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Why You Should Never Discount Your Rates

Posted by: Jason Orban

You know, The Marketing Drive isn’t just about marketing.

It’s about how to build a successful business that you love and that you’re proud of.

We’ve spent many years, learning hard lessons about business and I guess like a lot of people, we want to share with our community.

We want to help out as much as we can, and provide a ton of value, so you don’t need to start from scratch.

So let’s talk about discounting your rates.

It always happens, you get a new client and they want a deal.

The first thing that always goes through my mind is, “Well this person has balls”.

But something weird inside of me goes, well yeah we can offer them a discount. But really why? I usually have to stop myself and I’ve learned to just Shut Up at that moment.

Don’t say anything and realize that “No, These are our rates, This is what we charge!”.

But even after being in business for nearly 15 years, I still struggle with it.

And I bet you do too.

Someone asks you for a discount and you automatically feel guilty for not accommodating.

But here’s the thing you need to remember.

Nothing Good Comes From Discounting Your Services. Nothing!

Now okay there may be a time where you're working with a charity or someone you really want to help, then use your judgement, but it's like lending money to friends and family... there's a 90% chance you won't get that money back... 

However there are times where we're allowed to help.

But when it comes to business, discounting your rates is a no no. 

Chandelle has always said, that you should never discount your rates. It’s something we’ve told all the hair stylists that we’ve ever had work in our salons. You just don’t do it. You can offer value added services if you need to, but you don’t discount.

Now this doesn’t just apply to hair stylists.

It applies to any service where you’re trading dollars for hours. Graphic Design, Coaching, Trades, Programming, Writing…. You pick, whatever it is, you don’t discount, and here’s why.

You’re a business and you need to pay your bills. 

1. By discounting your services, you're failing your client. 

As mentioned in our post about charging what you’re worth, you have bills to pay and cashflow is the lifeblood of your business.  if you’re going to discount your services you’re going to hurt your cashflow, and how well do you think you’re going to be able to serve your customers when you’re struggling to pay rent, your employees, or daycare. It’s an added stress that you don’t need to deal with.

2. It doesn't matter if you're just starting out 

Now I know that a lot of times when we’re just starting out, we feel we need to discount our services. But this is just our mindset playing games with us.

The truth is, if you have experience, if you know what you’re doing and you’re confident about the value you can bring to your customers then you need to charge for it.

If you’re not confident about being able to charge your full rate for the product or service you’re providing, then you shouldn’t be offering it.

How is your client going to feel when you deliver a sub par product, or you don’t deliver on the expectations that were set in the beginning?

This brings me to point Number 2.

3. You don’t want customers who don’t respect you.

You think you’re doing them a favour, and you’re going to help them out now and later they’ll help you out right?

More projects will come and you’ll raise your rates later?

But guess what, It doesn’t happen. That respect is gone.

The next project may come, but when you say, ok well these are my rates, they’ll say, but you did it for this rate before, I’m not paying that.

You want your customers to respect you for the work that you do. You want them to pay you the rate you need in order to do that work. You don’t need to be in battles with the client arguing over payments or rates.

This does happen.

By discounting your rates you open yourself up to a world of hurt.

What happens if all of a sudden they don’t think the work you’ve now done for them isn’t worth the price you’ve worked out? Because you’ve discounted your rates once, why won’t you do it again?

I’ve had to fire clients like this.

They shop around for the cheapest price but they also want the best work.

So they often latch onto the people who do great work and try and whittle them down to lower prices, yet still demanding top quality and a lot of your time.

4. You going to disappoint everyone.

OK well maybe that’s a bit harsh, but I’ve seen it happen more often than not.

You take a job at a reduced rate, but you become resentful.

You have new clients coming into play who are paying you at 100% your rate, but you’re still wasting time on the discount client.

You know you need to do the work because you’ve made a commitment, but in the back of your mind you know you’re losing $25 (or whatever it is) for every hour you do work.

So two things usually happen.

  1. You rush to get through the discount client’s work. Delivering a poorer quality work.

  2. OR you put it on the back burner and focus on the full paying client.

 

5. Your clients will doubt your work and they won’t take you seriously.

Nothing is more frustrating that someone hiring you for your field of expertise, but they don’t value your expertise and they don’t trust what you tell them.

