How do you, as a freelancer or small business professional, feel when a client asks for a discount? Do you have clients who request discounts on Every. Single. Project?
With each client I serve, I have two objectives: how can I deliver more (and better) than they expect or have asked for and what is the fair market price for my services, given that I must be both competitive and profitable? I also give ongoing clients a fixed discount. Why not? I am not investing time and energy marketing to them. And typically, I know enough about a repeat client’s needs, systems, and objectives so that working with them truly is more time efficient than working with a new client where my learning curve is more time intensive.
The reality is, because I am already pricing my work at an optimal price both for my client and me, there is no margin for negotiations.
After recently experiencing repeated requests for discounts with a new client, I decided to do some research on the topic. When your subconscious brain starts interrupting your good nights’ sleep with 2 A.M. anxiety because a client has asked for discounts on three out of three projects you’ve done, then it’s time to do some research and put the matter (and me) peacefully to bed once and for all.
Are there best-practices? What do other small businesses do? Can I make a list of pros and cons to help me navigate? And why does this issue cause me so much anxiety?
In my combo process of research plus soul searching, I developed the lists below of issues to consider when clients ask for discounts.
Pros, Cons, and Choices for Dealing with Clients Who Ask for Discounts
Why You Might Consider Discounting Your Work
- Your work is your best advertising. Sometimes it makes sense to actually give away a little bit of it free. There are no Facebook ad campaigns, pay-per-click ads, or mainstream media marketing initiatives that you can do that have the potential to ‘sell’ a client on your work as effectively as giving away a meaningful snippet of what you do. “Let me write a couple of paragraphs for you or mock up a sample page. If you like it, we’ll go forward. If you don’t, there’s no charge.” This offer dramatically reduces client risk and builds their confidence in your work and your process. The challenge here is determining the size of your sample. You want to give away only enough to help your client make a buying decision.
- If you do not have other paid work at the time a client asks for a discount, then there is something to be said for making some money, rather than nothing at all. Inherent in this position is the reality that when professionals in any field underprice their work, they are damaging everyone in their niche. Winning the battle but losing the war only delays the inevitable.
- A client who asks for a discount may genuinely have budgetary issues. When this is the case, consider options that will help the client receive what he or she needs without undermining your pricing. Can you scale back the work? Could the client’s objectives be fulfilled in stages, thereby ensuring you the work down the road but spreading out the expenditure for your client.
- Can you use the request as an opportunity to gain something you’ve been seeking yourself? For example, can you use the requested discount to help you negotiate a commitment or contract for future work from the client? Does the client provide goods or services you’d like to have? (BTW, there are income and in some cases sales tax rules about bartering, so be careful when you engage in tradeoffs.)
- Make sure the client knows the full scope of the work you are proposing to do, along with the time it will take you. Clients don’t do what we do. Often, they sincerely don’t understand how much time it takes you to do the work. Explain, educate, just don’t whine. This extra step in communication can motivate a client to rethink his request for a discount.
Why You Might Not Consider Discounting Your Work
- Unless a client is genuinely in a tough (and temporary) spot financially, discounting your work once only serves to communicate that you may be willing to do it again (and again) in the future.
- Discounting your work communicates that you have already inflated your price, otherwise, how could you afford to discount it?
- Discounting your work makes no sense when you have other clients waiting for you to start their full price projects.
- You work, presumably, to support yourself, your business, and your family. Your client negotiates discounts for his own benefit or that of his business and his family. Ask yourself why, you, your employees, or your family should have less in order for someone else’s business or family to have more. Think of the issue concretely. You quote a client a fair price. You acquiesce to a client’s request to discount the project by $1000. Boom. Your kids don’t get the theme park weekend, while your client’s kids do. Many of us who struggle to hold the line in negotiating for ourselves can do so much more easily when we think of each negotiation as money that flows directly out of our family’s coffers.
- Lastly: discounting your work may make you feel undervalued, underappreciated, or disrespected. Once this happens, it can be extremely hard to get that message out of your head and even harder to deliver your best work to a client you’ve now come to consciously or subconsciously resent.
For many people, me included, a client’s request for a discount triggers conflicting emotions and an uncomfortable feeling. The first step in dealing with discounts is easy to say but often hard to do—don’t take the request personally. The second step is to ask your client one question about their request, “Why?” This question, and your client’s response, changes the issue from a negotiation to a simple matter of you deciding, based on the facts provided, if their “why not” outweighs your “why”. Also, keep in mind that for some people, requesting a discount is a habit. It can even be cultural.
In the end, the answer is simple: assess how providing a discount makes you feel and what it will cost you financially, personally, and long term. Then do what you can live with comfortably, aware that sometimes you just need to walk away from a client.
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