Have you been asked about discounting your fees in exchange for a promise of future business? "If this works out well, I have A LOT more work to send your way. Take that into consideration when sending me your quote."
I used to have a bad habit of actually believing what people told me. That's not really such a bad thing, but from a business standpoint, it can be a huge (and expensive) liability.
So, you find yourself discounting your fees in exchange for future work. Everyone's happy, right?
But here's the real question:
How can you place value on something that doesn't yet exist?
Just how valuable is the "future work" that you don't yet have? The "future work" that doesn't exist? Can you pay your bills with that? What happens when that "future work" doesn't show up for 9 months, or at all?
You have actually created a bigger problem:
You've been framed as a discounter!
Deep in the dark corner of your client’s mind, their perception of you has forever shifted. Whether you realize it or not, you've set the expectation of what it means to do business with you. You've planted the seed that discounting your fees is possible, and you have "free money" to give away. From now on they'll be asking themselves, "How low will he go?" Once you've been framed, you will never alter their perception of you… ever!
Many believe discounting your fees will bring you more business. Sounds reasonable, doesn’t it? It’s not that easy! There's an “invisible” cost that comes with discounting your fees.
The hidden cost of discounting.
You will only be able to understand the "hidden cost" of discounting your fees by peering inside the head of your client and seeing how your discount affects their perception of your business. Your actions will erode your client’s perception of you, your value, and your business. Discounting your fees will make you look desperate, needy, and weak. Clients are not attracted to those who are desperate, so quit creating that perception!
The smart way to discount.
If you feel you must, discounting your fees can be a powerful tool in your bag of tricks, but use it in a smart way. Don't be discounting your fees without getting something in return. That shifts the scales and makes the overall value exchange completely lopsided. When the value exchange is lopsided, you hurt your credibility, your bottom line, and the prospect for future business. If you truly believe your client needs your valuable services more than they need their money (and if you don’t, you should!), then why in the world would you demand anything less for your services than the maximum price the market will bear?
Here's one way of discounting your fees in a way that actually helps you:
When your client says, "How about a discount?", "Yes" or "No" are not your only answers. This is your chance to get creative. If there is future work, how about discounting your fees 10 or 15% in exchange for payment for the next project now? That's a real value exchange. The client gets their discount. You get a boost to your cash flow.
Here's the bottom line:
Never ever screw up the value exchange in a business relationship. If you give something, ask for something. Discounting your fees and receiving nothing concrete in return is a business killer.
Here are two phrases you should repeat to yourself until you feel it:
1. I don't need the business.
2. I don't need the money.
These two ideas will prevent you from making stupid business decisions and will allow you to operate from a position of strength. There is never any logical reason for discounting your fees in return for a promise of future business other than to be nice, and "nice" will not keep your business afloat in this economy!
The next time you're asked about discounting your fees in exchange for a promise of future business, keep your focus where it should be- on the exchange of real value between you and your client! Steve Stenros- First Choice Inspections is a CREIA MCI and ICC home inspector serving southern California. He can be reached at 888-335-3040.
Originally posted at First Choice Inspections
Steve Stenros, MCI
Master CREIA Inspector #0115
ICC Residential Combination Inspector #5251439
Certified Infrared Thermographer #7791
FHA/HUD Inspector- #V975
203k Consultant #S0611
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