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Is there ever a time to charge less?  In fact there is…

(Remember Crazy Eddie? – funny, but the wrong approach for your company.)

1. If a company’s terms put payment way out there, often a discount for upfront payment is warranted.  While speaker’s fees generally are prepaid, consulting fees are not.  Using a fixed fee model allows you to invoice early, and many companies actually have a policy to accept early teams with a 10% discount.  An added benefit comes in that the project is much less likely to be downsized or canceled when fees are prepaid.

2. Subcontractor work or business where you are no the front line seller can also be discounted since there is little cost of sale, and possibly less or no commission being paid.

3. Certain referral sales may also be discounted since your prospecting time is low.

Note: Challenging economic times are not justification for discounts.  Instead, figure out what value is needed to move people, and find things to do that justify themselves based on value.

Finally, should you do something for free?  Yes.  I’d rather do work at full price, tossing in some pro bono work when called for, than discount across the board.  As I have mentioned, once you start discounting, your street price goes down and cannot be regained.  On the other hand, if a client is in desperation or you have enormous competitive pressure while entering a new market, pro bono work can be performed without creating a long term expectation.  Bottom line, you control pro bono work, discounts control you.

© 2010, David Stelzl

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Justifying your Fee

October 29, 2010 — 2 Comments

My son has never had pizza!  Can you believe it…you should know by now that I eat pizza at least once a week, and that’s a bad week for me.  Why have I deprived me son?  Be cause he is allergic to everything.  Gluten (which knocks out just about every restaurant bread), wheat, corn, dairy…that is, until yesterday.

After seeing numerous doctors, some local, some far away, we finally have the problem solved.  The local doctors offered him cortisone to treat skin rashes which covered his body head to toe when he was an infant.  My wife, believing the surface treatment was the wrong answer, began researching this.  She soon discovered the food allergy problem, which is actually the result of your body not properly digesting a food, which leads to a toxic substance in the body rather than properly digested food, which in turn must come out of the body, generally in the form of a rash.  Well, with a long list of allergy foods in hand, we were able to keep Tiny Tim (as I call him) somewhat free of rashes.  The problem is, that means Tiny Tim can only eat a hand full of boring foods while watching the rest of us enjoy pizza and ice cream.

Then a couple of months ago someone refers us to a doctor just three hours from my house.  Two visits, three weeks of treatment using natural products (no drugs), and he’s free to eat whatever.  Of course Insurance doesn’t pay for this type of treatment…it’s all out of pocket.  But do you think I questioned the fee?  Did I send out RFQs, collect three bids, push the doc for a 30% discount, count his hours?  No!  He solved a serious problem using his intellectual capital.  He earned the right to advise me, charge me, and convince me to call him the next time I have a medical need.  This is the essence of becoming the trusted adviser.  This is not a commodity.

PS.  Tiny Tim and I are having pizza tonight!

© 2010, David Stelzl