enough to ask for these charge backs.
So I got a really solid handful of DMs about this, maybe 10, 8, 9, 10 something.
Over the past couple of months, I was like, man, maybe this is really a thing.
So I shared an Instagram story and I had a little text box and I said, hey, listen, if you’ve had a charge back for a client who received services with you, let me know what happened.
I got hundreds of responses.
That part I was not expecting.
I was not expecting the scale of responses I received.
And instantly I was like, oh, this is a thing.
This is the thing that maybe people aren’t talking about.
And a lot of people are like, oh, it’s happened once, it’s happened twice.
It happened in August.
Like, oh, it’s just, you know, yeah, it’s so funny that you asked.
It did just happen.
So it’s not like people are saying, yes, we’ve had 12.
But because I brought up the conversation, people were like, oh my gosh, yeah.
Or other people having that too.
I think we’re going to see this trend.
And because I think we’re going to see this start to trend, I want to prepare you as best as possible for how to navigate it.
Because I think the way these salons were set up might surprise you.
And you might think that you are set up for success so that no one can do this to you.
Wait until I tell you the stories I have for you today.
So first things first, before I even get into the meat of this episode, I want to tell you this episode is not going to end with, so here’s the five things you need to do to win all chargebacks.
I don’t know how to do that.
I don’t win all chargebacks in my business.
I don’t believe that there is a way to do that.
What I want to do is set you up for the most success possible so that when and if you do get into this position, you have a resource to come back to and you realize you’re not alone in that and you didn’t do anything wrong and you set yourself up for as much success as you can.
Because I do have some tips and I do have some things that I think are going to surprise you.
So I just want to host the conversation.
And then as time goes on and we start to see some things that really do seem to be working well, we can always come back to it.
So based on the data that I shared, or based on the survey that I shared, I should say that, the data came back that 14% of respondents say that, yes, a client had filed a charge back against services rendered with them and they got their money back.
14% got their money back.
22% of respondents said that they’ve had charge backs and sometimes they get the money back and sometimes they don’t, despite sharing all of the same evidence every single time.
And that’s what’s interesting about charge backs, is that you can have the perfect process and all the things in place and one credit card company might totally accept it and one might not.
And they are manually reviewed, so you could also get a person on a bad day who just chooses not to side in your favor.
Like, because it is so subjective, it’s kind of like a gamble.
It’s like going to Vegas, honestly, with these credit card transactions.
64% of respondents say yes, and we did not get the money back.
So before you’re like, oh, I’m sure I know what those businesses look like, the ones that got their money back.
Here’s what you should know.
The businesses that did not get their money back had cancellation policies in place, had clients sign agreements, had clients who had left glowing online reviews and then asked for the charge back, and it still was not enough evidence.
Happy text messages from the client after the visit saying they loved their hair.
Charge back came through, client got their money back.
That was not good enough evidence.
Photos of the clients in the space, not enough evidence.
So here’s what you need to know.
Credit card companies, and this is great for us as human beings, credit card companies’ point of view is to protect the consumer.
And they openly say that.
They don’t try and hide that.
It’s not like, oh, this is a secret and I’m just revealing it right now.
No, credit card companies have always said, we’re here for the consumer.
They’re not here to protect the business.
They’re here to protect the buyer.
And so, whenever a charge back comes through, whenever a client files a complaint saying, listen, I went to such and such a lawn and I didn’t get what I asked for, or whatever, I would like to have my money back, please.
The point of view of the credit card company is, this client was probably done wrong.
And it’s to you as the service provider to prove that they’re incorrect.
You know how in a court of law, it’s like innocent until proven guilty?
In these battles more often than not, it’s guilty until proven innocent.
So I looked up kind of the data on when a charge back can be filed for a service-based business.
So we know that a charge back could be filed for like if you ordered a sweater online and it never showed up.
Obviously, like if you didn’t get the thing that you asked for, obviously.
But when for a service-based business, is it deemed appropriate?
The service or product was not received.
So that becomes an issue with cancellation policies.
And we’ll come back to that in a moment.
The quality of the service or product was not as expected.
