Coming Down in Price Without Hurting Your Business

When the U.S. economy was at its best, your business was booming and you could pretty much write your own ticket. However, as everyone is well aware, the economy tanked and companies and individuals are no longer willing or able (in many cases) to pay the same rates for certain services.

Reducing your rates to survive the economy

At a time when businesses are not going to pay what you are charging for your products and/or services, it makes no sense to stick to your old prices in principle. If you insist on doing that, you may end up not getting any business at all. However, if you are able to reach a compromise that will still give your business what it needs but also meet the needs of your client at the same time, you will most likely be better off and your business can still be a success. Of course, you will need to proceed cautiously and not necessarily change your rates across the board. Some clients may still be willing and able to pay you your original rates. You should consider your rate change on a case-by-case basis.

Your business has slowed down since the recession began

If you have experienced a real slowdown for a while now, it is definitely a good idea to consider reducing your rates. Of course, that does not mean that you won’t be able to raise your rates to your full amount once things approve economically. In fact, that may be yours for the taking very soon. You need to also be careful about how quickly you go about reducing your rates. In other words, don’t be too quick to come down in price because you don’t want to create the perception that you are easy and that your products and/or services are not really worth as much as you initially wanted to charge.

The emotional side of things

When you are at the very beginning of a relationship with a new client, there may be an emotional factor that is introduced if you feel that you have no choice but to reduce your rates. You may start to resent the situation, the client, and the project. If that occurs, you may not have a chance at having a fruitful, productive, solid relationship on a permanent basis with that client. Of course, that is what you should have with all of your clients. Of course, if you decide, in the end, to actually reduce your rates, make sure that you don’t let your emotions get in the way. You don’t want an attitude to ruin your chances at a long, valuable, mutually beneficial relationship with any of your clients.

Proving your worth

In the beginning of your  relationship with your new client, the client may be testing you to some extent. He or she may do that by insisting on a reduced rate from you until he or she is satisfied that they hired the right person to do the job. If you feel that it is worth cultivating that particular client and you are not losing too much (reputation-wise and financially), it may be worth reducing your rates. On the other hand, if you have been in business for a long time and you are well established and your professional reputation precedes you, you may decide against it. If the latter applies, you should not need to prove yourself in the same way and if you choose not to work with that particular client, you will undoubtedly find other clients who will be willing to pay you what you are worth.

Beware of false promises

The truth is that everyone want a bargain (at least as far as the amount of money that they have to spend). Understanding that concept means that you also understand where that other person is coming from. You should expect that he or she will try to get you to reduce your rates. One thing that you should be cautious about is if the client (or prospective client) promises that if you reduce your rate, they will give you additional work. On many occasions, that additional work never becomes a reality. You should base your decisions on one particular project and you shouldn’t pin any hopes to what is not a reality yet. Otherwise, it is like signing on ice.

If you start low, it will be almost impossible to get to where you need to be

There is no doubt that you have the full intention of getting your rates back to where they belong even if you feel that you were forced to reduce those rates (for your own reasons). The issue with getting your rates back to where they belong is that it may be difficult (or even impossible at times) to do so. Not only will your client get used to paying the reduced rate but he or she may tell other people about your rates as well. That could really impact your business.  On the other hand, there are times when reducing your rates is totally justifiable and it makes good business sense. The following are some of those situations:

• You turn out to be the hero: If your prospective clients came to you by way of a recommendation from someone whom you both know, it may be worth preserving the relationship by negotiating until you arrive at a rate that you both are comfortable with. If your prospective client is in a bad situation, a gesture of good faith on your part may be called for in the situation and it will not be something that the other person forgets. It may be invaluable for you to leave such a lasting impression on the other person. Of course, a strong business relationship is never just about the money.

• The karmic influence: In life (and in business), one hand really does wash the other. In the interest of continuing to strengthen the relationship that you share with the other person, it may be worth bending a little more toward that person. You will probably get it returned to you many times over. It is a matter of building trust, credibility, and establishing a position where the other person will always choose you first to fulfill those particular needs.

Conclusion

There are very few situations that are black and white. There are always gray areas that influence and drive whatever decisions you need to make. The same thing applies to business. There are times when reducing your rates is the appropriate and sensible decision to make and there are times when it is not the right thing to do. Of course, the other side of the coin says that if you are willing to compromise to that extent, you need to also make sure that you are attracting the right type of client for your business. Only  you can decide on behalf of your business and hope that you have made the right decision for everyone concerned. Remember, you need to come up with a price that you can not only live with but one that also makes you feel valued for the professional contributions that you are making. Value and respect are definitely just as important as price.