My Home Inspector Blog: Discounting Your Fees In Exchange For A Promise

Discounting Your Fees In Exchange For A Promise

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 morgullible teste 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?

roll the dice


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.
open mind

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.

strength 


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!


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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

 

 

 


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Comment balloon 72 commentsSteve Stenros • September 06 2011 01:35AM

Comments

Yes, we've all been asked about discounts/rebates.

Maybe you can give the guy a coupon for a discount on the NEXT project he sends your way. That may work. If he does have a lot of work coming up, he should be happy about that. If he says he'll lose the coupon, tell him you'll mark that on his account info.

 

Posted by Pacita Dimacali, Alameda/Contra Costa Counties CA (Alain Pinel) almost 7 years ago

That will work, Pacita! These types of "offers" seem to come in waves with my business.

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I can't tell you how many times I've heard that promise for future work.  Thankfully, another person in my company answers the phones now, so I don't end up having to say "no" any more :)

Posted by Reuben Saltzman, Delivering the Unbiased Truth. (Structure Tech Home Inspections) almost 7 years ago

Good Morning Steve, a truly excellent idea!  I will pass it along to associates who will be able to use the idea.  I hope you had an excellent Labor Day!

Posted by Dan Edward Phillips, Realtor and Broker/Owner (Dan Edward Phillips) almost 7 years ago

I hear that all the time. It's an old and overused tactic, and the future work never materializes. We can only ework so cheap.

Posted by Jeff Pearl, Full Service Full Time Realtor (RE/MAX Distinctive / LIC in VA) almost 7 years ago

Reuben: You mean there are con-artists in Minneapolis who do the same?!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Hi Dan! I'm sure you run across the same thing. The investor who is going to buy two dozen homes in the next few months, but wants you to cut your commission. Thanks for all the re-blogs! I had a really non-laborious Labor Day. How about you?

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I agree, Jeff! That tactic is way overused! Have a great day!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Great article Steve.  Everyone wants a "deal", especially in today's economy.  But, true expertise is the best value!

Posted by Kelly Mac Group (619) 319-7010 San Diego Beach and Luxury Realtors, San Diego Beach, Coastal and Luxury Homes (Keller Williams La Jolla) almost 7 years ago

Steve, sadly, not only are you now a "discounter" but they tell all their friends, your potential referrals from this source, that you'll discount!

Posted by Connie Harvey, Realtor - Nashville TN Real Estate (Pilkerton Realtors) almost 7 years ago

Steve:  Touchy subject and you did a great job pointing out the pitfalls!

Posted by Sidney Kutchuk - Realty Works Temecula Kutchuk - Realty Works Temecula, Realty Works Temecula (Realty Works Temecula) almost 7 years ago

Steve

Great job on a difficult subject. It seems that so often you get what you pay for when it's discount.

It was terrific to meet you tonight! I look forward to following your blogging here.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude - Carlsbad (Solutions Real Estate ) almost 7 years ago

I couldn't agree with you more, Kelly!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Oh boy, Connie! The plot thickens! It sounds like this has happened to you! :)

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Thanks Jane! How was your Labor Day weekend?

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Hi Jeff! Thanks for arranging the Encinitas meet-up! I met a bunch of nice people and had a fun time!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Hi Steve, this is a really great post on a very touchy subject for some agents...I agree with you 100%...come from a point of strength...I can't believe this is not featured yet, I suggested, like, etc....fyi, thanks for your comments on my recent blog post....appreciate it. 

Posted by Hrisco & Associates, -"When Experience Matters - The Agent You Need!" (Hrisco & Associates | eXp Realty, LLC.) almost 7 years ago

Thanks for the kudos, John! I hope the AR staff feels the same way! I think every business person who provides a service finds themself in this scenario sooner or later!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Excellent advice, Steve.  Discounting for the sake of discounting is not a good idea.  If it looks more like a give and take then you will show that you value your own services.

Posted by Jane Peters, Connecting you to the L.A. real estate market (Home Jane Realty) almost 7 years ago

Jane: I agree. Give and receive something back. Sounds fair to me!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve:

I actually did discount my commission based upon a promise for future business.  However, I asked my client to sign an agreement that he would list the property he was flipping with me.  He signed the agreement and I listed the renovated property and it sold quickly.  I was lucky.

Posted by Evelyn Kennedy, Alameda, Real Estate, Alameda, CA (Alain Pinel Realtors) almost 7 years ago

Discount your fee and the next to come along will ask for a discount on that fee and so it goes. Ready to work for nothing?

Very sage advice my friend.

