The “Friends and Family” Discount for Professional Service Providers
January 24, 2019
I recently spoke with a solopreneur bookkeeper about her business and her pricing strategy. After taking some time to review her pricing, clients, and the associated work requirements, she stopped and sheepishly offered, “Well, there’s one more thing I should mention.”
Oh boy, I thought, here comes the real problem.
She went on to tell me that she had several friends who needed help when they’d started their businesses and she’d offered to do their books at a heavily discounted rate. These arrangements were still in place after several years.
“Do you deliver your completed work for them at the same time you do for your other clients?,” I asked.
“Yes, more or less,” she replied.
“And they’ve come to expect that because of the fine service you’ve given them, right?”
“And how are their businesses doing now?,” I asked.
“They’ve done well,” she said.
“And they haven’t volunteered to pay your normal rate now that they’ve got established businesses, have they?”
We both laughed because I already knew the answer.
For professional services providers, here’s a major problem with friends and family discounts: they expect the same level of professional service that you give your clients who pay normal prices. This bookkeeper had spoiled her friends with a premium service offering which they’d come to expect as customary. The fact that they were paying discounted rates had been forgotten.
If you’re a videographer, then friends and family expect unlimited edits on their treasured video even though you’re giving them a big discount. For attorneys, friends and family assume you’ll to go to the ends of the earth to help them with their case. If you’re a social media marketer, the expectation is for the same number of posts and level of engagement as all your other clients.
And while you’re doing this work for your “friends,” an existing client relationship blows up because you haven’t given them the level of service they expect for the normal price they’re paying. Or a great new client comes along, and you can’t take them on because you’re “too busy.” The latter scenario was the space this bookkeeper was occupying. She felt like she was at full capacity and couldn’t take on more clients, when, in fact, her time was cluttered with these special arrangements which were getting in the way of great clients for her.
This problem is rampant with CPAs, accountants, and bookkeepers, by the way. I caught the disease once myself. A non-profit I had volunteered with and whose cause I strongly believe in needed some accounting work done. The previous professional handling the work had volunteered their time, and the work required wasn’t tedious. I offered to do it at no charge because it was my contribution to a cause I believed it. The work was easy and wouldn’t take a lot of my time.
The problem, it turned out later, was that they wanted their work done at specific times which conflicted with the work I was doing for full-paying clients. Stupidly, I didn’t go into the job thinking about this problem, and they assumed I would deliver the work pretty much on demand. After a few months, we mutually agreed that they needed to seek another arrangement.
Be very careful, professional service providers. These discounts and the associated work look innocuous at the beginning, but the seeds of dysfunction for in your business are planted, waiting to grow.
©Ray Business Advisors, LLC and John Ray
About me: I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.