January 11, 2016

The Devil is in the Discount. Why You Should NEVER Lower Your Rate.

The Devil is in the Discount. Why You Should NEVER Lower Your Rate.

In the late 90’s, I was managing a premium brand for Jacuzzi and we had a giant web project up for bid. It was a complicated project, requiring the development and management of standardized websites for franchise hot tub dealers in 63 countries.

 

I had a brilliant young woman submit a proposal for the job, and I knew I wanted to hire her. She was sharp and determined and her solutions were creative and well-strategized.

 

But her proposal was out of my budget range.

 

I asked her to come to my office to discuss the proposal – to see if there was a way we could work together within my budget. I knew in my gut that she was the best solution for our issue at hand, and I intended to hire her. I was fully prepared to give up some of the services in the proposal – to minimize the bells and whistles – in exchange for the peace of mind I would receive in working with a true professional who was highly motivated to do the job.

 

She wanted the job.

 

I wanted her work.

 

When we sat down at the table and I presented my budget limitations, her automatic reply was:

 

“I can give you a 25% discount. I’d really like to work with you.”

 

In a split second, it changed the way I felt about her. I wondered – if she would give up so easily on her hourly rate – whether or not she really had other clients, and why she was clamoring for work.

 

I wondered if I’d misjudged her value.

 

But I believed in her, and I knew her business was relatively new. And so I told her, flat out, what I knew to be true about negotiating services:

 

Never discount your hourly rate.

Never.

The devil is in the discount.

Once you begin to barter on your time and expertise, you’ll never recover.

 

And so I asked her to re-write the proposal. Not with a discount, but with creative ways to save time, and to eliminate elements that were nice-to-have, but not critical. I asked her to submit a proposal where she would be paid for every hour, at her prevailing rate, and I could protect the department’s marketing budget.

 

She was more than surprised. But she went back to her office and re-wrote the proposal. And we worked together for many years, on many projects for many companies, always with me paying her full hourly rate, and both of us feeling good about the outcome.

 

I was an executive at the time, responsible for the health and productivity of a large marketing department.

 

Why didn’t I just take the discount and run? Lots of reasons.

 

 

  1. Discounting hourly rates leads to resentment. I knew that once the project began, I’d be spending loads of hours with this web developer. And she was a pro. What would happen on hour 150, when she was working late and earning only 75% of her standard rate? What would happen when another client came along who agreed to pay 100%? Would she jump ship? Would she resent the commitment she’d made to our company? Would her enthusiasm wane? Most certainly. If you bill hours based on your experience and expertise, discounting them won’t lead to more work or more money. It will, very simply, lead you to a point where you resent the clients who buy at the lower rate.
  2. Negotiations for people never work. Getting a discount on a sweater as the Spring season rolls around feels great. Inventory is left over, and your favorite retailer needs to move the merchandise. That’s a win-win. Trust me, that’s entirely different than asking for (or giving) a discount on a human being’s time and effort. There are only so many working hours in a week. Professionals don’t have “extra inventory.” As soon as you give – or request – a discount on hours, you’ve cheapened the value of your day, or someone else’s. You’ve made it impossible for the week to end on an up-note.
  3. Discounting hourly rates leads to doubt on the part of the client. Imagine if your doctor said this to you: “I’m running a special on yearly physical exams. If you sign up before Friday, I’ll give you a 25% discount.” How would you feel? Would you worry about the quality of care? I can assure you that your clients will wonder about the quality of your service if you give it away cheaply.
  4. Discounting hourly rates never ends. Once you establish that you’ll discount your time, it will never end. You’ll feel compelled to lower your price as a tool to get new clients or new work. It will become part of your negotiating routine. And what’s worse, you’ll come to believe that your own value is in question. And you won’t recover. Once it starts, it never ends.
  5. Hourly rates should be based on market value and what you bring to the table. One of the things I hear most often from small business owners is, “I can’t charge that much. I’m new.” Here’s the thing: unless you’re unqualified or posing in a position for which you’re ill-prepared, being new has nothing to do with your rates. You bill your time based on what you bring to the table. You set your hourly rates – in relation to the rest of the market – based on what you’ll provide to the client. That way you’ll feel wholly confident that when a client asks for a discount, she couldn’t get that discount elsewhere. You’ll stop worrying about being undercut by the competition if your rate is truly based on what the market will bear for the same level of service and expertise.
  6. Your hourly rate determines your cash flow. One of the things I often say to the creative professionals who work with me is, “This is not the Red Cross. We work for profit, and we’re not ashamed.” We bill every hour that we work for our clients. And that’s because we’re businesspeople, and we have a responsibility to the businesses we’ve established. Branding isn’t a hobby for me. And your business isn’t a hobby for you, either. If you’ve set your hourly rate properly, it covers your expenses and allows your business to move forward. And even more than profit, we need cash flow to make a business work. Discounted hours lead to cash flow issues and poor business performance, and nobody benefits from that. Not even your clients.

