Comments on: Give it away for free or charge full price, but don’t discount your fees http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/ News, opinion, and fresh thinking for web developers and designers. The official podcast of sitepoint.com. Tue, 02 Dec 2008 01:57:54 +0000 http://wordpress.org/?v=2.5 By: Czaries http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15750 Czaries Thu, 16 Mar 2006 16:24:09 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15750 Discounting for pre-payment is always okay in business, and is definately acceptable practice. It does not send the message that you are "desperate for upfront cash", as it is understood as a standard business practice. We all know that the value of $1 today is greater than the value of $1 in a year, so it won't hurt you as much as you think it will to give a discount. For simplicity, say the payments are $10, made once per month over a year (12 payments). You give a 10% discount for paying upfront, and the client does so. The PRESENT value of all these payments (totaling $120) discounted at 10% will be $113.75. This means your $120 in one year is only worth $113.75 in today's dollars. That's already only 94.78% of the value. So what discount are you *really* giving them? About 5.21%. Discounting for pre-payment is always okay in business, and is definately acceptable practice. It does not send the message that you are “desperate for upfront cash”, as it is understood as a standard business practice. We all know that the value of $1 today is greater than the value of $1 in a year, so it won’t hurt you as much as you think it will to give a discount.

For simplicity, say the payments are $10, made once per month over a year (12 payments). You give a 10% discount for paying upfront, and the client does so. The PRESENT value of all these payments (totaling $120) discounted at 10% will be $113.75. This means your $120 in one year is only worth $113.75 in today’s dollars. That’s already only 94.78% of the value. So what discount are you *really* giving them? About 5.21%.

]]> By: Idesyns.com http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15437 Idesyns.com Fri, 10 Mar 2006 18:22:40 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15437 I have to say that I don't like to discount services at all. Discounting or comping services will hurt your profits in the long run. I have personally seen this happen with clients trying to further deal an even larger discount. That being said, I do freelance work for local bands and small businesses who aren't always able to pay what would be considered fair to most firms or established designers. The only way for me to "get my foot in the door" at this point is to undercut or wheel and deal. I see both sides of this argument, understanding that "dealing" cheapens the industry, but how is one man supposed to compete with entire teams of established artists and coders? Clients understand that they are not paying for a team of people. As a one man operation I have no choice but to offer discounts and freebies or starve. I have a disclosure clause in my contract that is supposed to help stop the passing on of price information but as it stands right now I end up dealing anyway. I'm sorry... I have to say that I don’t like to discount services at all. Discounting or comping services will hurt your profits in the long run. I have personally seen this happen with clients trying to further deal an even larger discount. That being said, I do freelance work for local bands and small businesses who aren’t always able to pay what would be considered fair to most firms or established designers. The only way for me to “get my foot in the door” at this point is to undercut or wheel and deal.

I see both sides of this argument, understanding that “dealing” cheapens the industry, but how is one man supposed to compete with entire teams of established artists and coders? Clients understand that they are not paying for a team of people. As a one man operation I have no choice but to offer discounts and freebies or starve. I have a disclosure clause in my contract that is supposed to help stop the passing on of price information but as it stands right now I end up dealing anyway.

I’m sorry…

]]> By: jackofalltrades http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15375 jackofalltrades Thu, 09 Mar 2006 18:34:49 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15375 I don't give anything away for free even for friends (though I might decided after the work is done not to charge them) WHY? Because when it is free they have nothing invested and then scope creep becomes scope run and I wind up spending many hrs doing this or that tweak.. so I always set a price .. As for discounts, I have discounted on a "new customer" basis and that has worked, but what has worked better is I charge my normal rate which is not cheap and then specifically outline what they will get for that amount. then I always do more than expected (though not more than I expected to do for the cost) (finish before set deadlines.. fix items that were not originally part of the contract) then they think I am the one that will go to the mat for them (which is true to a certain extent - I won't be abused, but I will do more than the contract requires) and since the contract limits number of changes etc they are thankful for my extra devotion to their product and they use me again.. I don’t give anything away for free even for friends (though I might decided after the work is done not to charge them) WHY? Because when it is free they have nothing invested and then scope creep becomes scope run and I wind up spending many hrs doing this or that tweak.. so I always set a price ..

As for discounts, I have discounted on a “new customer” basis and that has worked, but what has worked better is I charge my normal rate which is not cheap and then specifically outline what they will get for that amount. then I always do more than expected (though not more than I expected to do for the cost) (finish before set deadlines.. fix items that were not originally part of the contract) then they think I am the one that will go to the mat for them (which is true to a certain extent - I won’t be abused, but I will do more than the contract requires) and since the contract limits number of changes etc they are thankful for my extra devotion to their product and they use me again..

]]> By: petertdavis http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15267 petertdavis Tue, 07 Mar 2006 14:46:39 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15267 I think 5% penalty per week would be illegal. I think 5% penalty per week would be illegal.

