You Want To Pay Me What? How Lowering Your Rates Can Hurt Your Business

shockedI am staunchly opposed to lowering your rates in order to get work from a client who is not willing to pay your going rate. It never ends well and can actually do a lot to damage your business and future potential.

Here is my reasoning on why you should avoid all rate negotiation that results in you taking on work for less than you would normally charge. Please keep in mind that my argument is based on the assumption that you have the skills and level of expertise to justify the rate you are charging.

Consistently undercharging and trying to beat the competition is a business-killer.

Once you compromise your rate in order to win work, the client will expect you to charge similarly for all future work. And if you do this with several clients, you will effectively lower your worth and hurt your potential for ever making what you should be making. Once you’re there, it can be a very difficult situation to get yourself out of. Plus, there is always someone who charges less, so you may as well just work for free.

You may not be inspired to give 100%, thus hurting yourself.

If you’re getting paid less by client A to do the same work that client B is paying your full rate for, whose work will you do first? And if your time is limited, which work will you spend more time on? While this may make some sense, the bottom line is that doing any work that doesn’t show your best work only hurts your reputation.

You may wind up with feelings of resentment and dissatisfaction.

If you’ve ever taken on work for a reduced rate and then, in turn, had to deal with an especially difficult client, you probably know exactly what I mean. When you’re getting paid less than you deserve, every normal blip in the client relationship will feel like a huge deal. You may find that you have to make more compromises, either for the client or on your own business policies. Over time, you will really start to dislike the work, the client and everything involved in the situation. It’s not a good way to live.

You’ll attract the wrong type of clients.

When you compromise your rates, it hurts your confidence in yourself and your business. Eventually, you’ll attract clients who only want to pay a reduced rate, don’t understand the value of what you do, and are looking for the cheapest bargain out there. Take time to set your rates, because if they’re true to what you’re bringing to the table, you will be more confident and willing to turn down work that doesn’t support that.

While I think you should never take on work for less than you would normally charge, you should keep in mind that this doesn’t mean you shouldn’t negotiate at all with your clients. Negotiation can have a number of favorable results if you’re negotiating terms you’re willing to be flexible on. For example, you may negotiate on how and when you will be paid, terms of the project, and timing and deliverables of the work. In some cases, you may even negotiate to get the client to pay you what you deserve to be paid.

But wait, there’s always an exception…

I also think it’s important to clarify one situation when being flexible with your rates might make sense.

If you are new to the industry and/or working on your own, there is a certain amount of trial and error that goes into setting your rates. You simply may not know what the market can bear, what your time and skill is worth, and how much you will need to charge to reach a level of financial security. Plus, if you’re just starting out, you may consider the value of building a strong portfolio and base of experience more powerful than the money you actually make on some work.

But if this doesn’t apply to you, you shouldn’t be compromising your rates in order to get more work. If you are doing that consistently, maybe it’s time to revisit what you charge and consider lowering your rates to a more acceptable level, or to find a new pool of (better) clients.

I’m sure there are many out there who disagree, and I’d love to hear why. Why are you flexible with your rates? What benefit does it give you?

If you’re with me in the no-compromising camp when it comes to rates, what impact has it had on your business?

Image credit: Ramzi Hashisho

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  • Vantrix

    Longtime back i came across a very good blog where it was mentioned that – “Better to charge more and have few clients(less work) rather than charging less and have more work”! I just decided to make that statement as my core business philosophy then and there itself- Needless to say i earn well by doing less,quality work and have more time for myself these days…

  • Vantrix

    Also one good fallout of my decision as mentioned above was that i over a period of time managed to have a set of very solid clients who valued my work philosophy and i in turn could do quality and satisfying work.

    Anita CM

    http://www.vantrix.net

  • Anonymous

    Excellent points. I’ve found my cheapest clients are always my most “expensive” in terms of costing me time, anguish, etc.