 

So how do you get around providing discounts? How do you say “No, Thanks. This is my rate, and I’m sticking to it?”

 

Understand the difference between discounting hours and limiting scope.

 

You can potentially provide clients with lower prices. But that doesn’t mean discounts on your hourly rate. It means limiting or reducing the scope of the work.

 

If the client can’t afford your proposal, don’t work at a cheaper rate. Work a fewer number of hours.

 

Think of it this way: If you’re building a house and you want an intricate travertine tile floor and the contractor tells you it will be $5,000 to install, you don’t ask the contractor for a reduced hourly rate to meet your budget. You choose a type of tile that allows for a cheaper install. The same should be true of your “labor” relationship with clients. Don’t reduce your hourly rates. If you feel compelled to provide a less expensive option, do so by showing up for fewer hours.

 

Know the difference between “You’re too expensive,” and “I can’t afford you.”

 

Just because someone can’t – or won’t – pay your prevailing rate, doesn’t mean you’re too expensive. I learned this early in my entrepreneurial career from a mentor who worked at a big agency. Sometimes clients are not the right fit for us, plain and simple.

 

Be willing to walk away.

 

If you want to run a profitable business, you have to be willing to work to sell every hour at a maximum rate. That means walking away from discounted work at a discounted rate. It’s frightening, I know. But it’s better to struggle a bit in the beginning as you search for work, than to continuously struggle financially because you can’t hold your value with clients.

 

Practice the conversation.

 

When someone asks you for a discount – especially a friend or family member – it can be uncomfortable. Learn to say this:

 

“I wish I could give you a discount. I’d love to work with you. But I only have so many hours in a week, and my business and my expenses hinge on the income I get from those hours. If I discount my hours, I can’t pay my bills and I can’t move forward in my business.”

 

No one, especially not a friend or family member, should expect you to crash and burn for their benefit. More often than not, people simply don’t understand your situation. Their requests for discounts are innocent.

 

That web developer I mentioned at the beginning of this post? She and I became friends. And she told me more than once that the discussion we had about her discounted rates set the tone for her business going forward. And she thanked me.

 

So charge what you’re worth. In the end, your clients will actually thank you for it. And so will your wallet.

 

Have you been confronted with the “discount dilemma?” Share in the comments below.

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67 thoughts on “The Devil is in the Discount. Why You Should NEVER Lower Your Rate.

  1. Ashley says:

    This was a very valuable post. I appreciate your insight. Although I consider myself to be a professional and I know that I offer tons of value to my clients, I often feel the pressure to discount. Sometimes I fold, other times I don’t. I’ve just got to get better at it and practice what to say when these conversations inevitably come up.

    1. Julia Hook says:

      Hi, Ashley. You’re absolutely right about the idea that this takes practice. Just like anything else, we get better each time we do it. The pressure to discount is out there for all of us. Thanks so much for sharing.

  2. I’m a new life coach. New in the sense that I have recently completed formal training even though I’ve coached for years. I set my rates 50% higher than I initially wanted to because I have learned that people will commit their time and effort if they pay for it. Sounds uncomfortable! Everything I do to change my own mindset is uncomfortable. My coach makes me uncomfortable because she says I’m worth it.

    I think sometimes I’m uncomfortable because of the lingering limiting beliefs. This money business is the hardest thing I’ve had to confront. I battle with it often plus the “what will people think of me” story.

    Loved this post. Love your other posts. And loved the branding PDF. Your entry into my life is timely. I’m listening!