Posted by Corinne Guest, The Choice of Professionals for Luxury Home Buying (Barrington Realty Company) almost 7 years ago

this is a great post! As an agent it's tough to say "no" when you really want that listing. Every agent should read your post.

Posted by Steve Mangus (not active) almost 7 years ago

That's excellent, Evelyn! You completely understand the "give and receive" concept! Way to go!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

LOL Corrine! I didn't file for a not-for-profit business either!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Yeah, Steve, you're right. When a Realtor cuts their commission, they take a much bigger hit than I would! But I'm running a cash flow business and I like to keep the cash flowing!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve,

I usually give my close aquaintances a small discount for listing with me, especially if they are going to be buying through me as well. I also give consideration to the clients financial situation. If they are willing to be transparent with me and it comes to light that a discounted fee will keep them from having to come out of pocket at closing, then I will usually work with them. If I know the individual has the money, I ask them which of my services they would like for me to omit in order to give them a discount!

Posted by Scotti Jowers, Realtor - West Monroe, Louisiana Homes for Sale (CENTURY 21 Shackelford French, Search West Monroe Homes ) almost 7 years ago

I bartered for discounted fees one time.  Knocked $500 off a commission and in exchange the seller who was a techhie created a brand new website for me.  That was 7 years ago and I still have the website.  A darn good bargain.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) almost 7 years ago

I've won some and lost one doing this. If someone asks me to sell their house for less in exchange for using me to buy their next home, they have to put it in writing now. 

Posted by J. Philip Faranda, Broker-Owner (J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY) almost 7 years ago

Scotti, I also give an inspection discount when Realtors who regularly send business my way are purchasing a home for themselves. It's the least I can do! Many of them have referred my services dozens of times over the years and I appreciate it more than they know!

 

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Rob: A $500 website that is still in use today?! That IS a bargain! Way to go!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I agree, Philip! Unfortunately, many people cannot be taken at their word. If it's not in writing, it never happened!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Very often people ask me if I will do that if they buy from after the sale of the home.  Yes - IF they sign an unconditional EBA....Has to br upfront or there are a thousand ways that client can slither around.

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) almost 7 years ago

Excellent advice.  I like the coupon for a discount on future services idea. 

Posted by Tracy McPeek almost 7 years ago

Ruthmarie: What is an EBA?

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Tracy: That works for me!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve - I am guilyt as charged.  I let a client last November talk me into lowering my points on his whopping $110,000 loan that was ALOT of extra work "because I have 6 or 7 other friends who are looking to buy this next year"... here it is September and not only have I not seen any of that business materialize, but I haven't heard from this client in over 6 months!  

Friends don't let friends take discounts on their professional services!

Posted by ​​Elise & Glenn Groves, Mortgage Brokers ​First Priority Financial, Inc., Mortgage Broker,Banker, FHA, VA, Conv, Jumbo - Pur (First Priority Financial Inc., NMLS# 3257, ​Elise NMLS #255824, Glenn NMLS# 1124642) almost 7 years ago

This is great advice --- in the past, several clients asked me to provide a staging proposal, adding "I have some other homes/listings that will need staging too, so please give me a "volume discount."  I told them that any price reductions would come on the LATER projects, not the first one!  (did they think I was born yesterday?)

Posted by Maureen Bray Portland OR Home Stager ~ Room Solutions Staging, "Staging that Sells Portland Homes" (Room Solutions Staging, Portland OR) almost 7 years ago

Well-put, First Priority! Isn't that something? Santa Rosa has a few "embellishers", too!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Good for you, Maureen! How many of those LATER projects have you seen?

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

If it's not in writing, more than likely you are probably going to get taken advantage of in this type of situation.  It's only a win/win if the person really means what they say and that is going to be impossible to determine unless the discount is given on the last transaction and not the first one.

Posted by Morgan Evans, LICENSED REAL ESTATE SALESPERSON (Douglas Elliman Real Estate) almost 7 years ago

Thanks Morgan. Agreed. Let them deliver the goods first!

 

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve,

On fee for service arrangements I can offer a discount. But for transactions, I don't. I would rather cut out a few deals per year than do the work and not really get paid.

Brian

Posted by Brian Madigan, LL.B., Broker (RE/MAX West Realty Inc., Brokerage (Toronto)) almost 7 years ago

Steve,  Very good explanations with sound reasoning.  Thanks for a great post.

Posted by Kathleen Vetrano, Helping YOU Achieve YOUR Dreams (RE/MAX Gateway) almost 7 years ago

Makes sense, Brian. No one likes to work for free.

