Stop giving your profit away

How much are you worth? According to IPSE, the Self-Employed Association, freelancers and consultants may be losing profit because they reduce their prices before customers have even pushed back. Fear of losing the work can turn into a discount nobody asked for, and repeated often enough it can seriously damage a business.

Pricing is one of the hardest decisions for any freelancer because you’re not simply putting a value on a product. You’re putting a price on your own time, knowledge and expertise, which makes holding your nerve when a potential client hesitates much harder.

IPSE is addressing the subject in a webinar on 7 October led by Martin Spiller, Associate Professor in Entrepreneurial Practice at Oxford Brookes University and a non-executive director at IPSE.

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DON’T NEGOTIATE WITH YOURSELF

Imagine quoting £1,000 for a job and immediately worrying that the customer thinks it’s expensive. Before they’ve responded, you offer £850 instead, which means you’ve just given away £150 without establishing whether price was actually a problem.

Do that ten times and you’ve lost £1,500. Worse still, today’s discounted price can become tomorrow’s customer’s starting point, leaving you permanently trying to work your way back to what you should have charged in the first place.

CHEAPEST ISN’T ALWAYS BEST

Clients aren’t simply buying hours. They’re buying experience, reliability, expertise and reassurance that the person they’ve hired can actually deliver what they need.

A £1,000 consultant who confidently solves a £20,000 problem can represent far better value than a £500 consultant who doesn’t. Freelancers who compete primarily on affordability also face an unavoidable problem: somewhere there will almost always be somebody willing to do it cheaper.

LEARN TO HOLD YOUR PRICE

IPSE is tackling the issue in a webinar on 7 October with Martin Spiller, Associate Professor in Entrepreneurial Practice at Oxford Brookes University and a non-executive director at IPSE. He’ll examine how customers weigh price, risk and value, why competing on affordability can damage a business and how freelancers can become more confident about holding their price.

That’s particularly important for sole traders because there are only so many hours available to sell. Charge too little and the answer is usually to find more customers and work longer hours, potentially creating a business that’s extremely busy but barely profitable.

Discounting can sometimes make commercial sense for a long-term contract, guaranteed volume or particularly valuable customer. But it should be a deliberate commercial decision, not something you do simply because there’s an uncomfortable silence after you’ve given someone the price.

The IPSE webinar runs from noon until 1pm on 7 October and is open to members and non-members. If you’re a freelancer, it might be worth an hour of your time because before cutting your next quote, you should at least give the customer the opportunity to say yes.