    Thank you,
    Sharon 🙂 xo

    1. Julia Hook says:

      Awww, Sharon. What nice comments. “This money business” is the hardest thing that any of us has had to confront. It’s world-wide and it’s not industry specific. Business would be so much easier if it weren’t for all the money. (I had an HR Manager once who used to say, “HR would be so much easier if it weren’t for all these people!”) Anyway, as far as the “what will people think of me” story, here’s the beauty in holding your prices. When you do, what people will think of you is, a)that you’re worth it, b)that you’re a great businessperson, and c)that they won’t get what you offer cheaper anywhere else (otherwise, you’d be pressed to discount it). So you’ll actually IMPROVE what people think of you by holding your price. Remove your self worth completely. Every bit of this is about the benefit to the consumer, providing a valuable product, and charging what it’s worth. Thanks so much for reading along. And for giving such wonderful feedback.

  3. EXCELLENT ADVICE … Intend to follow. Was always difficult in the past, however, you gave us the tools, language, reasons to use. VERY HELPFUL! Thank you.

    1. Julia Hook says:

      Hey, Caroline! I’m so glad this is something you can use. That makes my day. Rock it, Girl!! Many Thanks to you for being here.

  4. Chrysti Tovani says:

    To remove your self worth from the value of your product/service is the best advice I’ve ever heard. Anytime I’ve ever discounted my services, I’ve felt short changed. Exactly as you said, over time, we feel resentment. Why? Because we know the VALUE we are giving. I made these mistakes too. Now I understand that I am not the right fit for everyone. That’s okay.

    1. Julia Hook says:

      Chrysti: The self-worth thing is so critical to the process, and so hard to do. As service providers, each time we show up, we give “little pieces” of ourselves. So it’s so hard not to tie our self-worth into the equation. But payment, pricing, and positioning are market issues. They’re determined, really, by a free-market economy. And most of my clients in the service industry are wholly relieved by this revelation. Thanks for reading along. I so appreciate it.

  5. Georgia K says:

    I’m in a difficult situation today after my cousin and I agreed that I would coach her. She mentioned she can’t afford 50 euros as a therapist was previously charging her for 45 mins. I immediately thought I must give quote less than that when in fact my ideal client is for at least 3 times that amount. I already begun feeling resentful with my self for even getting into this even though I would love to offer my service to her. Though this post is helpful Julia I am still frozen on what to say next.

    1. Julia Hook says:

      Hi, Georgia. That is a predicament. But none-the-less, you are a businesswoman. And your time is your income. I believe a back-track is probably necessary, if business is the goal. If you’ve already told her that you’d provide your service for less than you’d charge others — and less than it’s worth — because you made a snap decision based on her needs alone, then I think you should be honest about that with her, and try to rectify it. After all, coaching is not a one-time affair, and this relationship could go on a long while with you resenting your cousin/client. I’m guessing that a contract was not signed. If, on the other hand, this is something that you’re doing for the benefit of your cousin — a “pro-bono” kind of thing to help out someone you love — then you’ll have to find a way to get past the resentment that comes with a lower price, and come from a place of abundance, with giving in mind. Either way, what’s key is your mindset. Whether this is business and you misquoted, or it’s a kind of charity and you’re not 100% in, it sounds like you’ll need to get your own head clear before you can make a move. Incidentally, I decided some time ago that I wouldn’t discount my rate for friends and family. Instead, I do offer my services for free quite often to those I love… Either I give it away as a gift, or I charge full price. I find that anything in between leaves both me and the recipient feeling confused and frustrated. I’m not sure if this helps, but you are in my heart and on my mind. Best to you. -Juju

  6. Robin says:

    Wonderful advice!
    I was asked recently by a on again off again client for a quotation, after providing them with one they said they really wanted to work with me, but they received another quotation from another company and maybe I could match their price?
    My response was thanking them for the opportunity, however there are bills that need to be paid and I cannot lower the cost by 50% because those are not my mark up margins. A few weeks later they place the order with my company because the other guys had hidden costs and lack of time management.
    It has taken a long time to get here.. thank you for your wisdom and support!

    1. Julia Hook says:

      Hi, Robin. I’m so glad you enjoyed the piece, and that you stuck with your guns on your pricing. So often folks feel that negotiating a rate is their fiscal responsibility. And I can understand that. At the same time, you holding your rate is your fiscal responsibility. I have found, many times in my career, that clients will balk at a price they later come to accept after a true comparison with the competition. Thanks for reading along. Have an amazing day.

