Don’t Ever Negotiate Price Again
Ever send your client a bill for work you already completed and now they’re questioning the charge? Typically, those clients who challenge your fees are wondering why the work took so many hours. In their mind, the project seemed uncomplicated. Price negotiation allows clients to question your final bill.
Most entrepreneurs I’ve met don’t enjoy these conversations. Negotiating your fees takes time. Furthermore, reducing your bill means you did some work for free. In the end, either you or the customer leave the conversation frustrated.
Once you complete the project it’s value drops. It’s similar to a new car. As soon as you become the new owner and drive that car drives off the lot, its value goes down. The used car value will never equal the new car value.
Your mindset needs to understand this before anything else can be done. That’s because we tend to equate our value with time. That belief, however, is faulty. Your clients aren’t buying your time. They’re investing in a solution.
Like so many accounting professionals, Gary needed to set up his new clients on Quickbooks before any work could be done. Until now, he did this without charging them. We started talking about charging his clients a set up fee. Gary said, “it doesn’t really take me that long. And I need to do this before any work can be done. I’m not sure I can charge for that.”
Are you giving too much away?
I explained to Gary that when you know what you’re doing it’s easy. I responded, “If it was so easy don’t you think your client would already have done that? How long do you think it would take one of your clients to get started on Quickbooks?”
As Gary considered that question, he started to realize his value. At that point, he was open to discussing a set up fee for work he’d been giving away for free. This perspective bought up other things he did without charging his clients, including hours spent with customer service to fix a problem.
What are some of the things you never charge for? It may be 15 minutes with one project and 10 minutes with another client project. Over time those minutes add up to a significant amount of potential income that you’ll never receive.
[bctt tweet=”What are some of the things you never charge for? Over time those minutes add up to a significant amount of potential income that you’ll never receive. #getpaidwhatyoureworth” username=”lorenfogelman”]
What specific thoughts justify writing off those things? What would you do differently if you no longer had those concerns any longer?
You’ve got to own your value first before you can expect clients to fully appreciate your service.
Here’s what I know about entrepreneurs who negotiate their price.
You’re working with price sensitive clients.
They’re highly demanding and some don’t appreciate you.
Those clients have greater loyalty to low prices than your business.
You’ve been thinking about letting them go, but don’t know how.
You need a lot of clients to make a profit.
Since you’re a hard worker, your work cuts into your personal time.
As I mentioned earlier, your value lowers once the work is done. You can solve this by agreeing on your fee before you begin the work. Value based pricing emphasizes your expertise instead of your time.
Avoid price negotiation. Consider these points for your value system.
Be selective. Avoid clients who expect a bargain from you. Emphasize how you can help them. If they still want to negotiate, then send them somewhere else. You don’t want these non-ideal clients. Once you’ve crossed over to negotiation, they will continue to ask for exceptions.
Release. Fire your current price sensitive clients. I know that’s scary. Gradually eliminate them one by one. As you free yourself of those non-ideal clients, you make room for clients who value your service.
Set your rate. Price your services according to value, not time. You’ve been undercharing for awhile now. Let’s fix that. Your ideal clients are less price sensitive than you realize. When you explain your value and how it solves their problem, you’ll be surprised at how clients can afford your service.
Offer options. One size doesn’t fit all. Clients can choose which package best serves their needs. As you explain the value of each package, clients will self-select which one fits their needs.
Alternative. Sometimes a potential client really wants to work with you, but truly can’t afford your current packages. Negotiating your rates is how you used to respond. Don’t do that. Instead discuss removing some things from your package and then adjusting the fees based on the specific service you eliminated.
Own your value. Stand by your rates. Changing someone’s initial perception of you is difficult. One of my clients shared that if my rates were below a certain price point, he wouldn’t have worked with me. Because I know my value, I work with great clients who appreciate how I serve them.
Pricing. You agree on your fee before the work gets started. On the other hand, billing occurs after the fact. Billing reflects time, not your expertise.
Reminder. When you’re used to accepting all clients, then it’s uncomfortable to let someone walk away. That’s why I’m repeating it. Let non-ideal clients who don’t recognize your value, walk away. Chasing never works.
Most entrepreneurs don’t understand how pricing works. So they offer a low rate when they first start out. This strategy, however, works against you. That’s because it’s difficult to later raise your fees to your true value when you’ve become known for low rates.
[bctt tweet=”Most entrepreneurs don’t understand how pricing works. So they offer a low rate when they first start out. #getpaidwhatyoureworth” username=”lorenfogelman”]
It’s similar to flying from Miami to Los Angeles. The experience, and expectations, for a coach passenger are different from those in the first class section. You arrive at the same time and on the same plane. However, lower fare coach seats don’t include the same amenities as first class.
Value-based pricing focuses on outcome. You’re hired because you possess the solution to your clients needs. You’re hired for your expertise. These clients don’t watch the clock.
When you first approach value pricing, you may not know how to explain your value.
Consider these five key value pricing strategies so you can stand firm with your rates.
Expertise. Competing on price minimizes your expertise. Define your specialty. This way you stop competing wtih generalists.
Urgency. People value speed. So when a client suddenly calls you with an urgent problem, you can charge premium pricing. Plumbers do it all the time. If you’re toilet overflows on the weekend, you’re paying a premium fee to get it fixed immediately. Basically, other work needs to get pushed aside so you can meet your client’s tight deadline.
Limitation. Limited supply for your product or service. If you are service oriented, your work hours are limited. With higher rates, you need less clients. This frees up time to do more of the things you enjoy.
Complexity. Some projects are more complex than others. Price your projects according to the level of complexity instead of time spent on the project. More complex projects require greater expertise and specialized knowledge. Emphasize the skills you bring to the table.
Benefits. Focus on the benefits your clients receive. Your personal touch and client care are extra benefits that exceed the standard. Don’t just consider the present work you do for your clients. Think of the lifelong benefits your service offers. Are those things reflected in your rates?.
Price negotiation chips away at your value. We want to build up your confidence and worth. Once again, consider your mindset. Are you ready to own your value?
Imagine no more price negotiation. You now fully own your value. As a result, you’re now ready to highlight your knowledge, expertise, and experience. Your pricing reflects those things.
A solid belief in your service combined with value based pricing, is a game changer.
Clients who never appreciated what you do for them will move on. Working with ideal clients actually renews your enthusiasm. They will happily pay you what you are worth.
I’ve worked with entrepreneurs just like you who want to get paid without shortchanging their business. Price negotiation is a choice. Refusing to negotiate on price can challenge your desire for clients. That’s especially true when you are starting out or are experiencing tough times in your business. Coaching can help you find the stuck places and get you in control of your destiny. Now is the time to schedule a private strategy session to help build a value-based pricing strategy.