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I am a small business owner that receives somewhere around 10% of my business from referrals; neighbor to neighbor, friend to friend, co-worker to co-worker, etc.
I'm usually firm on my rates and what I value my time at, but sometimes I will offer a client a nice discount under certain circumstances. Every now and then I will run into others that say "I can't afford that" or "Can you come down a little" in which case I try to work with them. I'll offer them a reduced rate for a period of time and then increase them down the road with ample notice.
Recently, I have run into the issue with clients sharing their rates with other potential clients/friends they refer us to. Some of them will actually bring it up saying something like "Jessica told me you only charge her $$."
Personally I think it's inappropriate because a lot of times I will end up having to justify my cost to the new potential clients, which I don't feel like I should have to do. At that point it more or less puts me in an awkward position, and seems like I'm possibly being unfair.
As a consumer myself, I don't question rates of someone providing a direct service to me. I understand that their time is valuable and they provide a price based on what they believe it is worth. I also compare it with other rates in the area to make sure what I am paying is fair. I believe that the beauty of a free market allows one to charge what they want, and otherwise people can choose a service that better fits what they are willing to pay.
My question is for both consumers and other small business owners that provide or receive a service.
My rates were standardized, so it made no difference if people talked. I have no idea what you provide or if that would work for you, but it might be a solution. Many industries have standard rates - auto repair, for example, is almost always billed "by the book."
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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It depends on what products or services you are providing. I had a business for 16 years, and probably 80% of my business from referrals, the rest from my website. In my case no two items were the same for two customers very often so it was not a problem. Every item was customer made and priced based on the materials, machine time and labor. I would not give a discount just because someone said they couldn't afford it, I would instead steer them onto a more affordable option. Discounts were only for the biggest regular customers that spent several thousand a month.
If we give someone a special price we will tell them that this is a very special price and ask that they please do not share this with anyone else. They would already be aware of our normal rates and I would assume if they refer us to someone they'll follow our request and/or relay our regular rate.
I am a small business owner that receives somewhere around 10% of my business from referrals; neighbor to neighbor, friend to friend, co-worker to co-worker, etc.
I'm usually firm on my rates and what I value my time at, but sometimes I will offer a client a nice discount under certain circumstances. Every now and then I will run into others that say "I can't afford that" or "Can you come down a little" in which case I try to work with them. I'll offer them a reduced rate for a period of time and then increase them down the road with ample notice.
Recently, I have run into the issue with clients sharing their rates with other potential clients/friends they refer us to. Some of them will actually bring it up saying something like "Jessica told me you only charge her $$."
Personally I think it's inappropriate because a lot of times I will end up having to justify my cost to the new potential clients, which I don't feel like I should have to do. At that point it more or less puts me in an awkward position, and seems like I'm possibly being unfair.
As a consumer myself, I don't question rates of someone providing a direct service to me. I understand that their time is valuable and they provide a price based on what they believe it is worth. I also compare it with other rates in the area to make sure what I am paying is fair. I believe that the beauty of a free market allows one to charge what they want, and otherwise people can choose a service that better fits what they are willing to pay.
My question is for both consumers and other small business owners that provide or receive a service.
What is your stance on sharing rate information?
I don't know specifically what business you're in, but I have to say this: Sharing an hourly rate is a dead end for a host of reasons. Why?
1) The rate itself is meaningless to your prospect, chiefly because they don't know what the process is for getting the work done. For example, my rate is $135 an hour. But that doesn't mean squat to a client, because it doesn't speak to how effective I am or how experience allows me to do the work much more quickly. An hourly rate doesn't speak to the end product and its quality either. If I manage to complete a project in an hour for $135/hour while someone less skilled bumbles around for four hours at $50/hour, which was the better deal for the client?
2) Therefore, quoting a rate immediately puts yourself in the position of being a commodity, where the only purchasing factor is how cheaply you can get it done. You are not a bushel of wheat. You have experiences, knowledge, specializations, certifications, and a host of other factors that have intrinsic value to prospect with brains.
3) Because of #1, it's better to say something like, 'I have an hourly rate, but that's for internal estimating purposes. I prefer to give you an estimate based on my understanding the project." That way, the client has certainty when it comes to what bill they're going to receive while you get rewarded for being efficient. I've yet to have a client who didn't respond positively to that.
Doing it this way, by the way, means better margins. For example, I quoted a client a couple of thousand dollars on a project. It was a legitimate quote based on what I thought would go into the work. However, once I rolled up my sleeves and got to work, I happened on a solution that was elegant, simple, and overdelivered on the results he wanted.