]]> By: ProVocalist http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15260 ProVocalist Tue, 07 Mar 2006 08:29:59 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15260 I read elsewhere on sitepoint that you can use the following to your advantage on invoices (and you'll notice it swings both ways) pay within 7 days: 5% discount (price =$xxxxx) pay within 8 - 30 days: 0% discount (price =$xxxxx) pay after 30 days: 5% penalty per week (price =$xxxxx) This kind of discounting gets tham to pay up quickly, saving you hassle, and also states clearly that you mean business when it's time to pay up! I read elsewhere on sitepoint that you can use the following to your advantage on invoices (and you’ll notice it swings both ways)

pay within 7 days: 5% discount (price =$xxxxx)
pay within 8 - 30 days: 0% discount (price =$xxxxx)
pay after 30 days: 5% penalty per week (price =$xxxxx)

This kind of discounting gets tham to pay up quickly, saving you hassle, and also states clearly that you mean business when it’s time to pay up!

]]> By: petertdavis http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15239 petertdavis Tue, 07 Mar 2006 00:42:00 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15239 Standard discount for a 12 year paid-upfront contract I'm doing 10% discounting. Standard discount for a 12 year paid-upfront contract I’m doing 10% discounting.

]]> By: aneitlich http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15225 aneitlich Mon, 06 Mar 2006 22:59:38 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15225 petertdavis, In your case, the question is a financial/risk one. How much of a discount do you take? The math turns out to be interesting. Say you give a client $12 off on a $10 per month contract. You are basically financing them to the tune of 12/120, or 10% (actually it is more like half that, but let's assume a one-time payment at the end of the year vs. a one-time payment up front). That's okay because in exchange you are reducing your bad debt plus signing some contracts you might not have otherwise signed. But suppose the discount turns out to be 20% or 30%, in a world of 4% interest and 7% overall stock market returns (maybe). Then you are not only giving your clients too good a deal, but also showing them that you are desperate for money up front -- which might make more savvy clients question your solvence. But your "discount" is actually a quid pro quo: You are giving up something to get something in return. That is fine in my book. The issue comes from people who give up their price in return for no concession at all. Best, Andrew petertdavis,

In your case, the question is a financial/risk one. How much of a discount do you take? The math turns out to be interesting. Say you give a client $12 off on a $10 per month contract. You are basically financing them to the tune of 12/120, or 10% (actually it is more like half that, but let’s assume a one-time payment at the end of the year vs. a one-time payment up front).

That’s okay because in exchange you are reducing your bad debt plus signing some contracts you might not have otherwise signed.

But suppose the discount turns out to be 20% or 30%, in a world of 4% interest and 7% overall stock market returns (maybe). Then you are not only giving your clients too good a deal, but also showing them that you are desperate for money up front — which might make more savvy clients question your solvence.

But your “discount” is actually a quid pro quo: You are giving up something to get something in return. That is fine in my book. The issue comes from people who give up their price in return for no concession at all.

Best,

Andrew

]]> By: karim http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15214 karim Mon, 06 Mar 2006 22:26:55 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15214 Amen! I actually set my prices regarding the two following rules: 1- The experience i got and get everyday, and that time learning and searching no one will pay it for me. 2- The time a project may take. The fees aren't negociatable! :) Amen!

I actually set my prices regarding the two following rules:

1- The experience i got and get everyday, and that time
learning and searching no one will pay it for me.

2- The time a project may take.

The fees aren’t negociatable! :)

]]> By: shadowbox http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15071 shadowbox Sun, 05 Mar 2006 08:24:55 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15071 Discounting for a valid reason is okay in my eyes - like peterdavis' situation where he and the client both benefit from the discount situation - i.e. peter gets lots of cash upfront and saves billing hassle, while the client saves a little money over the course of the 12 months. The problem I see comes from clients who expect a discount for no other reason than 'they ask for it'. Nice try, but no dice - if you can't afford it, let's re-assess the spec - or you are of course welcome to go elsewhere. There has to be a clear and mutually benficial reason for giving a discount - just dropping your prices for no real reason opens up a whole can of worms. Discounting for a valid reason is okay in my eyes - like peterdavis’ situation where he and the client both benefit from the discount situation - i.e. peter gets lots of cash upfront and saves billing hassle, while the client saves a little money over the course of the 12 months.

The problem I see comes from clients who expect a discount for no other reason than ‘they ask for it’. Nice try, but no dice - if you can’t afford it, let’s re-assess the spec - or you are of course welcome to go elsewhere. There has to be a clear and mutually benficial reason for giving a discount - just dropping your prices for no real reason opens up a whole can of worms.

]]> By: petertdavis http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15045 petertdavis Sat, 04 Mar 2006 21:09:52 +0000 http://www.sitepoint.com/blogs/2006/03/02/give-it-away-for-free-or-charge-full-price-but-dont-discount-your-fees/#comment-15045 Hi Andrew, One of my main "products" is to sell advertising spots on my websites. I often offer a discount if I can get the advertiser to pay upfront for a full year's contract. I generally charge monthly. I offer the discount because it's a great benefit for me to have all the cash upfront, I have the use of the cash in advance, and I have that client locked into a 12 month contract and don't have to chase payment every month. Are my discounts bad for me too? Hi Andrew,
One of my main “products” is to sell advertising spots on my websites. I often offer a discount if I can get the advertiser to pay upfront for a full year’s contract. I generally charge monthly. I offer the discount because it’s a great benefit for me to have all the cash upfront, I have the use of the cash in advance, and I have that client locked into a 12 month contract and don’t have to chase payment every month. Are my discounts bad for me too?

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