Why Discounting Your Rates is Not a Good Idea
When you began running your business, you likely put a lot of thought and effort into your rates, taking into account your overhead, the time it would take you to complete certain services, marketing costs, outsourcing or paying your team, and many other factors that contribute to establishing pricing that you feel is fair and making your work worthy of your time and attention.
Even though you likely have a solid rationale for why you charge the way you do, there are some situations in which offering reduced pricing may seem like a good idea. Whether it’s an uncomfortable pitch meeting where you want to reduce tension or fear over dropped business in the current economy, it can be tempting to go back on your initial financial structure. However, discounting your rates is generally not a good idea. Here’s why.
It Lowers Your Client’s Perception of You Value
The idea that you get what you pay for is deeply ingrained in many consumers. If you offer reduced rates, they may assume the quality of your work is also lower.
It Undermines Your Authority
If you’ve already given your rates and then offer to lower them in response to pressure, you undermine your authority as an expert in your field. This makes it easier for the client to walk all over you in the future, as they know you are willing to bend what you want to make them comfortable.
You May Become Resentful
If you routinely work for less than you feel you’re worth, you may become resentful of your clients, your work, and ultimately your business. Protect yourself from burnout by charging what you’ve determined is fair for your time.
It Sets a Bad Precedent
Offering a discount once may make your client ask for more discounts on future services. In addition, if they are happy with your service and refer others to you, they may communicate the lower rates they received, leading to more of the same lower-paying customers in the future.
You Spend More Time Working for the Same Profit
Your time is valuable, and you certainly don’t want to spend more hours working for the same amount of money.
What to Do Instead
Instead of offering discounts on your services, consider the following:
Offer an incentive for up-front payment
Consider cutting services from your package to meet the client’s budget
Protect your long-term profits by creating an introductory offer and clearly communicating that it is only valid one time on a certain service
Charge per project, not hourly. According to Loren Fogelman's blog, this separates your time from your fees and protects your profit margin.
I’ll admit I’ve discounted my rates and credited clients for some of their fees in 2020 and in 2021. But it was due to their financial struggles related to the pandemic, not because I was feeling pressured to reduce them just because the client didn’t want to pay the rate I charge for services.
So, if the pandemic is not the true reason clients are asking for lower fees, think about these tips before adjusting what you want to charge. While taking the easy way out of a negotiation and lowering your prices can feel tempting in the moment, charging what you’re worth is a long-term investment in your company and your mental health. Trust in the pricing structure you’ve created as well as the value you provide with your services!
