This transcript was generated from the episode audio and may contain minor errors.
[Music]
Beware the Ides of March. That's correct, this episode is number 1170 going out on the 15th of March, 2020. Be sure to watch your back today. You never know what could happen. And in today's listener question, what if you are renting rather than selling an expensive item?
You've got something that you wanna rent out to make money rather than sell. This could be a good fit if the items in question are the kinds of things that most people need only once, or perhaps occasionally, such as an outdoor wedding tent, even a tuxedo for a wedding, perhaps something like pricey camera gear that a photographer needs for a particular shoot, something like that. Now today's caller is doing something fun. He makes giant lawn games. And instead of selling them, wants to rent them out for events.
But he has a concern about collecting a security deposit. Now, as a reminder, I am learning along with you. I often hear stories and case studies of different ways to make money that I had never imagined before. And sometimes I also encounter a challenge or a problem that I think is gonna be pretty simple to solve. And the more research I do, or the more I delve into it, the more I realize actually, this is not as simple as I thought.
And so in this case, I was surprised to discover that this issue is not as simple as I would have assumed. All right, so let's talk about it. How can I collect a security deposit from my customers? Stay tuned. [Music]
Hello, this is Rick from Aurora, Colorado.
And I've been listening to the show only a short while, but long enough to reach out for a question. As a side gig, I do woodworking, mostly making those giant yard games such as Yahtzee, Cornhole, and Domino's. I noticed that I tend to do a lot of work on them for a marginal profit, sometimes barely enough to cover my costs. I decided renting them out for weddings and company picnics would be a better way to make more money for less money. More money for less work.
My question is, how do I ensure I get my items back at the end of the rental period? I have a rental agreement, but I'm afraid that's just not enough. I rent out my games at my cost of materials. So if I do lose them, I'm only at my time, but time is valuable. Services such as PayPal and Square don't hold deposits.
And I don't see anyone putting down a substantial cash deposit, which would be the value of which I would sell the games for normally. Smaller deposits, not me, the same result as no deposit. Please help. I'm looking forward to hearing from you. Thank you.
[Music]
Rick, thank you so much. This ended up being a pretty interesting question. Thought it was kind of simple at first. I was like, oh, how hard can it be? But actually, you're correct that this is more of a challenge than it should be, actually.
I think somebody should come along and provide a better solution for it. So Rick is correct that both PayPal and Square don't have an easy way to handle security deposits, much to my surprise. And in diving into some research on various forums, I found like a 24-page thread of comments dating back three or four years with numerous merchants, lots of other small business owners, side hustlers, complaining about this to Square. And multiple times in this long thread, one of their customer service agents would chime in to say, thank you for the request. Our developers are working on it.
So if you're listening later, perhaps this has been resolved, but since they've been saying for three years now that it's in the works, I wouldn't hold my breath. So not sure why they haven't done that, but what can you do? That's the real question. So two possible solutions. Square and PayPal are easy turnkey platforms that a lot of people use for good reason.
I often recommend them because they're easy. But this might be a case where, especially if your business is really gonna take off, where they aren't the best solution. And so in this case, any traditional merchant account, which is what you need to accept credit cards without going through one of these platforms will allow you to take refundable security deposits. That's not an unusual feature at all. So if you search merchant account, if you go to your local bank, there are many, many options for merchant accounts.
Admittedly, it's not going to be as simple as filling out the Square form or the PayPal form, but it will allow you to do that. Second idea, as some of the merchants mentioned in that long thread, you can effectively get around the lack of a security deposit feature by simply charging your customer the extra amount with their permission, of course, and then refunding it later. So for example, if you were renting those long games for $300, but had a $500 security deposit, you would charge the customer $800, again, with their permission. And then once they return those games or those items safely, you would then refund the $500. Now, this isn't a perfect solution either because companies like Square and PayPal don't want you to have too many refunds.
So it might be fine, but if every order ends up having a partial refund attached to it, it's a possibility that they might not like it and could even eventually cancel your account. Okay, so I'm sorry, there's not an easier fix, but from what I can tell, those are your best options. And this could also bring up maybe a third solution or just a different question asking, is that security deposit essential? Like how much of a problem is it? And I know you said that you're renting them for I think the cost of the items, but of course your time is valuable.
That's totally true. I guess the question is how much of a risk is it? And if you think it's going to be a common problem or if it's like, you know, once in a great while it might be an issue, then you could just not do it essentially. But of course you'd be the one to answer that based on your experience and based on how things are going so far. Anyway, Rick, thank you for the great question.
As I said, I learned something through this process, so hopefully it will be easier in the future. And either way, good luck with your side hustle. Sounds really cool. I love to play, you know, giant Yahtzee or cornhole. All right.
Listeners, if you got a question, come to sidehustleschool.com/questions. We'll be featuring them throughout the year along with answers that are sometimes helpful and updates from other listeners as they launch their projects. Thanks so much. Do come back tomorrow. My name is Chris Guillebeau.
This is "Side Hustle School." [Music]
From the "Onward Project."