  7. Georgia K says:

    Julia, your advice and your sense of judgment is why I make the time to read your blogs over others. Your advice transcends industries. Thank you so very much! You have hit a chord with settling on the idea that I am giving her a “gift”, not a discount. That was my initial thought when I offered my service to her, and then somehow one thought overcame another and then another and I was left feeling confused and resentful, with my self most of all. Thank you for being so attentive, on-point and being able to bring value to my work-life without judging me, and in fact, empowering me! I certainly will either give for free or charge full price in servicing my family in the future, with a clear mind and heart!

    1. Julia Hook says:

      I’m so glad it made a difference, Georgia. And I would never judge. After all, the fact that I’m writing about the topic means that all of us are feeling it. This is part of being an entrepreneur, and part of being human.

      And besides, I love a great gift. I’ll bet your cousin will, too.

      Enjoy. I’ll see you around!
      Juju

  8. Janis says:

    Julia,
    Let me first begin by saying a big “thank you” for your PDF. I have studied marketing strategies for several as it relates to growing my business and offering tons of value is incredibly important. Your PDF was exactly that! It was worth every minute reading it!
    Capturing the essence of what I offer has crystallized over the years. As an intuitive therapist, (clairvoyant, empath, and 25 years as a therapist) I come to the table with a unique set of skills that almost no therapist has. I have embraced that wholeheartedly and I LOVE my work!
    Being in the process of redesigning my website, getting clear about my brand’s tagline/message has been essential. Your PDF has been so helpful!
    I teach my clients how to live their lives with courage, confidence and certainty AND intuitively.
    I am so glad that I found your information. You are one in a million!
    In love and light,
    Janis
    janisrcohen.com

    1. Julia Hook says:

      Thank you so much, Janis! I’m so appreciative of your kind words and support. And I’m super glad the Anatomy of a Brand PDF is helping you through the process. I find that once business owners realize branding is a holistic process, they see things much differently and they begin to “kill it” on a whole new level. I’m go glad to have you here. I look forward to getting to know you.

  9. Naomi Teeter says:

    This is fabulous, Julia! I’ve been guilty of discounting in the past for a return client… and what did she do? She expected almost every day contact with me (like we were bffs). NEVER AGAIN.

    These days, the only discounts I offer are off of products/programs once in a great while. Lesson learned!

    1. Julia Hook says:

      Hey, Naomi. I’m glad this spoke to you, and happy you’re here. It’s funny how expectations get out of whack, isn’t it? We see things one way, our clients see them another way… It seems that discounting makes that disparity even more intense and confusing. I love a straight-forward deal, with everything on the table. Thanks for reading along.

  10. Jo Lia says:

    I’m going to print this blog out and stick it on my wall. In fact I may need to stick it on my forehead for a while. I discount so often I forget who I’ve charged what. And then they tell their friends who also expect a discounted rate. I get resentful and end up not doing my best work. Not any more. Such important advice. Thank you. Thank you. Thank you

    1. Julia Hook says:

      Jo Lia… I can stick this on your forehead for you. That’s just one of the many services I provide. 🙂 No more discounts.

  11. Solid, thoughtfully-written advice! Confidence is key, once a client realizes how easy you fold, the abuse may begin as well. Slippery slope. Thank you so much.

  12. Solid, thoughtfully-written advice! Confidence is key, once a client realizes how easy you fold, the abuse may begin as well. Slippery slope. Thank you so much Julia.

    1. Julia Hook says:

      You’re so welcome, Erika. I’m glad you enjoyed the post. And slippery slope is exactly right. Here’s to holding our rates! All of us!!

  13. Jeniffer Rimolo says:

    Thank You! This came at a great time. I did a design and didn’t get paid. I try and to be nice and give a product without getting paid. As you mentioned it completely changed our relationship, and even when I tried to collect the they were a no show. I had given that person a discount and had to learn the hard way, never again.

    1. Julia Hook says:

      Hi, Jeniffer. I’m so sorry to hear that this happened to you. But I think it happens to almost all of us at least once in business. Here’s to moving forward, at full price, with folks who value your service.

  14. Ruth says:

    Hi, I’m really enjoying your posts and videos. I once had a client asking if I had a sliding scale of payments, as she had recently lost her job and was on benefits. I told her I didn’t but we could work at managing what she needed within a shorter period of time. So, instead of doing a whole hour body work, we did half on the relevant areas needing most help. During the course of her treatments with me, she mentioned that she had just had the MOAT cleaned, I repeated it and said ‘oh I thought you just said moat cleaned’. It transpired she lived in a stately home which is open to the public and the moat needed cleaning. I was glad I didn’t give away my time for free and learned a valuable lesson. All is relative when it comes to what someone is prepared to pay and how they value you/it

    1. Julia Hook says:

      Hi, Ruth. Hahaha. I love it!! I’ve never had a client with a moat (at least not one that I knew about)! But I’ve sure had similar things happen. And you’re right… everything is relative. Thanks for reading along and for sharing. I’m so glad you’re here.

