How do you price your services during a recession?

Are you feeling under pressure to offer discounts because people may be struggling with the cost of living crisis?

Every time there’s a downturn or a wobble in the economy, whether it was the major meltdown in 2008, the pandemic in 2020 or the looming recession in 2022 or many incidents in between, the answer is the same.

Don’t discount, don’t compete on price and don’t ever work for free no matter how many guilt trips are laid on you.

While price cutting might lead to short-term revenue, it can also devastate your future pricing. If you drop prices, the danger is that you’ll be so far beneath your profit margin that you’re essentially giving your clients the money you need to run your business.

Discounting can ruin your reputation

Most small businesses and freelancers work for years to build a great reputation and that confidence in your value creates lifelong customers. Anyone who notices you dropping prices will start to doubt the value you bring even if nothing else has changed. Price is a perception of value, it’s not a science.

Remind yourself and your clients what is special about your business and they’ll remember why they started buying from you in the first place. Your smart clients will recognise that continuing to buy the best means their own business is more likely to survive so investing in good services and products is even more important.

You don’t get paid what’s fair, you get paid what you negotiate

People who want cheap prices will find them no matter what you do. These are not your ideal clients. Keep your good customers happy and retain the level of value and service they expect and you’ll continue to thrive long after the recession has ended.

Lots of people wondered if they should discount their services or even work for free during the COVID19 crisis.

Some were pressured into doing free work by unscrupulous people who were trying to take advantage of the situation or because they thought their competitors would be doing it, so they should too.

“I want to help” is a common feeling.

Most people who start their own business have an urge to help. We’ve spotted a need and devised a solution. For some people, getting paid to do something they love feels like a bonus, and even in ‘normal’ times many struggle to accommodate people who need their services but can’t afford them.

When lots of people are hurting an unhealthy dose of rescuer complex can emerge. We want to be part of the solution; to help, to be heroes.The sense of wanting to help can come from a place of also wanting to feel worthy, or wanting to be of service. A rejection can challenge our sense of purpose but good intentions can lead to very bad outcomes. Leaping in with offers of help or submitting to pressure often results in resentment – from both parties.

The ideal client / supplier relationship is when we treat each other as valued partners. When the power balance shifts we change that relationship and it is rarely successful.

Be your own hero first.

Just as we’re all familiar with the injunction, “put the oxygen mask on yourself before attempting to help others”, in times of stress we need to be even more aware of this. Discounting can jeopardise the very existence of your business and then not only will you be unable to help others, you’ll need help yourself.

If you’d like to talk over more specific solutions for your business, or if you are worried about what is happening and how to survive or make sense of the uncertainty, please get in touch!

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