One of the most common questions professionals ask me is what to do when they’re asked to reduce their fees.
My response is always that there are many ways to avoid discounting. What’s best will always depend on your relationship with the client asking for a fee reduction and why they’ve asked for a reduction in the first place.
For instance, sometimes you may be happy to offer a one off price reduction if your work pipeline looks lean or if it leads to ongoing work at your normal rate. Other times it may be more appropriate to give a flat out ‘no’.
Before you have the conversation about reducing fees
I recommend the starting point should always be to consider the experience and culture of the client and their organisation. Is haggling simply part of their corporate DNA? Have they a bad experience with professional advice? With this understanding you can consider options for your response.
If you find that clients are asking for discounts often, spend more time putting together accurate estimates so you’re confident about talking through value and scope of work with the client. Pre-empt the conversation. Try to identify any specific areas that the client may have difficulty with beforehand and raise it.
Also, always respond to a price reduction request verbally - preferably face-to-face. Avoid email where it’s easy to misconstrue meaning, tone or context.
Now, once you have those basics sorted, here are my 19 ways to avoid being beaten down on price.
When you want to give an outright ‘no’
- Start by simply asking ‘why’? You’d be surprised how often people fall at the first hurdle.
- Explain that you have carefully prepared your fee estimate and that it accurately reflects the work required.
- Explain “what it takes” to do the work – provide evidence, analogy, or example.
- Offer to revisit the scope and walk the client through the detail of your quote. See what you can take off the table. Is there any work the client can do themselves?
- Explain you can't make a decision on pricing, instead it needs to be referred to the managing partner or your firm’s pricing committee.
- Let them know what you’re not charging for. But be careful about how you express this one because some clients may interpret it as being defensive.
- Discuss concrete reasons that justify your fee. Turn the conversation to the complexity or uniqueness of what you’re being asked to do, the turnaround time or even the risk giving advice exposes you to.
- Acknowledge their concern head on and provide reasons as to why you’re aligned to their objectives. “Yes, the fees may be more than you expected but …” Share examples of other clients in similar situations and the outcomes you achieved.
- Just say no. For example, “No - we are not allowed to discount because we believe it is unfair to our loyal clients who accept our payment terms.“
- If you are asked to match your fee to another firm ask for the basis of their engagement. For example, they may be providing a lower rate because of volume of work.
When you’re inclined to negotiate just this once
- Link discounts to the volume of work you do for a client or for quieter periods when you’re not at capacity.
- Link any discount to an agreement on a longer term relationship.
- Link discounts to undertaking a greater share of the client’s work.
- Link discounts to a longer turnaround time for deliverables.
- Link discounts to cashflow. For instance, if you receive payment today or in advance of doing work.
- Discount disbursements rather than the advice you give.
- Segment the risks involved and reduce the price by moving higher risk or work back to the client.
- Offer to do one stage or component of work free of charge with all other work at full fee. In other words, don’t introduce a new discounted rate, which the client may mistake as your standard rate.
- If you’re doing the work over a period of time, offer to apply a discount to the final invoice on the condition that all invoices are paid on time.
Prodonovich Advisory undertakes fee analyses, reviews tender submissions, conducts interviews with partners and clients, and facilitates workshops on ‘Pricing with Confidence’.
We also offer a ‘sounding board’ service for firms struggling with pricing, a service Sue-Ella Prodonovich developed after meeting with UK-based pricing expert Paul O’Bryne, a Fellow of the VeraSage Institute.