Don’t Discount Your Agency Services Like This
Have you ever offered a discount JUST to get a client?
I’m not talking about a Pay-In-Full savings…
I’m talking about you made an offer of X and the client wouldn’t move forward unless you offered it for Y.
Y was less than X and deep down you didn’t want to do it, but you did just to get the client.
Have ya done that?
If so, this is THE BIGGEST MISTAKE I see agency owners making today.
Watch today’s video where I break down why and what you should do instead.
Watch now.
Transcript / MP3
What's good. Everybody. Greg Hickman here, founder of all agency@altagency.com. And in this video, I want to break down and share the biggest mistake that I see agency owners, creative service professionals making when it comes to getting clients in the door by actually discounting their services. So I don't want you to discount your services like this. So let's jump into how you should start to think about getting new clients and why discounting is not the way to go. Let's do it. ...
Have you ever found your self in a situation where you're talking to a prospect and you really know you can help and they want what you have, but they only are willing to pay a certain price. That's maybe like 15 to 20% less than what you're asking for. Maybe they're asking for a discount. Maybe they said that their budget just happened to be that amount lower, whether it's 15 or 20, it doesn't really matter. The point is they do not want to pay you the amount that you've stated on the call or in the proposal. Yet you take the deal maybe because you don't know where the next deal is coming from, or you don't have the next opportunity. You don't know where that exists or how you're going to get another person on the call, but you decide F it I'm going to take this client.
And, uh, I'll do it for, you know, 20% less. I want to break down how this actually could backfire, uh, and really why this is actually is worse than just not taking that client altogether. So let's just jump over to the iPad. So let's just do some math. Let's say for the sake of the example, a client comes in and whatever the project is, you're quoting $5,000. Now they come in and say, Hey, you know, whatever reason, the 20% off, you know, Hey, my budget's only 4,000, so that's 20% off. Okay. My budget is only 4,000. And so now you're sitting there saying, well, you know, I was in your head, you're saying this is worth 5,000, a sh you've told yourself time and time again, you shouldn't go below 5,000, um, you know, better, right. You know, better than to discount the services when really the 5,000 is exactly what you deserve and what the project warrants, but let's play out this example.
So you say, okay, fine. I'll do it. So now you have the client paying you 4,000 for the work that you normally charge 5,000 for. Well, one thing that I see that agency owners don't pay attention to is their costs to acquire a client. Now, ballpark numbers, you know, when you go to things like paid traffic, whether you get referrals or not like your time, there is time in bringing clients to you. Especially if you want a predictable business, this is not the episode where I'm going to dive into why referrals are not predictable, but if you've ever used advertising or use marketing, you've either spent money to bring prospects to you, or you've used your time and content to bring people to you. And so there is a cost to acquire a new client in kind of the, the high ticket coaching consulting world.
You often see the cost to acquire around $1,500 from paid ad into, you know, a lead magnet or a, an attraction piece, like a webinar onto a sales call into a, into a close it'll cost, $1,500 to acquire a client. Now that number asterisk can be lower. That number can be higher. We've seen 1500 BS, the safe bet. So for the example, let's say it costs you $1,500 to get this client. Now you've already discounted 20%. So they're paying you 4,000, but really it took 1500 to get that person in the door. Anyway. So now you have 2,500 left that you're actually getting paid to do the work. Now, depending upon what type of work you're doing, you have cost of goods. You have cost of fulfillment, unless you're purely selling a digital course. And you're not involved in all at, at all in the process.
So maybe you're hosting coaching calls. Maybe you're doing a website build, maybe you're whatever sort of fulfillment you're doing. There is a piece of the puzzle that is labor. So you have to take into consideration your costs, whether you have, you know, your, your time, your materials, um, you know, any, you know, contractors, okay. Overhead, uh, whatever those other costs are. You have that too. Now I'm guessing that because you're in a services business, your costs probably aren't going to be zero because you're not just selling a digital course. So it's your time, whether it's you fulfilling, or you hired a contractor, you have costs. So you end up having this situation where, okay, well, they just paid you 2,500 and I can tell you time and time again, we either see that the cost of all of this minus time materials, labor, et cetera, that you're actually now in the red, you're actually making, you know, you've lost say a thousand bucks, right?
