A friend recently asked, “how do you handle the ‘what do you charge’ question?’”
If you are a business owner or freelancer, that is a question you probably toy with often. How much should you charge? Is the amount you are charging going to provide enough of a return on investment for your client? Can you prove the return on investment? Will your fee cover all of your costs? Are you leaving money on the table by charging too little? How does your price affect how you are valued? Should you allow your client to negotiate a lower price?
Those last two questions are the questions that I would like to start with.
I started my career as an IT recruiter and part of my job was to negotiate the salary and benefits for the new hire. I knew what the going market rate was and I knew what the budget constraints of the company were. I also knew the value, financial and otherwise, of the company making the right hire. Hiring the wrong person is costly. It can lead to an increased cost in training, or loss of productivity, or even loss of clients. When/if the job does not work out there is the added cost of letting the employee go and going through the recruitment process to replace that employee. So even when there are budget constraints, it makes sense to find the right compensation package for the employee.
When a company is hiring an agency or a freelancer, they are facing many of the same scenarios. They should want a partner who can get the job done correctly the first time, who can educate your company on best practices, who will meet deadlines and contribute to the overall success of their company. If they hire based on the lowest bid they will oftentimes hire a freelancer who is skilled at burning money by running through tactics without an overall strategy that is aligned with the project goals.
If your skills, experience, and professionalism increasing the value that you bring to the table, should you negotiate your price/value?
The short answer is maybe.
Before you even quote a price for a project you should go through the exercise of setting rates for all of the offerings carefully considering what is a competitive price point, be able to provide your clients with a clear ROI, and make sure that all your expenses for the project including time spent on sales, operations, and account management are covered.
If the client cannot afford the rate for the project as quoted, you can be flexible by adjusting the scope of work to focus on what is a priority to get a quick result or build a foundation that they can continue to build on. This is where your expertise and consultative approach comes in.
If you choose to reduce your fees, be sure you have a really good reason. Sometimes I reduce my fees because I really want to contribute to a nonprofit or startup that I believe in and I know they cannot afford me, but I want to help. What I don’t do anymore is reduce my fees for a company who can afford my services but they want to negotiate a deal.
Not long ago I was advised that I should quote a higher price and then when the client began the negotiation process I could tell them I would lower the price “just for them” and I would ultimately win the price I wanted in the first place.
I will admit, I pondered that advice, for about an hour. What I concluded was I would not want anyone doing that to me. It is why we all hate the car buying process, right?
Also, what kind of client relationship is that setting? You are telling your client that yes, I charge more than I need to for my services or that yeah, my services are not as valuable. If you have gone through the process to show that you are the expert in your field and you have gone through the training and trials to become an expert, a good client will value your service, but only if you do so yourself.
Also, if you allow a client to “get a deal” your relationship will be similar to when you are buying a car, the relationship becomes all about the money and most likely the client is still wondering if they are paying too much and may continue to look for a better deal from another person.
So, should you negotiate your price? There are always levels you can pull such as I will reduce it for a long-term agreement or if you pay in full up-front. But never, ever, negotiate your value.
About Sherry Heyl
Sherry Heyl is an award-winning marketing manager with in-depth experience developing marketing plans and managing campaigns. Her expertise is in social media marketing, content marketing, and influencer marketing. She works primarily with start-ups, small businesses, and non-profits. She is also the founder of Amplified Concepts.
You can contact her at firstname.lastname@example.org