Starting out in any business is a fun and exciting time. People you don’t even know are suddenly willing to pay you money for the products or services you’re selling.. how wonderful! You’re networking at every possibility, trying to get everyone in the world aware of your company. You’re asked for favours, you’re asked to prove your chops, and of course you’re willing to go the mile beyond the extra mile to chase down every opportunity.
One of the biggest lessons we were taught in entrepreneur classes was this – don’t discount your services just because you’re a new business. Charge what you’re worth. Whether your mechanic is fresh out of school or has been at it for 40 years, it should cost the same to get your brakes changed at any service shop. Time and results will then dictate who is worth charging a premium for their services. If you’re new and agree to discount your services just to get new business, does that client respect and value your offerings as much as someone who has agreed to pay what you’re worth, or are they only looking to save a buck? Will they stay with your company once your rates go to where you’d planned they must be to stay in business?
Along those same lines, here’s a lesson I learned the hard way: Don’t discount your prices today for the promise of more work tomorrow. Other businesses may like you, they may enjoy doing work with you and they may speak highly of you all the time – but they’re in business to make money, just like you.
Here’s a quick breakdown of what happened. I was delivering some signs to a client, when a neighbouring business owner saw me, said he liked my work and asked if we could chat. I’d had several friendly talks with him before, so I was excited at the chance of working with him also. He explained his situation, what he needed absolutely right away, and the several, bigger ticket projects he would also need very soon. Money was tight so he couldn’t afford a lot for this first project, but he was moving into his usual busy season and things would be great soon, allowing these other projects to proceed. We negotiated a price, and I, distracted by the promise of things to come, allowed my price to be dropped down… a lot. But, if I got these other projects, it would all be worth it, right?
The simple first project turned into many emails back and forth, phone calls and running around. When it was finally approved and delivered, months later, he couldn’t pay me. I got paid a few days later, not a big deal – and he said we would talk in the coming week about those big projects. I didn’t hold my breath.
Two weeks later as I was on my way to see my other client, I stopped by to say hello and ask about those other ‘big projects’. “Oh, I’m getting a friend to do them for me”, I was told. “They won’t be as good as what you can do, but it’s really cheap. You understand, right?”
I bit my tongue. Sure, I understand. I understand you get what you pay for. I understand that I discounted my rates so cheaply that I probably lost money on that first project, thinking I was going to be getting more work to offset that loss. My fault, not his.
But I’m not paying my bills with understanding.
Looking back, the wise choice would have been to charge my standard rate on the first project and then include a discount on the other projects, if they happened. Or even to sign on for all of the projects at once, offering a discount to the multiple projects.
I understand there was no malice nor ill will on the part of the other business owner. He was doing the best he could for his company, and when someone offered to do something for super cheap, he took it. It was my fault for discounting my prices right away, hoping to be rewarded later. Stores don’t offer “Get the first one for 50% off if you promise to come back and buy a second one later!” – and neither should I.
It’s been a couple months now, and I still say hello and smile every time I see that other business owner. He still doesn’t have those other projects done. I asked about them, once, and he rolled his eyes, sighed and said things weren’t going very well and his friend was driving him nuts. I smiled again and wished him well on it as I left his shop. I still had that smile on my face as I entered my other client’s store where they were already smiling back at me, with a check in hand for me – and even better, a list of new projects they required from me.