And I think that that specific point is the one that’s burning most Stylists.
The cardholder did not authorize the charge.
I think that would very rarely be able to be something that’s proven by a client, so it’s probably not that.
There were processing errors during the transaction.
I remember when I worked in the restaurant business, there were definitely times where the servers were accidentally over, honestly, mostly in undercharge.
But let’s say you went and had a lunch and it was supposed to be $177 and the server charged $711 instead, like they transposed a number.
Obviously, a charge back would be appropriate for that.
Or the cardholder was issued a duplicate credit for the transaction.
My credit card company sends me notifications when that happens.
Do you ever get those where it’s like, oops, it looks like you were charged twice?
That is obviously something you can dispute as well.
I think in our industry, the service or product was not received.
That specific point is something that even with a solid cancellation policy, sometimes the credit card company will go in that favor.
Because technically, in a service-based business, if no service has been rendered, the person doesn’t have to submit payment based on these guidelines.
And so, here’s the thing is like, yes, you can have great cancellation policies, no-show policies, and all of those things.
But when it comes to chargebacks, and the point of view of these credit card companies, it is a human who’s going to cast an opinion at the end of the day.
The other thing is that the quality or service of the product was not as expected.
I think that’s fairly easy for a client to prove.
It wasn’t what I expected.
That’s, I think, where a lot of stylists are getting into trouble.
So, when I looked at the patterns that I saw when stylists were reporting what happened to them, several people said they got lumped in with fraud.
That I thought was really interesting.
So, if you’ve ever had your credit card stolen, if you’re an adult, you’ve likely been in this position.
If you’ve ever had your credit card stolen and you see fraudulent transactions, usually you have to get on the phone with a representative from your credit card company, and they’ll go through the last handful of transactions with you.
And the more transactions that you do not recognize, the deeper they’ll go.
So, if you only have one transaction you don’t recognize, they’ll maybe go like five or six back, and then they’ll be like, okay, I think we’re good.
If you have like four or five that you don’t recognize, sometimes they’ll go like 30 transactions back.
And so, if a client, for whatever reason, doesn’t recognize your transaction, it can get lumped into a fraud case, and you will lose that money.
So, that’s one of the ways.
And I was surprised how many people said that one.
Lots.
That was interesting to me.
Another fact that you should know is that sometimes it can take months to get the funds back, even if you do.
So, if somebody files a charge back against you, basically what happens is your credit card processor or the bank or whatever pulls the money out of your account immediately.
It is gone.
It’s like you’ll go to bed and it’s there and you wake up in the morning and it’s gone, because they don’t want you transferring it somewhere else.
Now, that money does not go to the consumer or the client yet.
It’s basically like held in limbo until it’s decided who deserves to have that money.
The problem is, for some of you, you were going to feed your family with that money tomorrow, and now it’s gone.
So the money is gone as soon as the charge back gets filed.
And I saw Stylist saying it was six months before I got my money back.
It was four months before I got my money back.
So these things do take time, which brings me to my next fact.
It will take hours to sort this out, and sometimes months to have a resolution.
So in the best case scenario, you’ll spend an hour, two hours, filing all the paperwork required for a charge back.
So I don’t know about you.
I always think of my time in a dollar amount.
And in Thrivers, we have a calculator that shows you how to do that.
If your rate is like $80 an hour, and you’re spending three hours working on a charge back for a haircut, it’s like, sometimes it’s like, is it even worth it?
And sometimes it is, because if you’re anything like me, you like to prove a point, and you’re like, no, they’re not going to get that free haircut.
And I totally understand.
This is a really stressful process.
And so I just want to say that because if you get to a point where you’re like, am I really going to fight for this $30?
Like, sometimes you have to decide, is it worth it or not?
Now, are you going to fight for this $600?
You better believe that I am.
But if it’s something that’s little like, there was somebody who was saying, actually a couple of people said, that clients disputed tips and they went back and forth with the credit card company over like a $20 tip.
Like, I just want to give you the freedom to sometimes like let it go.
Like, is it really worth the time, energy, effort, headache responding to all the things for 20 bucks?
If it is to you, great.
