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Don’t be the cheapest – someone will always out-cheap you!

By January 24th, 2017 No Comments

Sign Saying we are cheaperWhen you first start out as a creative agency, you really want work, don’t you?

So you offer to do work for free. You discount your work. You do extra work for free or for far less than you should. You’re building your portfolio, and your creative experience, so it’s fine in the beginning.

But as time goes on, this becomes a trap that your creative agency falls into, one that most creative’s & digital professionals just can’t get out of. And, as we discussed in a previous post about being paid what you’re worth, the more you do work “on the cheap”, the more work you have to do, which you hate.

This then results in you working harder, for longer, to earn even less.

The problem with being the cheapest is two-fold.

1. Your clients know they can get it cheaper
When you provide a quote, you’re bound to hear something like “But my brother’s friend said he could do it really cheap” or “It’s just a really simple logo – I found someone online who could do it for £25”. The global working world can be a very positive thing (including all the outsourcing capabilities), but it can also mean that your clients are too well-advised as to how they can get it cheaper elsewhere.

2. There’s always someone else out there who can do it for even cheaper.
No matter how good your work is, you will always be undercut. There will always be the ‘new guy’, the person who started up their own little creative agency down the road (out of a home office, or even out of Starbucks) and who is willing to work 18 hours a day at less than minimum wage rates simply to undercut everyone else out there – including you.

Then there are the freelancer sites that claim to offer website design for £60, or a brand new logo for £25. It can be hard to compete.

What does this result in, for you?

Although you want the work, and sometimes really need the work, competing on price, and being the cheapest, means that you will end up taking on the wrong type of work.

You’ll get clients who pay you very little, and ask thousands of questions.

Work that you used to enjoy doing becomes a nightmare, an exhaustion, a frustration.

As you get frustrated, your clients do too – and this can begin to lose you business. It becomes a cycle, or more accurately a spiral, sending your creative agency downwards fast. The spiral is not a good one, and digital creative’s have seen it happen all too often.

How do you combat this deadly spiral?

1. Have a minimum profitability template for new work

Don’t create prices based on your enthusiasm for the project, your creative feelings, or a comparison to other digital creative’s. There will always be someone who will be cheaper than you, so set a profitability line and don’t allow new clients to cross it.

This means understanding what your most profitable products or services are. It helps if you have Xero – you’ll have access not just to the numbers, but add-ons that help you project manage, and track time.

2. Be careful of free or low paid work

As you may have discovered, free or low-paid work often takes more time than higher paid work. Those who are getting work “on the cheap” have the highest expectations, because they don’t value your services very highly. They’re using you as a servant – or even a slave – not a partner in their business or life.

Listen to your gut, or your instinct. If you meet with a prospective new client and think, “This could be a lot of work for very little return”, you’re probably right. If that happens, triple your price quote. If they accept it, you will make a profit. If they don’t, you can focus your creative time elsewhere.

3. Have confidence in your skills. Price it high!

Presumably you (and your team, if you have one) are excellent at what you do. Talented, creative, clever, and willing. If that is truly the case, you should price yourself accordingly. It’s an interesting fact that the higher your prices are, the higher value clients place on your services. If you buy a torch from the pound shop, you are not surprised when it breaks two days later. If you spend fifty quid on it in a speciality shop, you’ll expect it to last your entire lifetime, and include a warranty and guarantee so you get a new one if it doesn’t last.

Value your own services, so that your clients will too.

Finally….

As a final suggestion, try increasing your prices for all new prospects by 25%, and see what happens. We’d be willing to bet that you’ll either lose the business you didn’t want anyway, or you’ll impress them with the value you place on yourself, your team, and your creative services.

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