Financial Planners often ask me if they should allow their clients to negotiate on price. And I can understand why they might be tempted – after all, surely earning something is better than nothing? But the fact is, when it comes to your fees and the service you offer, don’t surrender – ever. Let me explain.
It’s tempting to give in and drop your fees
I recently did a blog about cost obsessive clients and how to deal with them. We touched on whether or not you should negotiate on cost – many Financial Planners cave in and offer a lower price because a client objects to the fee that’s put in front of them.
I understand the temptation to do that. I get it. And it can be especially easy to cave in if your business is new and you’re keen to see some money coming in. Some of our professional commentators even agree that, if you’ve got the staff and the time, it’s sometimes better to take work on at a lower price – it pays the bills.
Like I say, I get that. It makes sense from an accounting point of view.
But my view? You should never negotiate on fees – ever.
Why you shouldn’t negotiate on fees
This might not be for the reasons you’re thinking – it’s nothing to do with wasting resources. It’s about you.
The point is, you have a value that you’ve placed on what you provide. And, touch wood, you’ve already got a fair number of clients who have bought into that value – and paid you for it.
So when you come across the odd client who sees the value of what you offer, but they still want to negotiate, please don’t drop your fees. Why? Because it will just trigger a series of problems for you.
Dropping your fees leads to 2 key problems
If you reduce your price for that individual client, it will lead to 2 problems – one is small and one is massive:
- The small problem. By reducing things for that one client, you’ve now devalued what you do. You’ve also gone down a little in their estimations. And what if they then refer you to their mate, and tell them that you reduced your prices? What happens then? You can’t charge the new client your normal rate if they already know you charged others less! So you end up charging them the discounted price too. And that’s just the smaller of the two problems.
- The massive problem. Now, the bigger problem is you. You’ve broken the seal. Every time you come across a tricky fee discussion with a client, you’ll know in your head that you can discount your price. And I guarantee you that you’ll do it more and more because you’ve already allowed yourself to do it once. You’ll even do it in situations where you don’t need to. You’ll let anxiety creep in. You’ll start making assumptions that all tricky clients are going to reject your fees. You then start pitching your lower fee from the outset.
Once you drop your fees, the damage is done
Once you’ve broken the seal, it’s done. Mentally, you can’t go back. And the damage that causes your business, for years to come, is far greater than the cost of your Paraplanner sitting idle for a few days because they’ve got no work on.
Think about the value you provide
You’ve got to think about the value you provide – and your perception of that value.
If Apple’s iPhone factory produces surplus iPhones one month, do they do a sale? No. Even if they needed to, they know they have a brand – and a perception of value – to protect. If they sold their phones off cheap, everyone would always be waiting for the next sale, rather than paying the full price.
So, don’t break the seal.
In my view, don’t ever negotiate.
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