If you’re like, I don’t know if it’s worth it, that’s okay too.
You know what I mean?
And then you get to make up your mind about that client.
Did the client issue the charge back by mistake or are they vindictive?
And by the way, I have a great story coming up.
So wait for that one.
Another fun fact that I thought was interesting is a lot of people said, I went with this point of sale system.
I don’t want to drop names on this one.
There was a couple that came up a lot.
So it was interesting.
A lot of people said, I chose this payment processing system because they have protection against charge backs.
It was so funny because for every one of the messages that was like, I go with such and such credit card processor because they protect against that.
There was an equal amount of people who were like, they said they did that and I still lost my money.
So the reason I bring that up is I don’t want you to blindly think that any credit card processor can guarantee protection.
They cannot.
If they could, everyone, every small business owner would use that credit card company, but they don’t because they can’t.
There’s nothing that’s foolproof.
So I just don’t want anyone to sleep easy being like, oh my gosh, my credit card company has that.
I don’t know if any credit card company that can 100% foolproof guarantee that any charge back that comes through for any amount, they’ll just take the heat on.
I don’t know about that one.
So just double check.
And I don’t know that you can like hang your hat on that at the end of the day.
Another really common scam was gift cards.
A lot of people said, we got a charge back on a gift card transaction.
And those are really challenging to prove, really challenging to prove.
And that’s why sometimes if you go to, where did I see it recently?
Oh, I was checking out a CVS and there was a sign by the gift card stand and it said, if somebody is asking you to compensate them in a gift card instead of cash, this is a federal crime.
Don’t do it because gift cards, whether they be like from a CVS or from a small business, it’s kind of like cash walking out the door and it’s very difficult to track, trace, improve.
So if you are somebody who does sell gift cards, be careful and really watch that you don’t see any chargebacks come up on these gift cards in the time that passes.
So here’s another fun fact.
The client has up to four months to file a claim.
So somebody could buy a gift card now and then in four months.
So this podcast is being released in January.
You know, imagine somebody buys one in January and in May, they issue a chargeback.
That can happen.
So you have to kind of keep an eye on things like that.
Cancellation charges and no show fees was a really common thing that people were reporting chargebacks on, as well as extensions.
So I think that’s kind of like two sides of different coins.
Extensions is a very expensive high-end service, and going along with the whole it wasn’t what I expected clause, I could see people really taking advantage of that.
And then with cancellation charges and no show fees, it falls into the service wasn’t rendered charge.
So I want to share a really good juicy story with you.
And then I want to talk about the things that I think that we can do to set ourselves up for success.
But what you should know is, like I said before, people who said they lost money had cancellation policies in place, had clients agree to these things at time of booking, had set themselves up for success by taking photos and having contracts signed.
These aren’t like people doing hair out of their garage.
And it’s no surprise this happened.
Like these are legitimate business owners that were messaging me saying this.
So I just want you to keep in mind, like for as organized as you are, there might be a next level of organization that you want to try to reach.
So let’s take a little break and have a story.
And then I’m going to get into the actionable part.
Okay.
So this stylist reached out and said, I have to tell you a story.
I used to own a big salon, and when I took over the financials and started opening the statements, I noticed a charge back report I had never seen before.
On that report was a client that had received a cut with additional thermal styling, and she saw the charge back.
She was a regular client who always seemed to leave happy.
So I dug in deeper and found that she had processed a charge back for her last three appointments.
Because the other person that I co-owned with wasn’t checking the statement regularly, this client flew under the radar.
She got three free appointments.
Plus, we lost extra money for the charge back fees.
Because when there’s a charge back, you as the business owner lose, like there’ll be like a $35 charge on top of it, kind of like a canceled check fee.
There’s an additional fee.
And by the way, if you have too many charge backs against you, a credit card processor can choose not to work with you anymore.
So these are really high risk.
So this long owner says, we sent her an email and basically let her know she couldn’t come back until she repaid us for everything.
A year later, she tried to book with us again, and I saw her name pop up and I sent her a really kind email and said, I know people’s feelings can change.
We would love to have you back, but you still have to repay us for all of the services that you did charge back on.
