When Someone Asks You to Take Less
- When you drop prices, it's difficult to bring them back up again.
- It can signal other clients to ask for similar discounts, lowering your revenue and profitability.
- By unilaterally lowering prices and maintaining the same level of service or product, you undercut your value equation. If you are suddenly able to drop your price this much, why did you wait so long, and why not more?
I had protected myself by building up other areas of business as soon as I noticed that the economic climate was getting bad at least a year ago. (Negotiating well from strength does require thinking and planning ahead -- often far ahead.) So, if necessary, I could let the client go, and the client representative knew that when he said he understood from his own periods of self-employment how distasteful pay rollbacks were.
But I already knew their difficulties (keeping tabs on the well-being of clients is another important form of preparation) when he proposed a cut for the time being of over 14 percent, saying that he might be able to do a little better with future assignments. Because I work hard to deliver above average value, I've always been comfortable in charging above average rates, which gave me some room to move if I really wanted to. Furthermore, the client had been a steady source of reasonable revenue for a couple of years. So I sent the following email to agree to a temporary change in pay:
Normally I wouldn’t agree to a pay cut because I do need to keep a reasonable level of profitability and I can’t in good conscience cut back on the work I put into pieces in a tit-for-tat response. But X has been a good client for a while and I know that you have been pretty hard-pressed on the revenue front. So let’s give it a shot; as things improve, we can revisit the pay level. I’m willing to be flexible – I just want to make sure that we’re clear on this being temporary to help you through the drought. If you can do better in the future, I’d appreciate it.There are a number of principles I employed in my response that you can also use with a client that cannot pay as much or a vendor that cannot offer as much:
- I tacitly stated that I was in a position of strength and that normally I'd have to decline the request.
- I recognized the value of them as a client, bolstering the value equation by indicating that it was about more than short-term money.
- I sympathized with their situation and indicated that while I didn't need to keep the work at all costs, I was in a position to help them and wanted to.
- I stressed that I was not permanently dropping my rates, only temporarily lowering them to help the client out of a tight spot.
- I explicitly stated that I was counting on them to act honorably, and subtly communicating that I would not put up with less.
- I also indicated that I was seeing if this would work, which underscored that it was not a permanent arrangement.
Of course, there is only so much you can trade off without putting your livelihood into danger, so there will be requests for discounts that you'll have to let fall to the wayside and replace those clients. For example, if a company is on shaky-enough financial footing that payment is questionable, you're being asked for a degree of flexibility that is probably out of the question. But in more reasonable circumstances, this is a principled approach that should let you continue working with clients while not devaluing your own work.
I almost called this post When You Have To Take Less, but didn't because of a critical point: You must always be able to say no. Even when you feel that you cannot say no, you must leave the other party with the impression that you could. Only then can you ensure a negotiation of relative equals and not assume the position of an indentured servant.