Been there, done that.

When discounting your work, you cast doubt in your customer’s mind.

Client’s associate paying more with better quality and expertise.

By discounting your services, the client stops trusting your advice. After all, you were quick to discount your rates, so your advice must be sub par as well.

Even if you have 15 years experience, the minute you’re willing to discount your services for a client, you lose your authority.

You become a work horse, that they got for a good price.

Let me tell you, frustration ensues and you either look for ways to prove your worth, or look for ways to end the relationship.

Also consider this, what if you were to hire a new plumber or find a new dentist and right away they told you that they were giving a 25% discount on their services if you signed up before Friday?

How would that make you feel?

Would you worry about the quality of their work?

Would you ask yourself, why are they so quick to discount?  

Would you wonder whether they other clients?

Clients will wonder about the quality of your work if you give it away too cheaply.

6: Negotiating the rate for work done by people, never works.

First of all, you’re not a retail store.

What I mean by that is that in a retail store they can have sales and discount their rates because they have inventory.

They can afford to take a 50% hit and still cover the costs of the product. In most cases they’ve already paid for those products and now they’re recouping their money on stuff that hasn’t sold.

When you discount yourself, you’re losing a significant portion of your cash flow.

For us service providers there are only so many hours in a week and only so many hours where we can make money.

If we discount those hours, we can’t get them back and we can’t make up the difference.

They’re gone forever.

You’ve cheapened your, or your employees day and you make it impossible for the week to end on an upnote.

Even if you know you’ve done great work, you feel guilty because you know you weren’t valued and you weren’t paid what you should have been paid.

So what can you do when a client asks you for a reduced rate? How do you avoid discounting your services?

Besides telling them to hit the road? 

Here are a few tips.

  1. Work less hours OR Reduce your scope of work.

    If your client cant afford your proposal, or doesn’t want to pay your price, don’t reduce your hours. Reduce the size of the project. Remove features. See what needs to be done now, and what can wait for a future date. This will reduce the cost of the project and reduce the number of hours you need to show up to complete the project.

    If you hire someone to remodel your kitchen and the price is outside your budget, you don’t ask the installer to give you a deal on their labour, you pick different cupboards, you pick different accessories.

    It’s the same for your services, if they can’t afford the service, change the service, not the price.

  2. Know the difference between a client saying, “I can’t afford you” and “you’re too expensive”.

    Just because a client says they won’t pay, or that they can’t afford you, doesn’t mean you need to reduce your rates. You need to stick to your guns and work with the clients who will pay. The clients who want to pay you what you’re worth.

    Sometimes a client just isn’t a good fit. Like I said, I’ve had to choose to not work with clients becuase we couldn’t see eye to eye on rates.

    Just because a client says you’re too expensive, doesn’t mean you are. We have a lot of clients who pay our full rate, and we meet a lot of clients who say they can’t afford us…. Or that they can get our “product” cheaper down the street.

    To them we say great, go ahead and good luck. We know the value of what we do, and we deserve to get paid.

  3. You need to be willing to walk away.

    There’s nothing more powerful and shows more confidence in your work than being willing to walk away.

    I know this can be very frightening. We are all born with the idea that we need to say yes to all the opportunities that come through our door.

    But the truth is, being willing to walk away from a discount client with a discount budget will either bring them up to your level, or spare you and them from what could possibly be months of frustration, anxiety and despair.

    It’s better to struggle a bit in the beginning finding those clients who are willing to pay what you’re worth than it is to constantly bend over backwards because a client tosses a couple dollars your way.

Hold your value, Know your worth, stand strong.  The clients will come.

As we said many times in this article, you’ll be a happier business owner if you don’t discount your rates. Use the tips and suggestions we’ve outlined to help you stand your ground. If a client insists that you’re too expensive or that they can’t afford you, don’t feel bad. Maybe they’re just not the right client right now. Maybe you’re just not the right business for them to work with.

And well, You don’t want to work with them anyway.