Breaking Up Is Hard To Do

How Much?

Be prepared for this question. It's especially important if you're a consultant providing business services rather than selling your product on a large scale. You should know what you're worth and have your pricing structure well-researched by the time you go to market. If you've done due diligence on pricing in your industry and area of the country, you'll be able to handle price objections better. For example, if your hourly rate is $50 and a client insists on getting a $30-per-hour rate, you need to figure out all the ramifications of taking a rate cut. Will the project be high profile and be a good "foot in the door" with other prospects? Can you afford all your overhead costs and still pay yourself if you take the cut? What if the next client is unwilling to pay the full rate? Will you want to give up full-rate work to keep servicing the reduced-fee projects?

Clients making solely cost-based decisions may not be the best customers. They can be disloyal, always looking to jump ship when a better deal comes along. Cost-sensitive clients are also sometimes more demanding than other customers. As one of my public relations peers once said, "If they grouse about price substantially, they're gonna fly the coop."

It might make sense to pass on work that reduces profits. Jennifer Gratnick, an independent criminal defense attorney, sums up the issue in an article she penned for "Money is like a pilot's uniform or a doctor's lab coat-it establishes your credibility. Clients know they get what they pay for. If I quote a low fee to a prospective client, he wonders why I'm so cheap. He might hire me, but he'll always second-guess my judgment."

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: Breaking Up Is Hard To Do.

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