Now, should I have charged him about 40% of what I originally quoted, or do I chalk that up to 30 years' experience in my profession? Of course not. Because the satisfactory completion of the project didn't take 4 hours. It took four hours and thirty years.
It is nearly impossible to give a good answer without knowing the service you provide. As a long time small business owner I can guarantee 99% of your problems come from 1% of your customers.
If your business provides the same exact service to everyone, charging a different rate to different people WILL cause you problems. There is no way you can expect people to keep rates to themselves, it just doesn't happen.
It is nearly impossible to give a good answer without knowing the service you provide. As a long time small business owner I can guarantee 99% of your problems come from 1% of your customers.
If your business provides the same exact service to everyone, charging a different rate to different people WILL cause you problems. There is no way you can expect people to keep rates to themselves, it just doesn't happen.
agree. The OP dug their own hole by discounting for various reasons. Discount on volume and offer the same to all.
Price transparency is one of the critical aspects of an efficient market. Anything you do to prevent that is standing in the way of the right thing. If you don’t like your rates then offer them standard across the board. A new customer discount is a coupon that doesn’t change the implied rate.
I believe it is very poor taste to share this kind of information. As an example, I have a guy that comes every week to clean my pool. Whenever I need something such as a new filter, rubber gasket, or valve he gets them for me at cost which is way less than I can buy them at the pool supply store.
I would never share this with anyone because I happen to know that he doesn’t do this for all of his clients. Every $5, $10, or $20 that stays in my pocket is a win for me, and I’m not about to blow it.
I don't know specifically what business you're in, but I have to say this: Sharing an hourly rate is a dead end for a host of reasons. Why?
1) The rate itself is meaningless to your prospect, chiefly because they don't know what the process is for getting the work done. For example, my rate is $135 an hour. But that doesn't mean squat to a client, because it doesn't speak to how effective I am or how experience allows me to do the work much more quickly. An hourly rate doesn't speak to the end product and its quality either. If I manage to complete a project in an hour for $135/hour while someone less skilled bumbles around for four hours at $50/hour, which was the better deal for the client?
2) Therefore, quoting a rate immediately puts yourself in the position of being a commodity, where the only purchasing factor is how cheaply you can get it done. You are not a bushel of wheat. You have experiences, knowledge, specializations, certifications, and a host of other factors that have intrinsic value to prospect with brains.
3) Because of #1, it's better to say something like, 'I have an hourly rate, but that's for internal estimating purposes. I prefer to give you an estimate based on my understanding the project." That way, the client has certainty when it comes to what bill they're going to receive while you get rewarded for being efficient. I've yet to have a client who didn't respond positively to that.
Doing it this way, by the way, means better margins. For example, I quoted a client a couple of thousand dollars on a project. It was a legitimate quote based on what I thought would go into the work. However, once I rolled up my sleeves and got to work, I happened on a solution that was elegant, simple, and overdelivered on the results he wanted.
Now, should I have charged him about 40% of what I originally quoted, or do I chalk that up to 30 years' experience in my profession? Of course not. Because the satisfactory completion of the project didn't take 4 hours. It took four hours and thirty years.
Outstanding, thank you!
Quote:
Originally Posted by sam812
It is nearly impossible to give a good answer without knowing the service you provide. As a long time small business owner I can guarantee 99% of your problems come from 1% of your customers.
If your business provides the same exact service to everyone, charging a different rate to different people WILL cause you problems. There is no way you can expect people to keep rates to themselves, it just doesn't happen.
You are correct, but that number grew higher due to referrals. Since then I have set a new precedent with the advice provided.
Quote:
Originally Posted by johngolf
agree. The OP dug their own hole by discounting for various reasons. Discount on volume and offer the same to all.
Spot on. Lesson learned.
Quote:
Originally Posted by SWFL_Native
Price transparency is one of the critical aspects of an efficient market. Anything you do to prevent that is standing in the way of the right thing. If you don’t like your rates then offer them standard across the board. A new customer discount is a coupon that doesn’t change the implied rate.
Makes sense. I will be incorporating ONE TIME coupon codes into my website and have now made it completely automated.
Quote:
Originally Posted by Ron61
I believe it is very poor taste to share this kind of information. As an example, I have a guy that comes every week to clean my pool. Whenever I need something such as a new filter, rubber gasket, or valve he gets them for me at cost which is way less than I can buy them at the pool supply store.
I would never share this with anyone because I happen to know that he doesn’t do this for all of his clients. Every $5, $10, or $20 that stays in my pocket is a win for me, and I’m not about to blow it.
This is what I was getting at. Poor taste exactly. I realized this when another high paying client suggested I increase my rate to XX and said, "Eff-you- see-kay them because they are robbing you and they are too ignorant to admit it."
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