Lowering Your Rates Could Just Kill Your Business

By Randall Orser | Small Business

Sadly, many freelancers can’t afford to turn away work too often. Indeed, many freelancers are in a nonstop battle for income, especially when they are just starting out. Unfortunately, most will start dropping their rates at some point to increase business, however, this invariably isn’t the greatest move to make. Here are some of the reasons why dropping rates could kill your business.

It Sets a Precedent

Setting your pricing too low in order to gain work early on ensures that it’ll always be a battle to raise rates to reasonable level later. Why would someone pay more when they know you’re capable of working at a discount? The risk is high that you’ll get stuck with a considerable workload but unworkable fees. And, sadly, with no time to look for more profitable opportunities.

Perception of Quality

Your potential clients may see that cheap price as a reflection of poor quality, and that maybe you don’t really know what you’re doing. Which would you rather be known for, providing premium services with the appropriate pricing, or the bargain-basement worker churning out quantity to make ends meet?

Real Impact on Quality

You’ll find that if you rely on volume to bring in the cash, then the quality of your final product is going to suffer. That could end up being a vicious circle of which you’ll never get out.

Race to the Bottom

You may be working independently as a freelancer, but you’re not immune to market forces. If everyone in your industry lowers their fees to compete, then that reduces the value of the entire market. You’re better off not adding to the problem by lowering your fees when everyone else is do so. You actually may be better to keep your pricing, or maybe even increase it, as you’ll be seen as of better quality; plus, potential clients may see those others lowering their prices thinking they’re in dire straits and not around much longer.

Sell on Value Not Price

You won’t have a viable business model if all you do is sell on price, there’s always someone out their willing to undercut you. You’ll never compete with something like Fiverr workers from far-flung places; you need to find your unique selling position and focus on that. Let’s face it the clients going to Fiverr and the like aren’t really the kind of customers you want anyway.

No Room for Development

As a freelancer, you need space to develop your skills. When you discount your fees, you need to be working constantly to generate revenue, and that leaves with little time to grow. Successful business, and you are a business, invest a lot of money into research and development, and you should too.

You started out by turning your talent or passion into a revenue generator, but you are a business after all is said and done. Your figures need to add up if you want long-term success. Setting yourself up as a discount provider may bring in the work now, but be careful it doesn’t become a trap that frustrates your future developments.

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About the Author

President/CEO Number Crunchers® Accounting Inc. Learn how to just say stuff it to this bookkeeping thing with our 'Just Say: "Stuff It" To Bookkeeping program.