Discounting and how to avoid being hurt when others want you to cut your costs — the steps we need to take to firstly clarify what's going on and then what we can do to fix things up.
STEP ONE: PUSH FOR AN EXPLANATIONThe starting point in this whole topic is to find out why you're being asked to do something for less. Is it because budgets are being cut? Is it because your client is one of those bullies who feels compelled to push for a discount? Or is it because your rate is high when compared to others?
Whatever the reason, you need to know and it's ok to ask.
STEP TWO: CONSIDER YOUR RESPONSE...To the budget cutIf this is the explanation, your response should look at what services you'll have to cut to achieve the new budget. A good response may be: 'I'm sorry your budget has been cut, let's look at my cost centres and see what areas can be simplified or removed.' Don't drop your hourly rate. Don't do more or the same for less.
...To the client who likes bullying suppliersThis signals a non—ideal client, but maybe one that is repairable. Often a client bullies when he doesn't fully grasp what you do. A good response can be: 'The fact you're asking me to discount suggests you don't see the full value of my work. Kindly tell me what areas need further clarification and we can discuss this.'
Talking in this way opens up extra dialogue and allows you to make suggestions, guarantees or offers that dispel concern while maintaining your rates.
...When your rate is high compared to othersThis is the tricky one. Again this points to a client who is not ideal, but probably because you've set your sights too low. It could be time to review your positioning and your service offering. For now though let's assume that to stay with the work you have no option than to consider a reduction in your fees.
Here's how I reckon you should handle it...
STEP THREE: IF YOU HAVE TO DISCOUNT There may be times when to stay in the frame or worse, stay afloat, you have to discount. In these circumstances:
- Always show the discount on your invoices.
Start with the full rate and clearly itemise the 'special discount as agreed'. This way you will always remind your client (and yourself) that it's an abnormal arrangement.
- Agree a cut—off time and scope for the reduced rate.
Projects have a habit of running over time and expanding sideways. Cover yourself and leave the door open for further negotiation if the goalposts start to move.
- Agree a review period.
If the reduced rate is for a client where a long term relationship may eventuate, make sure you put a time limit on the discount. Along the way confirm through discussion the value for money your client is receiving and keep this information up your sleeve as ammunition for the review.
- Make sure you establish clear boundaries around what you do and what you do not do.
If you are to discount it's not ok that you work in a way that was not agreed. Make sure your client gives you what you need when it's needed. If anything starts to go awry speak up quickly and get it fixed.