  15. Donna Dozier says:

    JuJu, perfect timing for me also. I’m a seasoned Hairdresser in a lower income community. I WAS about to send out refferal cards. 20 % off new clients and 10.00 off the one that referred . I am already charging less than if I was in a city. Thank you . I think even with the printing of the cards ( now fire starters) I will be way ahead! I appreciate your wisdom. Cheers Donna Dozier

    1. Julia Hook says:

      Donna: I LOVE that you are re-thinking the discount. Give away some extra goodie if you want to attract people (a free scalp treatment or neck massage or deep conditioner) but don’t discount yourself. You are so valuable — your time, your talent, your expertise, your patience. Hold your rate. And your clients will respect you for it. Here’s to you!! -Julia

  16. Michele Legette says:

    Thanks for this valuable information, because there has been nu.erous times where i have under valued my service and in the midst i was very knowledgeable at my profession but i did it because i was new in the business and i wanted to build clientele, b ut not anymore. Thanks once again.

    1. Julia Hook says:

      Hey, Michele. Good for you. No more discounts. Rock that rate. Your clients will respect you for it. And so will your checkbook. I’m 1000% behind you!!

  17. Lilia says:

    Thanks so much for the article. I have people left and right asking for. Or people, who close to me or know me very well, think that I have to give them for free. And if I say no, because 1. You have to invest into yourself in order to move forward and feel, that you are doing something good to yourself. 2. This is my income and I have to pay for ever, they turning away and getting mad at me. I learned it hard way and still learning. I’m so glad I’m getting better and confident to say a rate.

    1. Julia Hook says:

      Hi, Lilia. Good for you for holding your rate. It’s the only way you’ll ever really move forward. Knowing what you’re worth is critical in making your business run. Keep at it. I’m cheering for you! All the way!!

  18. Shari says:

    Don’t you think that right after I read your email on this subject, I got a call from a potential client. The negotiations on her part were starting and thanks to you, giving me the confidence, I stuck to my price (which is still too low but that’s for another discussion lol) and didn’t give up on my integrity:)

    Timing is everything, and your email today was perfect!!

    ty ty ty:)
    xox

    1. Julia Hook says:

      Way to go, Shari!! I’m glad you didn’t negotiate. In my online brand-building program, holding premium pricing is the #1 thing I teach folks. It’s the first order of business. Charge what you’re worth. It’s the long-term route to profit. There is no other way… Glad I could help. And that you’re turning a new leaf!

  19. Sandra says:

    Thanks for this very timely article. I especially liked that you provided a statement that I can use to tactfully explain to my clients why I can’t provide a discounted rate. I wrote that down and will definitely use it! Thanks again.

    1. Julia Hook says:

      Hi, Sandra. I’m glad it helped you. Often people ask me, “What should I say?” I’ve thought about doing a podcast just about conversations. Sometimes the words are just hard… Have an amazing weekend.

  20. EJ says:

    Julia,

    My family’s business is a custom cabinetry and furniture business. I come from a brand management world and an interior design background. The marriage of the two would be perfect to help my family’s business… or so I thought.

    The discount offers we give are not on time but they are on product which takes quite some time to create. We are a rare breed these days in a world that outsources much of our manufacturing to foreign lands and imports. Our product is gorgeous and long-lasting though so people keep coming back.

    I own a business I am growing in the entertainment world, crowdMGMT, so this slow approach at growth for my family’s business, United Cabinets & Furniture- is daunting to me. I often struggle with what to charge for my business so I understand my family’s hesitations and desire to offer great “deals.” However you are 400% right – we have cashflow issues because of it.

    I am trying to figure out how the heck to get them to understand the importance of improving on systems and staying true to pricing that creates profit for us. I would LOVE your insight. I’ve been reading your blog a short time now but I feel that you hit on ALL the things I want to talk to you about. It’s like the next best thing to sitting and having coffee with you – thank you for sharing your wisdom.