So we've lost a thousand dollars after your time back and forth account management. You know, just the things that actually happen in the process to deliver that client, the result. So say you actually now lost a thousand. So let's say you even broke even, okay. Say, it's zero. What I find often ended up happening the, the money that is here, which should be a profit often correlates back to the discount that you gave. So you gave a discount up here, which so many times I see this because people don't calculate this. That was your profit. Now it shocks me how many agency owners and service professionals don't know what their cost of fulfillment is or what profit margin they're operating at, but more likely than not. And if you haven't calculated this, you should, the, the discount that you gave that 15 to 20% off is actually where you make most of your money.
If that's the case, what ends up happening is you take on this client because you felt like you needed to give them a discount to get them in the door, to collect that money. But at the end of the day, you're really losing money on that client, but you still have to fulfill on that work. So your time goes up, which means your bandwidth goes down. And the next client that comes in the door, the prospect that comes in the door that is able to pay full price. You now don't have the bandwidth to serve.
It happens. You actually would have been better off just saying no to that deal. If you understood your economics and held strong on the price that you wanted to charge, whether you charge five or not like do the math on your own numbers, but I see it over and over again, you take the client cause you don't know where the next dollar is coming from, but you're actually losing money because you don't know your costs and you gave away your profit by either discounting your services, or you gave it away through over-delivering, um, because of scope creep or mismanaged projects. And you actually would have just been better off turning that client down because they weren't willing to pay you what you, what you said you were going to charge, which was 5,000. In this example, in our heads, it is very easy to feel like, well, it's going to be more painful to just say no, because I won't collect anything.
And it's very easy for us to rationalize that in our head. Well, if I don't take this deal, I collect zero. But if I collect this client, I'm going to get $4,000. But again, we didn't do the math and we're actually losing a thousand dollars, but we still have to fulfill on that project. Thus, we're giving away our time and our capacity, which means we have a lot less of that for the next possible deal. And we see that happen over and over and over again. And what's worse. And we were, we were guilty of this. So I I'm I've been there. So I know how it feels. People that do this in the form of a retainer where what they're delivering every single month is they're actually like not charging enough on the monthly retainer and either over-delivering or they discounted the monthly retainer because they were early in their business and they never went back and renegotiated, and they'd been losing money the entire time, but they have to still spend the hours in the time fulfilling, which then creates a fulfillment problem.
Because when you do have someone that's willing to come in and pay you, you don't have the room to take them on and you don't feel confident in bringing them on because you have no capacity or bandwidth. So it creates this cyclical problem. And I'm really here just to kind of show you that more likely than not, if you are discounting your services, just to get a client in the door, you're POS in many cases, losing money, if not breaking even yet, you're still positioning yourself in a way where you don't have enough capacity to take on the right client, paying you the right amount of money, the money that you're worth, the money that you deserve, the money that you set out to get for the service and the value that you create in their life. So lesson number one is don't discount your services like this, just to get a client in the door.
Lesson, number two is do the math so that you know what your profit actually is. And if you're going to discount discount in a way where you're not giving away your profit and you actually can still make money, because think about it, the more that you can charge for your service within reason, based on the value that you can create, the better experience you're going to be able to give your client. You'll have the money left over to actually deliver a great service versus delivering a great service and losing money. So in many ways, I'm also saying, raise your prices, but sometimes some of you are already charging enough, but then you'll discount to get a client, a door, and we see the whole problem unfold. So don't discount your services like this. If you are trying to get a client in the door, many cases, you're better off just saying no and waiting for the next client, even if you don't know where that next client is coming from. So hope you found this video, helpful. Leave a question or comment in the comment section below, and we'll see you next time.
