How Do I Write a Cancellation Policy for My Small Business?

By Bill Stilwell · Last reviewed October 17, 2026

The short answer

A cancellation policy says how and when a customer can cancel, how much notice you need, what fee (if any) applies, and when your business can cancel. Write it down, show it before the customer books or signs, and apply it the same way every time. If you sell to consumers at their home, a federal rule may give them 3 business days to cancel.

What this means

A good policy covers both sides.

When the customer cancels:

How much notice you need (for example, 24 hours for an appointment, 7 days for a scheduled project)
What happens to a deposit
Any late-cancellation or no-show fee
How to cancel (call, text, email, or a link)

When your business cancels:

Weather, unsafe conditions, illness, or equipment failure
A customer who doesn’t pay or who breaks the agreement
What you will do: reschedule, refund, or credit

Made-up example: Maple Street Hair Studio asks for 24 hours’ notice. Cancel later than that, or don’t show, and the card on file is charged 50% of the service. The policy is on the booking page, in the confirmation text, and posted at the front desk. When a client complains, the stylist points to the same words they saw three times.

Why it matters

No-shows cost money. An empty appointment slot can’t be sold again.
Unwritten fees cause fights. Charging a cancellation fee the customer never saw invites a chargeback and a bad review.
Federal law may give customers a right to cancel. The Federal Trade Commission (FTC) Cooling-Off Rule covers many consumer sales made at the buyer’s home or at a seller’s temporary location.
Your own cancellations need rules too. Without them, a rained-out job turns into an argument about the deposit.

Who this applies to

Any business that books time, takes deposits, or signs agreements before the work. Counter-service businesses with no bookings can skip a formal policy.

The Cooling-Off Rule. According to the FTC, the rule covers consumer sales of $25 or more made at the buyer’s home and $130 or more at a seller’s temporary location, like a hotel room, fairground, or convention center. The buyer can cancel for a full refund until midnight of the third business day after the sale. Saturdays count as business days. Sundays and federal holidays don’t.

The FTC lists exceptions. Among them: sales made entirely online, by mail, or by phone; sales finished at your permanent place of business; real estate, insurance, and securities; sales needed to meet an emergency; and home repair or maintenance the buyer asked for (extra items you sell beyond that request are covered).

If the rule applies, you must tell the buyer about the right to cancel at the time of sale and give them two copies of a cancellation form plus a dated receipt or contract. After a cancellation, you have 10 days to refund the money.

Many states have their own cancellation rules, especially for home improvement, gym memberships, and other contracts. Check with your state attorney general’s consumer protection office.

How to do it

Check whether the Cooling-Off Rule applies to any of your sales. If it does, build its notice and forms into your sales process.
Check your state’s rules for your type of business.
Pick your notice period. Base it on how hard it is to fill the slot or recover costs.
Decide on fees. Keep them reasonable and tied to your real loss, like the time slot or materials already bought. Ask an attorney if your state limits them.
Write your own cancellation rights: weather, safety, nonpayment, and what you’ll do for the customer.
Say how to cancel. Give a method the customer can actually use outside business hours.
Show the policy before the customer commits: in the agreement (see 11.1.1 Service Agreement), on the booking page (see 14.9.5 Booking and Appointment Links), in confirmations (see 17.3 Appointment Reminders), and on your website (see 13.4.7 Policy Pages).
Apply it the same way every time. Note any exception you make and why.

What proof to keep

The signed agreement or booking record showing the policy was accepted
Copies of cancellation notices and forms given, if the Cooling-Off Rule applies
Records of each cancellation, the time it came in, and any fee or refund
Screenshots of the policy on your booking page and website, with dates

Common mistakes

Hiding the policy in fine print. If the customer didn’t see it, expect a dispute.
Different rules on the website and the booking app.
No way to cancel after hours. Customers who can’t reach you will call it a no-show you invented.
Forgetting your own cancellations. A policy that only binds the customer looks unfair.
Ignoring the Cooling-Off Rule for in-home sales. The notice and forms are required at the time of sale, not later. Ask an attorney how the rule applies to you.
Charging the fee to some customers and not others without a reason you can explain.

When to get help from a pro

Attorney: to review your policy, especially for in-home sales, memberships, and home improvement. Questions to ask:

Does the Cooling-Off Rule or a state cancellation law apply to my sales?
How large can my cancellation fee be in my state?
What must I do with a deposit when a customer cancels?

Bill’s note

[Bill: add a short note. For example, how SiteSmarty handles a client who cancels a website project midway, or a business owner you know who cut no-shows by posting a clear policy.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: the notice period, fees, and SiteSmarty’s own cancellation rights]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: the cancellation section of the SiteSmarty agreement]
[Result so far:]

Questions people ask

Can I charge a cancellation fee? Usually, if the customer agreed to it before booking and the amount is reasonable. Some states limit these fees, so check yours.

What is the 3-day cancellation rule? The FTC Cooling-Off Rule lets consumers cancel many sales made at their home ($25 or more) or at a seller’s temporary location ($130 or more) until midnight of the third business day after the sale.

Does the 3-day rule apply to online sales? No. The FTC says sales made entirely online, by mail, or by phone aren’t covered. State laws may still apply.

Can my business cancel a job? Yes, if your agreement says when you can and what you’ll do for the customer.

Audit check

Question: Is a written cancellation policy shown to customers before they book or sign, and applied the same way every time?
Pass looks like: Notice period, fees, deposit handling, how to cancel, and business cancellation rights, shown in the agreement, booking page, and website. Cooling-Off Rule notices used where they apply.
Fail looks like: No written policy, fees charged without notice, conflicting versions, or no 3-day notice on covered in-home sales.
Evidence to collect: The agreement, booking page screenshot, website policy page, and a log of recent cancellations.

Where this fits

Do this first: 11.1.1 Service Agreement, 11.1.6 Payment Terms

Do this next: 11.1.8 Refund Policy

Sources

Federal Trade Commission, "Buyer's Remorse: The FTC's Cooling-Off Rule May Help" (checked October 17, 2026)
Federal Trade Commission, "FTC Approves Changes to Cooling-Off Rule" (2015 thresholds) (checked October 17, 2026)
Google Business Profile Help, "Tips to improve your local ranking on Google" (checked October 17, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.