    All the best,

    EJ

    1. Julia Hook says:

      Hi, EJ. So… this is the classic dilemma in discounting. We feel that we need to give “great deals” to lure people in. And we lose money. And one thing is for certain: if we lose money on every deal, we can’t make it up in volume. So a premium pricing strategy that’s based on the BRAND holding value is essential. I talk about this a ton in my webinars. You can sign up at unforgettableu.com/brandingbasics

      It’s frightening to stop the practice of discounting. We fear that our customers will reject us. Or that they’ll choose a competitor who is cheaper. And differentiation is absolutely critical. If someone can buy a competitor’s product that is comparable in quality, at a consistently cheaper price, then there’s a business model problem. Or, we have to find issues other than quality upon which to differentiate the business. You build a custom product, which you say is gorgeous and long-lasting. You’ll have to dig more deeply — to some very specific differentiators — to lift your business out of the market. And then you’ll need to connect with your customers in a real and enduring way.

      This is a topic that I discuss over and over with small business owners. Because it’s the key to long-term profit. I hope to see you in one of my webinars! And possibly in my online program: UnforgettableU.com It sounds like you’ve got an amazing brand…

  21. Julia,

    Your article is timing and its refreshing to know that I am not along with people and organizations wanting a discount. Last week I was contacted by a football team of a big University, to provide an etiquette training to 120 team members for 1 hour that Saturday. This opportunity would have been 1.30 hours of travel one way, a few days to plan and an 1 hour presentation. I was excited about the opportunity and I gave my price.
    The excitement was short lived after his offer was $300 for a 1 hour presentation. I could not believe that he only valued the service as $300, on a short notice.

    Reading your article helped me to feel better and has given me some tips on how to handle future situations as such.

    1. Julia Hook says:

      Hey, Carolyn. Thanks so much for sharing. And I’m sorry I didn’t see your comment straight-away. So… couple of things, here. First, the idea that he only valued the service at $300? Don’t take that personally. His issue is ignorance. He’s naive. And what’s so ironic is that what he really needs is etiquette training! 🙂 Stand your ground. And prepare yourself for the next time by showing someone who’s ignorant or naive what the transformation will bring. How much does the university face in fines if their players act out? How much does the university lose in booster or donor money when the players behave like animals? How much does the university risk when their players don’t understand how to treat women or behave in a social circumstance. Value is never about how much something COSTS. It’s always about what that thing will deliver. I can’t tell you how much I respect you for teaching etiquette to young men. This is something our society very sorely needs right now. I am 1000% behind you.

  22. Susan says:

    I enjoyed this post a lot! What is your advice for photographers, where the “prevailing” cost is often way, way below profitability, but prospective clients have been educated by Craigslist pricing to expect rock bottom?

    1. Julia Hook says:

      Don’t get your customers from Criagslist… and don’t serve customers who buy from Craigslist. They are not people who appreciate the value of what YOU do. They are not buying what YOU are selling. They’re buying what OTHER KINDS of photographers are selling. Bloomingdales does not concern itself with the folks who use coupons at Walmart, because those folks are not Bloomingdales customers. When you tell yourself that Craigslist pricing undercuts your product, it’s just a story. And it’s a story that holds you back. Understand how you are different from those other photographers. And be able to explain to your customers how you are different. The secret to premium pricing always lies in differentiation.

  23. KH says:

    Thank you! I’m a new fan. Words I needed to read out loud to myself and my solo business.

    1. Julia Hook says:

      Awesome, Karen. Say them out loud every day… until you really hear them.

  24. Leslie Rains says:

    You don’t know how much I appreciate your articles and advice on things…I’ve searched and searched for marketing stragies and now I’ve stopped looking since I found you. You are awesome. Your tips are awesome and I wish I could sit down with you and go over my entire handmade items I make and sell because that would skyrocket my business to the top I’m sure….When you sale items and not a service, I price my items by the amount of time it takes me to make these unique items for people who have everything….Which is my brand that I learned from you….Thank you for everything you write and do to help us get our businesses started and growing…..I love your advice and will follow you forever!!!

    1. Julia Hook says:

      Hey, Leslie! Thank you so much. Means the world to me. I want to talk to you, though, about “time and material” as a basis for pricing. If your unique gift items are made from your artistry… you need to charge more than time and material. That’s how a plumber charges for his time. You get to add in extra — for your talent. Be careful never to trade your hours for money where talent is concerned, or you’ll give yourself away too cheaply. And when you’re ready to sit down with me, sign up for my online program at unforgettableu.com, and we’ll have a quickstart session together — or you can buy a coaching package to go along with it — and we’ll skyrocket that business right to the top. I love that you’re reading along. And that you’re taking the advice and making money with it. Go, Leslie. I’ll have my eye on you!

