Many of us, in an eagerness to land steady clients and predictable income, will compromise our standard rates during negotiation. But what may seem workable in the beginning, especially if we are gaining experience or receiving projects from a client in bulk, may not grow with us.
If you make a habit of price dropping in order to gain clients, odds are good you’re not only robbing your business in the short term, but in the long run you may even destroy it!
Here are 3 price dropping myths that are (potentially) killing your business:
1. “By being agreeable to the potential client’s low-ball pricing terms, they’ll be loyal to me.”
You are not the first person to think underbidding, or meeting ridiculously low suggested rates, will win a client for life. But the truth is, it makes you more disposable.
Let it sink in: You are positioning yourself as the generic brand on the shelf when you place your prices at rock bottom.
And what happens to the generic brand when the customer can afford premium? They choose the “better” product. Or, they leave the store altogether in search of the even cheaper option.
I had a client who ranked high on my lifetime value list. Over the course of six years, I met their extremely low rate of pay on the promise I would consistently receive their projects in bulk.
About two years into our relationship, they shared that they’d found talent that worked at a lower rate than I did, so unless I could meet that new price (and remember, I was already far below my scale), they’d let me go. I didn’t compromise that time, but I did (temporarily) lose the client.
By the end of that year they were in a pinch, and I ended up coming through for them in a big way, and on my terms. It was such a great working experience, that when they suggested we continue the relationship again (but at the lower rate I ran from), I caved.
After four more years of work, which came with ever-increasing deadline crunches, lack of the bulk jobs I originally signed up for, and never an increase in pay – I was essentially ghosted.
I did eventually hear from someone at the company, but it wasn’t someone I’d ever personally worked with. He was sure I’d done good work for them (and I was sure he had no clue who I was, despite being on a piece of branding he no doubt heard every day), and said they would “keep me on file.”
I’m not mad at them, as the situation played out exactly as I’d bargained it. Had I educated them on my value, my premium offerings, and the depth of dedication I would display to their brand, this may have gone differently. Sure, they may not have hired me in the first place, but who did I miss out on working with while I was up all night making sure I could provide low-priced work for this company? I could have spent that time on someone better suited for my growth.
Even with loyal clients, they will not care more about you than you do. Teach them how to value you.
2. “Price is the most important factor for every potential client, so the lowest price will always get the job.”
Guaranteed, there is someone else out there whose bottom dollar is lower than yours. There are small projects I would never do for $100 that someone is now doing for $5.
But what are the perceived values of those providers? Do you assume there is quality behind that rate?
And arguably, there are entire industries and luxury brands built around the concept that higher price equals a better result. Not everyone is looking for a bargain. A huge amount of buyers would be repelled by one!
Competitive pricing isn’t a crime, but it isn’t done in a vacuum. Perform discovery in a broad way on your market (and more specifically, your niche), your competitors, and any industry trends that are driving or lowering fees. Then, drill down on your own cost of doing business, your current pricing structure, and the experience and talent you currently have that help dictate your value.
There is a bottom dollar that you must earn in order to stay in business, but it won’t present itself to you until you look. You may also learn there is a higher rate waiting for you to tap into.
Another client of mine, who I had created content for at far below industry standard pricing, taught me a valuable lesson about the seemingly bottomless pit of “I can do it for less.” They did the ultimate: replaced me in-house, thus cutting their fees for content out of the equation completely by passing it off to a worker already on the clock. Was it as high quality? Did it garner as many results? For a client like this, it didn’t matter. Lesson learned.
3. “My schedule will always be full because I am so flexible with my rates.”
Sadly, this myth is what will hurt your business the most.
The biggest nugget of experience I could possibly share with you is this: It takes exactly the same amount of time, effort, talent, and determination to land a $1000 client as it does to land a $100 client.
With that in mind, do you see the flaw in the need to multiply your prospecting hours while cutting away your time to perform the work? Not only will the efforts you put in garner less of a payout, but you’ll set yourself up to increase your workload in order to get to that smaller apex.
You must always think realistically about your time, your overhead, and what is customary in your market. I could present countless examples, especially early on in my career, when I put myself at a huge disadvantage for time in order to “fill my schedule” with cheap clients. It left me continuously chasing the dollar and unprepared for disasters like non-payers, surprise expenses, and market changes due to recessions.
It’s not uncommon to mistake these three pricing myths as three marketing truths, but in the long run, your business has a much better chance of surviving and thriving if you give your premium professional services the respect of the proper pricing analysis that your years of talent and skill development have earned.