  • Rocky

    I can attest to the feelings of resentment towards a job/client that you reluctantly agreed to take on at a lower rate. One of my first jobs was for an aquaintance/friend that had fallen on tough times and needed a new image. He promised to use his extensive contact list and industry influence to get me more work than I could handle. He also bragged about how having his site on my portfolio would be a very valuable asset. I was young and trusting and could honestly use the cash (no matter how little) at the time so I went forward with the job. He is still tagging along and doesn’t understand why I put priority on my “paying” clients! And surprise, surprise; not one paying job from this guy in over a year! I love the work that I do, but when I open his job file to update his site it makes me sick. LIVE AND LEARN!!!

  • Anonymous

    IF you lower your rates, not only lower the price of your work. You lower your own price as a professional under your customer’s eyes. Besides that, if he/she made you lower your rates once, maybe he/she can get a bit more on you. It’s a dangerous door to be opened.

  • griz

    When I was starting out, an experienced and successful businessman told me that you never give deals to new customers, but you “do business” with your established customers who appreciate your work.

  • Raven-X

    As your skill rises in whatever you do, you’ll naturally raise your rates and rightfully so. While I feel it’s OK to negotiate terms with any client, never make the mistake of selling yourself short. After taking time to learn a valuable skill, you owe it to yourself not to do that (unless we’re talking about something rather extreme). I very much agree with the author, although I have a few projects I haven’t got my portfolio up yet. >_>;

  • http://www.eurotablets.eu/ Floost

    I added your blog to bookmarks. And i’ll read your articles more often!

  • Dejjan

    If you lower your rates, you’ll not lower only your work; you’ll implicitly also set new margins for fellows who are in some business.

    Consider the situation you are visiting a doctor for medical help: let’s say she will charge you 100 USD for whatever. There is no negotiation whether it is 100 USD or not. It is. If you don’t agree, you can visit the doctor around the corner; and he will also charge you 100 USD.

    And this is the point: do not lower your rate! Still, you have to understand the pain of your customer; if he is new in business or has financial problems, you can make a deal to pay for your work in rates; or deliver him only 50% of required functions for smaller amount of money. This way, you can show that you understand the situation and you are willing to help and cooperate to resolve his problem: you are his partner!

  • http://www.idea15webdesign.com idea15

    One instance where you may want to lower your rates is in creating a discount rate for nonprofits, charities, community groups, and the like. I take 25% off my hourly price for these groups. When you are writing proposals for projects, the fact that you have a discount rate can swing a decision in your favour, even if your discount rate turns out to be *more* than a competitor charges.

  • http://www.rwtconsultants.com israelisassi

    The less they pay the harder they are to please.. not always, but most of the time.

  • http://www.pishondesigns.com zainabSULE

    …I totally agree! No underpricing yourself. Bad for future deals!

  • http://www.andrew-brundle.com andrew-bkk

    While I don’t agree that it’s a good idea to sell yourself short, I think it’s often a good idea to add more value to what you charge by throwing in a few extras.

    In my experience, clients fall into three main categories: people who resent paying for anything and want everything done on the cheap; people who can afford 1-5 thousand USD; and people for whom money isn’t an issue.

    I personally detest clients who fall into the first category: they are invariably fussy, ignorant and ungrateful.

    The third category though is wonderful — but sadly it doesn’t come knocking every day.

  • Chris

    I’ve been through this with a couple clients who want to nickel and dime me to death! They end up costing me much more than they are worth and I resent it. As a professional designer it becomes most important to respect yourself.

  • Mobify

    Interesting points!

  • Just…B

    Great timely post. I am getting ready to write up a proposal for a new client and was torn about some of the fees to charge. Do not want to sell myself short as I have done that too many times. I just came out of a nightmare where the client nickel and dimed me down to the last penny. I had waived some fees as a courtesy and I lost way more money on the project just in time alone then what I actually got paid. Need to stick to my guns and respect my own self worth! Gratitude is a big deal in my world and I like connecting with clients who “get-it”.

  • behanj

    Great post as always, you really know how to get to the heart of a matter.

    Completely agree with israelisassi, when people get something cheap they don’t value it, it seems as though they are thinking “why is this so cheap, it must be inferior”.

    Also, when they can drive you down on rate/price is that not saying to them – “Hey, the initial price was my sucker price”

  • http://www.buyviagrageneric.com Buy

    yeh right.. great post, Thank You