  25. Oh, how I look forward to Thursdays seminar now! I AM new with my business and I HAVE been sending out discount coupons and trying to get all the business I could – just to be seen and to claim my spot on the market.. But what I bring IS unique and it SHOULD cost as much as the next similar product. I think the biggest problem comes with saying I AM good enough and my product IS just as good as the next so of course I should be able to charge the same. Thank you! The coupons stop right now and then it’ll just have to take a little bit longer to get a hold of the customers that actually fit my product. Thank you!

  26. Because you know what? it might not take me a whole lot of time to do a tshirt (I make tshirts for kids with cool and fun prints).. but the hours that went into making each and every single print, come up with the idea, make the design and so on and so on.. People don’t really take that into consideration or value your time spent prepping, thinking, planning, designing and so on. I’m all pumped up right now lol The thing that hit me the most is – maybe not everybody is supposed to be my customers – it is not the Red Cross and it’s not my fault if people can’t afford it.
    Again – thank you!

    1. Julia Hook says:

      I love your conviction, Birgitte. And your new found love for your own product and its value. Way to go. EVery one of those tshirts comes from your heart and soul. And it’s perfectly OK to charge full price for them.

  27. Indigo says:

    Hi JuJu!

    Over 1 month ago, I made 2 reservations to teach classes as a newly opened co-working space that rents upscale office space for $700/month. During my discussion with the facilities manager, he discovered that I am competent in 2 areas for which his business needed help. He asked me to do work that he needed done ASAP.

    I proceeded to do the work. I completed one project and was several hours into the next, when the company contact person asked me to about my hourly rate ($65/hour). That was on a Friday.

    On Monday, the facilities manager called me to discuss the bill. He said he could not afford my rate because his company is a non-profit organization.

    Even though I didn’t feel like their non-profit status was a good reason for them not to pay me, I did feel like i was culpable for not talking about payment up front. That was a mistake on both our parts. I misjudged their ability to pay.

    They had a service that I wanted and I didn’t want the present dilemma to tarnish our relationship, so I agreed to a discounting a portion of my fees (25%), bartering for a portion (25%) and being paid for the remainder (50%).

    I have sent one bill and 2 reminders. I frequent their offices about once per week. Each time I’ve encountered the facilities manager, he has a different version of an excuse and promise to pay if I would send him another invoice.

    They seemed like nice people, but now I’m getting bad vibes.

    I wanted to help and impress them. Now I’m stuck.

    Your article helped me to resolve to never handle my business like that again.

    Thanks!

    1. Julia Hook says:

      Hi, Indigo. I can see how this happened. I’ve been in situations before where I didn’t state my rate up front. And I’d be willing to be that you had some doubt about your rate in your mind… so you let that slide. That’s very human. We all do it. But don’t feel the need to give yourself away for free simply because you’re serving a non-profit. If they need your services, you’re still helping the world by showing up and providing what you know best. Even if it’s for payment. And it sounds like you’re correct to have a “bad vibe.” Stay with your gut. And take care of yourself first. If you don’t, your business won’t be around long enough to make the world a better place.

  28. Fay Robertson says:

    You know, I set my hourly rate fairly low, mainly because my practise is in a fairly poor area. I’ve noticed recently that people are prepared to travel for my services, and the people who come from a distance tend to be the ones who will actually work on the advice I give them.

    I think my prices could easily be hiked, and the philanthropist in me still satisfied as I’ll be able to direct cash to causes I choose in the area and as an added bonus, be working with YES people instead of BUT people.

    1. Julia Hook says:

      I like the way you’re thinking about this, Fay. Don’t give yourself away — instead put the money to good use. And in doing that, you’ll value yourself a whole lot more. Everything about that is just great.

  29. Cynthia says:

    This is excellent advice. I struggle with this for a few reasons; 1. I feel I haven’t tapped into the right demographic that can afford my rates. 2. I do not accept insurance (I am a psychotherapist/life coach). 3. I need clients/income. I thought maybe having a client and getting less beats not having a client at all and earning zero. What you said makes sense. I need to perhaps offer shorter sessions without discounting my hourly rate?

