Pricing Your Services to Lower Your Rates

With the current economic climate, I know that a lot of freelancers and small business owners are wondering whether they should be lowering their prices. They’re worried that, with a recession on the cards and financial difficulties being experienced by businesses as well as individuals, their clients just won’t be able to afford their rates.

In truth, given the current situation, you should be doing the exact opposite. Rather than lowering your rates, you ought to be raising them to account for inflation and the higher expenses you’re facing in your business. You don’t want to be putting yourself in financial difficulty because you didn’t increase your rates in line with your costs.

Having said that, I’m aware that things aren’t always this black and white. It can feel hard to raise your prices if you need all the work you can get, and it isn’t always the right thing to do. What happens if your customers can no longer afford you or you end up scaring off potential clients? You need to make money too if you’re going to be able to make ends meet.

In this blog post, I’m talking you through when it might make sense to lower your prices as well as when you might prefer to stand your ground. I’m also discussing how you can set your prices in a way that will enable your business to be viable and always allow you to earn enough money at the end of each month.

Pricing your services

Generally, I caution against lowering your prices to get more work. In my experience, the clients you'll gain by doing this tend to be pickier and value what you do less than those who pay more. Lower-paying clients are often the ones who seem to expect you to be sitting at your desk waiting for their email so you can turn around a piece of work in an unrealistic amount of time!

Plus, you’re likely to find it difficult to raise your rates with these clients in the future. It’s always easier to increase your prices with new clients than it is to raise them with existing clients. Once your customers know you’re willing to accept a certain price for your services, they’re unlikely to see any reason why they should pay you substantially more.

When and why you might decide to lower your prices

However, there are some specific occasions when it might be a good idea for you to lower your prices. These include:

Getting experience of a new sector – You might want to lower your prices so you can develop your skills and expertise in an industry you’d like to break into.
Building a portfolio – Similarly, you might not have much experience in providing a certain service and might want to build a portfolio so you can attract more (higher-paying) customers in the future.
Following your passion/helping a cause you care about – You might really like the sound of a project that has a low budget, or you might want to support a charity that is unable to pay your usual rates.
Benefitting from reputational gain – Perhaps working with a particular client will look great in your marketing, and you’ll be able to appeal to more potential clients as a result.

Whatever your motivation, if you do decide to lower your prices, make sure it's because you actually want to and not because you're being pressured into it. Always remember that it’s the service provider who sets the price. You decide how much your time and services are going to cost, no one else.

How to price your services

In Charge with Confidence, I show my mentees how to set their prices by taking into account both their business expenses and their personal outgoings. Once you know how much money you need to be making overall, you can understand the minimum you need to be charging by dividing this amount by the number of hours you have available for paid client work.

If you use this method, it’s important to remember that accepting anything less than your minimum will mean you either have to charge other clients more or work longer hours in order to make up the difference. Before lowering your prices, make sure you check whether you’re going below the minimum you need to be earning to make your business viable. And if you are, ask yourself if charging other clients more or working longer hours is something you're willing and able to do.

One way you can make accepting lower prices feasible is to build these lower rates into your pricing calculations. You might want to allow for times when you decide to accept lower-paying projects, such as if you want to offer your services to support a cause that means a lot to you.

In this blog post, I explain how earning more money than you need can put you in a better position to help others, allowing you to discount your services or work for free when that feels like the right thing to do.

What to do before lowering your prices

In any case, before you decide to lower your price for a client project, there are several things you can do to make it more likely your rates will be accepted.

1) Always try to quote your full price first

Never assume that the client can't pay what you want to charge. I see this a lot, especially among freelancers who work for NGOs. They think an NGO won’t be able to pay their full price, or they might feel morally obliged to work for less, when actually many NGOs are incredibly well funded.

If the client does come back to you and says they can’t pay your full price, that’s the time to negotiate. Don’t negotiate with yourself before the client asks you to!

2) Offer the client 2 different options

Having said that, if you’re worried about the client ghosting you when you share your full price, you could consider building 2 different options into your quote. In addition to your standard price, based on fulfilling the client’s brief as requested, include a cheaper alternative that would make the job less time-consuming or more enjoyable for you.

You could think about offering to send the deliverables in a less fiddly format, proposing a longer deadline so you can fit the job in around other client work, or reducing the scope of the project. This will show the client that even if they can’t afford your full price, there may still be a way of working with you.

3) Help the client afford your full price

Another thing you can do to avoid lowering your price is to do what you can so the client is able to afford it.

Sometimes, it’s the payment terms that are a problem. If you’ve asked for 100% of your fee upfront, you could consider offering payment in instalments instead. This way, rather than having to pay a large lump sum straight away, the client can split the total amount into smaller, more manageable chunks.

You can also offer to accept a different payment method instead. Again, you could offer to take payment by direct debit so the client can pay in instalments, or you could accept a payment method that involves fewer fees for the client. For example, might it be worth setting up a multi-currency bank account to avoid conversion fees? Or how about accepting payment via credit/debit card? This might be simpler for the client too.

4) Market your services to clients who can afford your rates

I can assure you that there are clients out there at every budget level. So, before lowering your prices within your business, try to identify those clients who are able to pay your rates.

Target these clients specifically through your marketing and messaging, and do your best to obtain new customers before you resort to lowering your rates.

What to do when you do decide to lower your prices

If you’ve tried all the above and you still think lowering your prices with existing clients is the best option, make sure you set conditions around your reduced rates. Don’t just lower your prices for exactly the same service because this essentially devalues the work you’re doing.

Think about whether there’s anything you’d like to change in your relationship with a specific client. For example, might you like them to give you longer turnaround times or change something in the way they manage your projects? If so, now’s the time to ask and to suggest this compromise in exchange for a lower price.

Alternatively, you could set a specific timeline for the lower price. For example, you could offer a lower rate until the end of the year, giving a specific reason before agreeing that the price will go back up again once this period of time has lapsed.

No matter how you decide to go about things, don’t simply lower your prices without asking for something in return. You set those original prices for a reason, and if you’re offering the client a discount, they need to know that it doesn’t come without conditions attached.

I hope this blog post has given you some food for thought and has shown you that there are many options you can consider before you decide to lower your rates. In certain circumstances, for certain projects, it might be a good idea to reduce your prices. But more often than not, it’s better to try to help clients afford your rates first.

If you’d like some support to understand how to price your services and how much you need to be charging, you might be interested in Charge with Confidence. During the programme, I’ll help you identify the minimum rate you can’t afford to go below, and I’ll also show you how to incorporate lower-paying projects into your pricing calculations. This way, on those rare occasions when it is a good idea to reduce your prices, you can do so without having to worry about making ends meet at the end of the month.

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