Why you should never discount your rate as a freelancer?

Every business does it and everyone does it for a different reason. Freelancing is also a business and you are the boss of your freelancing business, should you do what everyone else is doing?

In addition, sometimes there are clients that you really want to win and they ask for a discount. It’s very easy to agree just to close that deal.

Once you teach them, it is impossible to unteach them

Let’s look what actually happens when you decrease your price for your clients.

It is not just that their costs are going down or that they are happier with you. Nope.

It is also what the clients learn. They figure it out that, if they put the right pressure on you, they can always get a better deal for them. You can’t really blame them. Who doesn’t want a better deal?

As a result, they ask to get more and more for their money and it becomes easier and easier for you to accept their demands and harder to refuse them.Every chance they have they will try to get a better deal and will ask for a discount again and again.

When you refuse them a discount, even when they are very persistent, you will teach them that your work and skills are valuable, and that this value is not for everyone but only for those who can pay for it.

Increasing a price is incredibly hard

Once you give a rate to your clients, it’s very hard to increase it. Most of the time they will feel cheated because they will be asked to pay more for the same services they’ve been using.

It’s hard to explain and convince your clients why your price is changing. You cannot just say that they are paying you too low, or that you simply want to earn more money.

Lot’s of the work in freelancing is due to word of mouth marketing. You have a client and your client has friends who also need your skills.

Of course your new client is well informed from your past client. He might even know your rate. It will be very difficult to convince him to pay you more than his friend pays you.

It’s like a plague. When it starts it is hard to stop because it spreads so quickly. Try to avoid it by not giving discounts and you will be at better positions.

You feel cheated

You start working on the project and at some point you realized how much money you are loosing due to this discount. Especially as you work more and more with the same client.

This will inevitably affect your work and your performance. As a result both you and your client will suffer.

You will be loosing money and he will receive an average result instead of an outstanding one.

Perceived value

Let me tell you a story. Years ago a big sports company had some new shoes. They put them on the shelves of their stores. Each pair was $100. They made very little sales, unable to recover their expenses they did not know what to do.

Then one smart manager decided to take all the shoes back into the warehouse.

Several months later the company put the shoes again on the store shelves. They were on the same shelves in the same stores at the exact same places and they were the exact same shoes. However this time the price was $200 for a pair. Nope, it’s not a typo. The price was doubled.

In less than a week, all the shoes in all the stores were sold out. This were the exact same shoes as the first time. Do you know how many customers complaint for the price increase. Zero.

What does this example teaches you? Price is not just some numbers who happen to tell how much your bank account will increase. Price is an indicator. It is part of your marketing. It is a way to tell your customers how much your skills and work are worth.

Under price yourself and give the customer a discount and you are telling them that your work is not that valuable. Is this what you really want?

And if this was not enough this will affect also their behavior. If they don’t think you are valuable, they literally won’t value your time and efforts and will waste them without remorse.

Give your customer the right price without any discounts and not only you will be better paid but you will also better work together.

Horrible clients

Asking for a discount doesn’t make a client horrible, but giving it to them drives down you rates.

As your rate goes down not only you will earn less, but you will also start attracting the wrong clients.

From my experience and from the experience of every other freelancer and consultant you should know that the most demanding and worst clients are those who pay you the least.

Not only they give you very little money, but they also demand much more for them and they treat you badly.

Keep your rates and it will help you avoid difficult clients.

If it is so bad, why many business do it?

Good and fair question. There are two answers.

First, many business do it simply because they are run badly and because it is so easy to do a price discount. You just change one number. People don’t think too much of the consequences, they just hope that this discount will help them earn more work.

As a result not only they leave money on the table, but they also teach their clients that asking for a discount is normal and when this clients comes to you they put pressure on you because they are already used to receiving a discount.

Commodity, yes, but you are not a commodity

The other and maybe the only legitimate place for discounts is when they happen on commodity goods, like for example steel.

Your steel is the same as the steel of your competitor, so often the main way to increase your sales and revenue is by giving a discount and in return getting a larger order which compensate.

However, even in such cases many companies have learned ways to protect themselves. Giving discounts all the time is just race to the bottom and at the end nobody wins.

The companies don’t win because they are loosing money. The customer doesn’t win either because although the price is low the service he receives is also low.

I know of a manufacturing company which instead of decreasing prices, it built its warehouses and factories close to their clients factories. So they could deliver faster and on demand their product. Their clients loved it. Even though the price was higher they preferred to work with this vendor because of the convenience.

You don’t want yourself or your service to be seen as a commodity. And if the commodity companies find ways the avoid giving discounts, you can find a way too.

Reduce scope not your price

However, sometimes there is the situation of a great project, with great client who simply cannot afford you. It is super hard to resist to give a discount in those special situations.

Yet, there is a solution. Instead of reducing your rate, reduce the scope of the project. You will get the same amount of money, but you will do less work.

In every project I’ve seen there are always things which it can go without. Discard them. Not only the client will stay in his budget but he will be happy that his project is done and you will be happy that you kept your price.

Discounting prices is one problem freelancers face often, but another large one is difficult clients. Especially those who put pressure on you to decrease your rates. Learn how to deal with them with our 7 part free email course. You will learn how to handle a variety of situations which every freelancer faces sooner or later. Just leave your email in the box below and you will receive your first part today today.

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We are Stefan Fidanov & Vasil Lyutskanov. We share actionable advice about earning more and working with better clients as a freelancer and consultant.

It is everything that we have learned from years of experience working with customers from all over the world on projects of all sizes.

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