    1. Julia Hook says:

      Hi, Cynthia. This is an excellent comment — and I’m glad you brought it up here. I hear this same challenge from so many entrepreneurs: “Isn’t it better to have some income than none?” And I think that’s a trap that we fall into. One of the first things we learn in business school is that if you lose money on every deal, you can never make it up in volume. And what happens in a situation like the one you’re describing is that we chase cash flow, and never make any real money. We give away our profit, and then struggle to make ends meet. And this is not entrepreneurship or personal freedom. This is a life of hand-to-mouth. All three of your reasons above really bear examination. My recommendation is that you sit and take a good look at all of them. And rather than asking “why,” ask “how” or “who” or “what.” How can you change these things — or get around them? Is there a “who” or a “what” that can get you to the other side? I love that you’re looking at this. And I think it will be a game-changer for you. Thank you for sharing.

  30. Jenny Goring says:

    Thank you, Juju. This was just what I needed today. I am talking to a potential client I really want to work with and my initial proposal was not what she had in mind financially at all (much to my surprise after meeting with her twice). We’re going to meet again this week, and now I have the language and strategy I need for the next steps. I appreciate you sharing your expertise!

    1. Julia Hook says:

      It’s my pleasure, Jenny. Sometimes all we need are the words to put us in a place of strength. Go get ’em!! No discounts! My best to you. -Juju

  31. Blair says:

    Thank you for your post! These tips are invaluable. I couldn’t quite put into words what I was feeling towards “these” clients until I read the word resentment. It hits the nail on the head. I was drawn to this article because I recently produced a great event flyer for a business for only $35 and I should have charged 4x that much. I sold myself so short I literally hated the client every time she asked for yet another tiny change. However, I now realize that only I can dictate my worth and earning $35 for a boatload of frustration isn’t worth it. Thank you!

    1. Julia Hook says:

      Hey, Blair. Yesss. The feeling of resentment is strong in these situations — and it brings us very, very low. Isn’t it funny how we sell ourselves short, and then blame others for taking advantage of a great deal? I’m glad you can see it. Seeing it is everything!!

  32. Nina says:

    Thank you for this post, Juju. This is great information and I will certainly use the talking points on my friends and family who ask for a discount! The thing is, there is an underserved portion of my community that I would LOVE to help. I am an estate planning attorney. How can I serve people who I know cannot afford the legal services I provide?

    1. Julia Hook says:

      Hi, Nina. That’s a great question. You can reserve a portion of your time for the underserved community. Legal clinics or a certain number of reduced price or pro-bono hours each week. You could take applications to determine financial need, or just open the doors and serve. And then everybody else? Full price. That allows you to separate the two products/offers. So you’re not negotiating all the time — and the amount you’ll give is determined up-front in a giving plan. It will eliminate resentment on your part, up-level your contribution to society, and make you feel warm inside. Hope that helps. -Juju

  33. Joanne Smith says:

    YESTERDAY, I read your blog on discounting and why not to do it. TODAY, I had that exact conversation with a potential client. I stuck to my guns! He is a smart business owner himself, and I believe he totally understood when I explained that my time is my product, I only have so much of it and it is valuable. He even conceded that while, in the past, his company has paid less for similar services, he hasn’t always gotten the finished product he was expecting. I believe we will come to an agreement, but even if we don’t, my heart and gut tell me I did the right thing. Thank you for the helpful advice!

    1. Julia Hook says:

      Way to go, Joanne!! I love this story. Good business people respect others who are good at business. And your refusal to sell yourself short shows what kind of acumen you have. Good for you. I’m so happy for you.

  34. Buka says:

    You totally rock Juju! Great timely advice as I move into solidifying my brand. Unfortunately I did agree to a discount 2 months ago. I wish I had found you before then 🙁 The good thing is I have one more month before we work on a new contract and I’m definitely going to charge them for what I’m worth. Or else… 🙂

  35. Dana says:

    This is a great sentiment, but I’m a solopreneur selling physical products – seems like the only way to get traction in the marketplace is to give away lots of product for a steep discount. Any thoughts on how this philosophy would apply here? My intention has always been to position my brand as a high-end line (because it truly is high quality), but I’m worried I’l already falling into the trap of pricing it too cheaply.

  36. Ben says:

    Hi

    I work for a small family fun business that works on a flat rate monthly fee and makes very little profit.Could I ask for opinions on this.Thank you very much for a superb article.

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