Today’s question comes from Annalisa. She asks,
As a fairly new business owner (freelance graphic designer), I am constantly facing the battle between accepting work at a lower rate just to be able to pay the bills and not compromising my rate in order to build a business based on win-wins. While still building my client base, how do I know when to make this transition?
Annalisa, thanks for sending over this question! It’s actually one of the most common questions I get! Here’s my two-cents!
Agh…. Let’s solve the age old question.
In his book, The Pumpkin Plan, Mike Michalowicz says there are three types of clients. Good, Non-Existent, and Bad. He argues that bad clients are worse than non-existent clients and I tend to agree.
A bad client typically is one that :
These actions make you feel :
You will find yourself in a cycle of trying to “earn the price” and doing way more than you really should in order to “please” them. But trust me, you can hand them the moon and some people just cannot be pleased.
With that said, do I believe a bad client should be fired immediately? Actually no. It is sometimes these hard experiences that teach us most about running a successful business. I remember a conversation with my very first official client on communication. I received the dreaded, “Hey, I haven’t heard from you” email… you know the one! I was buried under a mound of work totally overworked and underpaid, very poorly delivering on my promises. This turned out to be one of the best lessons I’ve learned in my business about being proactive in communication with client, even when (especially when) telling them you’re running behind!.
We are often too quick to pin on the “bad client” label without first trying to understand if their concerns are valid. One of my company core values is “believe the best” and it’s precisely for this reason. There are for sure bad clients, and clients that need to be fired immediately … however, believing the best reminds me to take a deep breath and remind myself that there is an ACTUAL PERSON on the other end of that email. Maybe they have a valid right to be upset? Most of the time when I take my initial reaction out of the picture I can see where they are coming from and end up learning something really valuable!
YES and No.
Yes – we ALL need to build a track record, aka get some results. We have to put ourselves out there and figure out what we do and what we don’t do. I did this for two years before I officially launched Skidmore Consulting. On any given day of the week (or weekend) you could have found me helping someone sort through their business receipts pre-tax deadline, setting up quickbooks, or sweeping flowers off the floor. Basically anything and everything to pay the bills! And I would take whatever pay I could get. I was just throwing spaghetti on the wall and figuring it out! I believe anyone trying to launch a business should do this for six months before officially launching a business. We have to earn our right to get paid, and that takes time and experience.
After that trial period, then no! You should not discount your work just to get the client if you know you are charging and fair and reasonable amount for the goods and services you are offering. If you have an established business with paying clients, I do NOT believe in discounting just to get the client. (as long as you are priced correctly and truly not overpriced – that’s a conversation for another day) If a client wants to pay less for the goods or service then there must be a TRADE OFF. Pay less = GET LESS. If you are going to charge, then you need to charge a profitable price OR choose to do it under the “opportunity” category (meaning the client knows this should not be expected from the industry, it is free or discounted for a purpose). Discounting hurts the entire industry and will only set you up for an uphill battle for the rest of time.
Next time you are faced with booking the client at a discounted rate or losing the client, it doesn’t have to be one or the other! You can lower the price without sacrificing profit if you also decrease the time/cost included in the final deliverables!
When to make the transition?
Build your track record. Get some results. Have actual clients and portfolio work.
Learn how to price appropriately. I have so many resources on this but you can read this article to get you started : 20 creative entrepreneurs speak out “what is the hardest thing about pricing your work?
When 70% of the quotes you send out are booking, you know you’re ready to start increasing those prices. Until then keep working on perfecting your work, perfecting your sales process, and getting better.
And never forget : Be the tortoise not the hare. It takes time.