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

And thank you, Kathleen, for your comment!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve, no discounts here either---and I have done as many as 5 inspections for the same buyer---as well as done multiple inspections for investors.  If you say "no" once they don't bother asking again :)

Posted by Charles Buell, Seattle Home Inspector (Charles Buell Inspections Inc.) almost 7 years ago

We all need to stop giving ourselves away -- or we will all end up broke sooner or later -- a promise does not pay the bills -- our 2 cents.

Posted by Bob & Carolin Benjamin, East Phoenix Arizona Homes (Benjamin Realty LLC) almost 7 years ago

I have experienced the same, Charles. They don't get a discount, but they receive the high honor of being recognized as my "Customer of the Year"!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Amen to that, Benjamin Realty! Thanks for your 2 cents: It was worth a lot more than that!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve,

Truly, an extraordinary post by an extraordinary man.

Thank you!!!

Posted by Patricia Feager, Selling Homes Changing Lives (DFW FINE PROPERTIES) almost 7 years ago

Patricia: I'm speechless!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Simple solution: Just do what every magor business does- markup by 40% discount by 20%. Your customers wont be any the wiser. As long as they *think* they've got the upper hand your golden.

Posted by Josh Feygin almost 7 years ago

Well put, Steve.

Full price on the first transaction with a discount for repeat business makes sense.

Posted by John Juarez, ePRO, SRES, GRI, PMN (The Medford Real Estate Team) almost 7 years ago

Dear Steve -

The worst part is having trusted somone and then nothing materializes.  But onward and upward ...

I love what the un-named official says in #37:
Friends don't let friends take discounts on their professional services!

Have a happy day -
Lynn

Posted by Lynn B. Friedman, Concierge Service for Our Atlanta Sellers & Buyers (Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ...) almost 7 years ago

The phrase "if this works out well" should set off alarm bells in your head.  When a potential client uses such language, it usually means that they want you to "make the deal work" (no matter the circumstances) which is an unacceptable assignment condition in my book.

Posted by Jesse Skolkin (Independent New York State Certified Real Estate Appraiser) almost 7 years ago

Steve, I have what I call Pat's Frequent Buyers' Club and when they have their third transaction or closed referral, I start to work for less for repeat business.  Works pretty well for me.

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) almost 7 years ago

Josh, my business model has always been to give the client such great service that they don't even discuss price negotiation. "A quality home inspection is never expensive, it is priceless!"

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

John, what great incentive for the customer to come back to you!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Yes, Lynn, I also thought that quote was golden! You have a great day, too, and thanks for your comment!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

You're not kidding, Jesse. I can imagine you especially don't want to hear that phrase in the appraisal business!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

That's a fair trade-off, Patricia. Wow, your point total blows me away! You have been busy blogging! Way to go!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Steve, Congrats on the feature - it is gold star worthy. I agree with you on this one -  however, like many Realtors I have a VIP rate for family, close friends and repeat clients. It works and I think it's fair. 

Posted by Debb Janes EcoBroker and Bernie Stea JD, REALTORS® in Clark County, WA (ViewHomes of Clark County - Nature As Neighbors) almost 7 years ago

Thanks Debb! We all have a VIP rate. There's nothing wrong with that!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Congrats on the feature, Steve. A great post, indeed. Usually if someone wants me to cut my fee, I ask them for a much lower price on the house in order to get it sold faster and save me advertising dollars. That usually stops them because they don't like the price that low!

Posted by Toni Weidman, 26 Years Selling Homes in New Port Richey, FL (Sailwinds Realty) almost 7 years ago

Aaah, Toni! A little reverse psychology? Good idea!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I missed this featured post! Discounting fees has long been a tough call and it certainly devalues the role of the individual who discounts.

Posted by Melissa Zavala, Broker, Escondido Real Estate, San Diego County (Broadpoint Properties) almost 7 years ago

Hi Melissa! Thanks for your comment!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I myself am all too familiar with this promise for repeat business... I have learned from my mistakes and know not to trust these promises!  Good blog...

 

Thanks,

Benjamin Lang

http://benlangproperties.com

Posted by Lang Premier Properties, Metro Detroit Real Estate Group (Lang Premier Properties) almost 7 years ago

Thanks Benjamin. I think we've all been burned by this "scheme" at one time or another! Next time we'll be ready!

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

I never do it and prefer to maybe and I say maybe do something for them at the time the future business happens

Posted by Michael Murphy (Bienvenidos Real Estate) almost 7 years ago

Thanks for your comment, Michael. That's a safe way to approach it.

Posted by Steve Stenros, CREIA MCI, ICC, ACI Home Inspector,San Diego (Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula) almost 7 years ago

Participate