“My clients have been impacted by Coronavirus and they’re asking for a discount. What should I do?”
This question, in essence, was posed recently in our free Freelance Mastermind Group on Facebook.
It sparked a fascinating and, I believe, very important conversation around how to deal with a shrinking economy impacted by the spread of COVID-19.
Here’s the exact wording of the question from Jennie:
“Question – I have a client that has 4 brands. They are seriously struggling with the coronavirus shutting them down. They’ve asked me to decrease my fees.
Does 50% sound like too big an amount? This would be for at least 9 months. I figure a smaller amount is better than nothing. Or am I being too generous? LOL”
Here are just a few things we should all consider in response to Jennie’s question:
You’re under no obligation to extend a blanket discount to all your clients.
First of all, there is absolutely no obligation for you to call up your clients and extend a blanket discount for your work.
You may be watching other companies offer discounts to all of their customers. And I’m thankful for those companies. But plenty of businesses are keeping their prices as they are because they understand a healthy global economy depends a lot on cash flow.
As Jeremy puts in his response to Jennie’s question:
“Are they decreasing their fees to their clients? If not, why are you?”
Additionally, every business model is different and you have to know what works for yours. Kat didn’t mix words in her response:
“Keep in mind that their business model and financial situation is not the same as yours as a freelancer. Freelancers don’t have that kind of “margin” to give up on a time-based service.
It’s kind of sketchy that they would use the logic of “well, we’re doing it for our customers so you should, too” to try and negotiate with you on your rate.
What they do is literally their business and trying to pressure you to discount for them because “they’re doing it!” doesn’t pass the sniff test.
Also, this is only month 1 of the shut down. They should have plenty of cash reserves to float their business and expenses at this point.”
In short, if it doesn’t make good financial sense to implement a company-wide discount on your services, then please don’t.
You can’t help your clients through this tough time if you can’t stay in business.
What good will you be to them if you end up having to close your doors and go back to working a day job?
As Remington puts it, “pushing the burden down the supply chain isn’t a sustainable relief strategy for anyone.”
If you and your clients are going to survive this mess together, the answer may be to continue to charge them a fair price for good work—something you should have been doing all along.
Just because a client is asking, doesn’t mean you have to say “yes”
Keep in mind: just because a client is asking for a discount does not mean you have to agree to it.
Many people are just testing the waters right now to see what they can get a discount on.
In a situation where “every little bit helps,” many middle-managers are being told by their executive bosses that they should tighten up budgets wherever possible.
This means some clients will try to take advantage of this situation by asking you to continue to deliver the same amount of work while taking less pay at the end of the day.
You should naturally push back against this notion. Joely puts it nicely:
“The discount makes sense if the situation impacts your work too and you would have to deliver less than usual, if the demands remain the same then the discount needs to be reconsidered accordingly.”
Lots of freelancers chimed in with similar responses, emphasizing that scaling back on scope may be a more effective route. More on that in the section below titled What to offer clients if you can’t offer a discount.
There are ways to respond that let you take control of the situation
Whether or not you know exactly what you’ll be able to offer your clients during this time, there are some basic negotiating strategies that, if used well, can help you take control over these kinds of situations.
If I had received a similar request from one of my clients, I might have responded with a simple question. Something like:
“What kind of discount are you picturing?”
This allows for a couple different scenarios:
First, they can respond with a concrete number. They might say something like: how about 5% or 10%? That seems like a far more reasonable request during these times.
If it makes sense for your business, taking a 10% cut for a few months to keep a long-term client may be worth it.
Also, remember not to confuse their request with an ultimatum. Consider if they actually have another freelancer they could turn to quickly or if they’re just trying to be frugal.
Hopefully, you’ve established yourself as an asset in their company.
Second, they may shy away from the idea of a discount entirely when forced to bring up the number on their own.
This is an age-old negotiating tactic. You ask for clarification and they interpret it as pushback. Some people will drop the subject just to avoid conflict. They’ll say something like: “Oh, nevermind. That’s ok. I just thought I’d ask.”
