Discounting Your Fees In Exchange For A Promise

By
Home Inspector with Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula

Have you been asked about discounting your fees in exchange for a promise of future business? "If this works out well, I have A LOT morgullible teste work to send your way. Take that into consideration when sending me your quote."

I used to have a bad habit of actually believing what people told me. That's not really such a bad thing, but from a business standpoint, it can be a huge (and expensive) liability.

So, you find yourself discounting your fees in exchange for future work. Everyone's happy, right?

But here's the real question:

How can you place value on something that doesn't yet exist?

roll the dice


Just how valuable is the "future work" that you don't yet have? The "future work" that doesn't exist? Can you pay your bills with that? What happens when that "future work" doesn't show up for 9 months, or at all?

You have actually created a bigger problem:





You've been framed as a discounter!

Deep in the dark corner of your client’s mind, their perception of you has forever shifted. Whether you realize it or not, you've set the expectation of what it means to do business with you. You've planted the seed that discounting your fees is possible, and you have "free money" to give away. From now on they'll be asking themselves, "How low will he go?" Once you've been framed, you will never alter their perception of you… ever!

Many believe discounting your fees will bring you more business. Sounds reasonable, doesn’t it? It’s not that easy! There's an “invisible” cost that comes with discounting your fees.

The hidden cost of discounting.
open mind

You will only be able to understand the "hidden cost" of discounting your fees by peering inside the head of your client and seeing how your discount affects their perception of your business. Your actions will erode your client’s perception of you, your value, and your business. Discounting your fees will make you look desperate, needy, and weak. Clients are not attracted to those who are desperate, so quit creating that perception!


The smart way to discount.

If you feel you must, discounting your fees can be a powerful tool in your bag of tricks, but use it in a smart way. Don't be discounting your fees without getting something in return. That shifts the scales and makes the overall value exchange completely lopsided. When the value exchange is lopsided, you hurt your credibility, your bottom line, and the prospect for future business. If you truly believe your client needs your valuable services more than they need their money (and if you don’t, you should!), then why in the world would you demand anything less for your services than the maximum price the market will bear?

Here's one way of discounting your fees in a way that actually helps you:

When your client says, "How about a discount?", "Yes" or "No" are not your only answers. This is your chance to get creative. If there is future work, how about discounting your fees 10 or 15% in exchange for payment for the next project now? That's a real value exchange. The client gets their discount. You get a boost to your cash flow.

Here's the bottom line:

Never ever screw up the value exchange in a business relationship. If you give something, ask for something. Discounting your fees and receiving nothing concrete in return is a business killer.

Here are two phrases you should repeat to yourself until you feel it:

1. I don't need the business.

2. I don't need the money.

strength 


These two ideas will prevent you from making stupid business decisions and will allow you to operate from a position of strength. There is never any logical reason for discounting your fees in return for a promise of future business other than to be nice, and "nice" will not keep your business afloat in this economy!


CREIA verify logo



The next time you're asked about discounting your fees in exchange for a promise of future business, keep your focus where it should be- on the exchange of real value between you and your client! Steve Stenros- First Choice Inspections is a CREIA MCI and ICC home inspector serving southern California. He can be reached at 888-335-3040.

Originally posted at First Choice Inspections

 

 

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Dan Edward Phillips 09/11/2011 10:28 PM
  2. Dan Edward Phillips 09/12/2011 12:36 PM
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Rainer
22,320
Josh Feygin
Hallandale Beach, FL

Simple solution: Just do what every magor business does- markup by 40% discount by 20%. Your customers wont be any the wiser. As long as they *think* they've got the upper hand your golden.

Sep 09, 2011 06:34 PM #53
Rainmaker
775,443
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

Well put, Steve.

Full price on the first transaction with a discount for repeat business makes sense.

Sep 09, 2011 07:29 PM #54
Ambassador
954,670
Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ... - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Dear Steve -

The worst part is having trusted somone and then nothing materializes.  But onward and upward ...

I love what the un-named official says in #37:
Friends don't let friends take discounts on their professional services!

Have a happy day -
Lynn

Sep 09, 2011 09:22 PM #55
Rainer
241,053
Jesse Skolkin
Independent New York State Certified Real Estate Appraiser - Fresh Meadows, NY

The phrase "if this works out well" should set off alarm bells in your head.  When a potential client uses such language, it usually means that they want you to "make the deal work" (no matter the circumstances) which is an unacceptable assignment condition in my book.

Sep 10, 2011 12:57 AM #56
Ambassador
3,695,541
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Steve, I have what I call Pat's Frequent Buyers' Club and when they have their third transaction or closed referral, I start to work for less for repeat business.  Works pretty well for me.

Sep 10, 2011 01:48 AM #57
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Josh, my business model has always been to give the client such great service that they don't even discuss price negotiation. "A quality home inspection is never expensive, it is priceless!"

Sep 10, 2011 03:31 AM #58
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

John, what great incentive for the customer to come back to you!

Sep 10, 2011 03:32 AM #59
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Yes, Lynn, I also thought that quote was golden! You have a great day, too, and thanks for your comment!

Sep 10, 2011 03:34 AM #60
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

You're not kidding, Jesse. I can imagine you especially don't want to hear that phrase in the appraisal business!

Sep 10, 2011 03:36 AM #61
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

That's a fair trade-off, Patricia. Wow, your point total blows me away! You have been busy blogging! Way to go!

Sep 10, 2011 03:39 AM #62
Ambassador
2,029,932
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Steve, Congrats on the feature - it is gold star worthy. I agree with you on this one -  however, like many Realtors I have a VIP rate for family, close friends and repeat clients. It works and I think it's fair. 

Sep 12, 2011 04:56 AM #63
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Thanks Debb! We all have a VIP rate. There's nothing wrong with that!

Sep 12, 2011 04:15 PM #64
Ambassador
1,471,450
Toni Weidman
Sailwinds Realty - Trinity, FL
20+ Years Selling Homes in New Port Richey, FL

Congrats on the feature, Steve. A great post, indeed. Usually if someone wants me to cut my fee, I ask them for a much lower price on the house in order to get it sold faster and save me advertising dollars. That usually stops them because they don't like the price that low!

Sep 14, 2011 01:52 AM #65
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Aaah, Toni! A little reverse psychology? Good idea!

Sep 14, 2011 03:36 AM #66
Ambassador
1,230,337
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

I missed this featured post! Discounting fees has long been a tough call and it certainly devalues the role of the individual who discounts.

Sep 15, 2011 10:07 AM #67
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Hi Melissa! Thanks for your comment!

Sep 15, 2011 10:12 AM #68
Rainer
72,604
Lang Premier Properties
Lang Premier Properties - Clawson, MI
Metro Detroit Real Estate Group

I myself am all too familiar with this promise for repeat business... I have learned from my mistakes and know not to trust these promises!  Good blog...

 

Thanks,

Benjamin Lang

http://benlangproperties.com

Nov 02, 2011 10:52 AM #69
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Thanks Benjamin. I think we've all been burned by this "scheme" at one time or another! Next time we'll be ready!

Nov 03, 2011 04:33 AM #70
Rainer
113,730
Michael Murphy
Bienvenidos Real Estate - Parksville, BC

I never do it and prefer to maybe and I say maybe do something for them at the time the future business happens

Nov 10, 2011 03:12 AM #71
Rainmaker
138,326
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Thanks for your comment, Michael. That's a safe way to approach it.

Nov 10, 2011 03:26 AM #72
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Rainmaker
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Steve Stenros

CREIA MCI, ICC, ACI Home Inspector,San Diego
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