She canceled and they never heard from her again.
So the lesson learned in this is you have to be looking for these kind of things.
If you’re not paying attention, they can fly under the radar.
So for everybody who’s like, oh, that’s never happened to me.
You might just be missing it.
There is a chance of that too.
And this owner wrapped it up by saying, in all seriousness, every single charge back that’s been filed, we lost.
No matter how many ways we communicated, no matter if we had a refund or cancellation policy or not, we really feel, or I guess I should say, I really feel like the credit card companies will always side with the customers because they’re making money off of them.
And I agree with so many of the points this salon owner made.
So to this owner, thank you so much for reaching out.
I so appreciate you sharing this.
And that person’s right.
The credit card company does make more money on consumer debt.
So it’s no surprise that they’re going to be siding with the consumer as these things come up.
So what are the things that we can do?
What were the commonalities that I saw when people said they at least had a shot at fighting these chargebacks?
First things first, I don’t know if you know this, you can choose how your name shows up on a credit card statement.
So with your credit card processor, you can decide how that transaction is going to show up on a report.
Because so many people said I got caught up in a fraud thing, where a client, a really good client obviously didn’t want to scam me, but thought my transaction was fraud because they didn’t recognize it.
I’ve had that happen too.
So we changed our credit card transaction name to be something more recognizable, and we saw a huge decrease in that.
So make sure that yours is something that actually makes sense.
It aligns with your business name or your name as your client’s know you or something like that.
That alone is a big, huge step in the right direction.
Videos of the client seem to help.
So another nod to video marketing.
So many people were like, I had photos, I had before and afters.
The videos seem to be the only thing that gives some kind of additional credibility.
But again, those weren’t foolproof, but the videos did seem to be a bit more solid.
If a client creates a charge back against you, the credit card company will reach out to you and say, hey, listen, Sophia Jones is disputing the charge of $612 for services received on whatever, January 9th, and you have 30 days to respond, or 21 days to respond, or 7 days, whatever, and you get a chance to respond to the dispute.
More often than not, sometimes you don’t, but more often than not, you do.
I want you to give this a shot.
Share that the client did not reach out to you to express their dissatisfaction, and if they had, you would have been happy to work it out directly with them.
So here’s one thing that you should know that works in the favor of the business owner, is that technically when you file a dispute, you as a consumer should have tried to work it out with the business first.
And often these clients will say like, I try to reach my stylist, she won’t return my calls, I can’t get a hold of her, she says she won’t refund me, says whatever story they want.
And then the credit card company goes ahead and does the process.
If you say the client didn’t reach out to me to express they were dissatisfied, that may give you a leg up.
So give that a shot.
Now, when and if it happens, let’s say you have a dispute, your first dispute comes up in the next year or whatever, save all of your responses, screenshots of what you send on a Google Doc, so that you have a record of what you said, what you shared, what credit card company this was with, because once you find a dispute formula that is successful, that’s the one you want to continue working with.
So rather than having to retype words every single time and take a different approach, and what did I do last time?
Did I send a video?
How did I do that?
Did I upload a receipt?
And by the way, you can only upload so many things.
You can’t upload 15 files.
There’s a limit.
And so having a working Google Doc or somewhere where you’re tracking everything that you send and everything that you share in your process will really, really help you in the long run.
Now to close it up, last tip.
I don’t need you to rethink your entire payment structure because of this.
I don’t think credit cards are bad.
I think credit cards are wonderful.
I think that for most business transactions and consumer transactions, it makes the most sense.
I like credit card transactions more than I like cash, more than I like checks.
And I would continue using credit cards in your business.
I’m saying don’t not use them.
Here’s the thing, too.
If you become a cash only business and you have a client who could only pay you by credit card because they can’t afford it any other way, now you just lost a client.
And I think as we head into this uncertain economic time, it’s not about making things more difficult for the client.
It’s about preparing yourself for success.
And I think this is just a step in that direction.
I hope this is a fun one for you.
I’d love to keep the conversation going.
You can leave me a rating or review on iTunes and leave me a question in the comments.
So much love, happy business building, and I’ll see you on the next one.