Third, some clients may come back with a very high discount request.
To these kinds of clients, I’d explain that you could potentially go out of business with discounts that deep and you’d like to keep serving them for a long time. For these clients, I’d explore options in the next section on what to offer if not a discount.
What to offer clients if you can’t offer a discount
For many freelancers, the idea of offering a discount is just not feasible right now. Luckily, the group also had some fantastic suggestions on what else could be offered in lieu of cutting down your prices.
Mike shares this advice:
“I would suggest a cost deferral or a smaller amount – 50% is way too generous. I’d offer them a 20% discount or keep your price the same but offer a 50% deferral on payment for when things pick up.”
This is a great strategy if your own freelance business can stay above water financially during this crisis. Then, as things begin to return to normal (although timing is still unsure on this), your clients can finalize and pay their deferred invoices.
If you can’t offer a discount and you can’t “float” your clients’ invoices with deferred payment options, then perhaps you can find a way to add more value to your client’s business.
Colleen shared this great suggestion:
“Instead of decreasing fees, can you figure out additional ways to help them get more sales online? Take the focus off deliverables and put it on results. Offer them a complementary meeting to brainstorm some ideas.”
As the world and the economy continue to change, new opportunities will arise for freelancers which means those who can adapt and add value where it wasn’t needed as much previously are the ones that will thrive in a post-COVID world.
SCALING BACK ON SERVICES, NOT REVENUE
Of course, there’s always the option of simply scaling back your work to match their new (discounted) budgets.
Lily suggests “if they can’t pay for all you do, then maybe do less.” Kat chimed in too: “Reduce your scope of work. Do not give a 50% discount”
Theoretically, this would free you up for growing your income in other ways—through finding clients or building new revenue streams into your business.
TRADE OR BARTER
Finally, there’s always bartering or trading. While I’d avoid trading services or gift cards for your work, I did like one suggest from Sebastian.
“Maybe you can have them send you referrals and then give them a discount if the referral lands a project with you,” he brainstormed. “In other words your clients and yourself are in some way working like a team and both benefit. But I wouldn’t do 50%. Make them work for it.”
I love this idea. It gives your client a potential discount (that they have to work for), keeps you well paid (with new referrals) and keeps the economy healthier.
The dangers of offering a discount
The real reason so many freelancers (including myself) recommended not deeply discounting services even in the face of a global pandemic became clear the longer the thread went on.
There are some very real dangers associated with offering discounts to clients, not the least of which is the long-term impact it could have on your business.
Em posed a bold question:
“Imagine in 6 months time if you still have that client, things go back to normal, will you be able to raise your prices back up just as easily as you dropped them for her? Probably not.”
Clients (like bosses) are notorious for being quick to cut budgets and slow to raise them. It makes sense. They’re in business and therefore they care about profit margin.
Do yourself a favor and don’t set yourself up for a long climb back to your current rates once this is all over.
As Tasheila puts it, “How likely would you be to get your full price again once this crisis is over, once you’ve shown that you can do it for less?”
If you do feel like you have to offer a discount, minimize the long-term effects by making it clear this is short-term, one-time adjustment for your clients during this difficult time.
Nicole shares one way you can accomplish this:
“I would suggest entering the full amount on your invoice and then showing the discount of the full value so they can see exactly what they are getting. It’s the same psychology retail stores use with receipts saying ‘You saved $xxx.’”
Do what’s best for your business
It can be hard to know what’s best for your freelance business during these unprecedented times.
While I’m beyond thankful for everyone who has chimed in on this conversation, only you know your business well enough to make the final decision.
Whether you choose to offer deep discounts, no discounts, or something else entirely, I wish you the best of luck and we’d love to hear what you decide and how it turns out.
Keep the conversation going...
Nearly 10,000 of us are having daily conversations over in our free Facebook group and we'd love to see you there. Join us!