Columns by Peter Economy
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The Occasional Free Lunch
Is it just me, or does every client expect you to do work for free? Sometimes it sure seems that way. Let me explain.
While I occasionally work for an hourly rate, I do most of my work on a project basis under fixed-price contracts or other agreements. Do this project and get paid this much money. Do that project, and get paid that much money. Simple, right?
The problem with working on a fixed-price basis (also known as "bottom-line pricing"), is that life is not fixed, and things change. Sure, if you're just knocking out a quick illustration for $200 and then moving on to the next client, chances are good that very little is going to change during the course of your 60- or 90-minute project. But if you're engulfed in a six-month assessment of the management effectiveness of a 25,000-employee, multinational firm, you can bet things will change -- and change often -- during the course of your project.
Maybe your client will start feeling the heat from her board of directors and decide that your original completion date is too far away -- requiring you to deliver your results three months earlier than you originally planned. Or, instead of taking on just the company's North American operations, your client may decide that you should do Europe and Africa to boot. Maybe your client forgot to clear away all the organizational hurdles, and you find yourself spending far more time fighting to get the information you need from jealous and suspicious employees. Never mind actually doing the work you were hired to do.
As you know, major changes and organizational obstructions such as these are not a rare occurrence during the course of a project. The bigger the project, and the longer it lasts, the higher the probability that you'll run into snags. And there's one thing you can count on when it comes to project changes: most are absolutely guaranteed to cost you both time and money.
But, what happens if your project changes, and your client doesn't want to pay you any additional money to accommodate the change? In essence, they're asking you to discount your rates, to do, say, twice as much work for the same amount of money. Or, what happens if one of your clients simply wants you to do some work for free? You know, the good old, "You're going to charge me for this? Maybe next time I'll ask someone else do this kind of work for me. In fact, maybe it's time to bring in some fresh blood around here."
Every independent professional has been caught in this bind at least once. Most IPs face it on a regular basis. But the fundamental question always comes down to this: Should you go ahead and do the work, or not?
I've heard lots of good arguments on both sides of the issue. Some IPs argue quite convincingly that you should never, ever give out freebies or reduce your rates for clients. According to their way of thinking, to do so is to set a dangerous precedent that will lead your client to expect further freebies or discounts in the future. But other experienced IPs argue just as convincingly that it can make perfect sense to give out freebies or to reduce your rates -- especially if it will help you get your foot in the door for more business (or help ensure you keep it there once you've got it firmly planted).
So, which approach is best?
I believe that giving yourself away for free can be good business practice. In fact, I'll go further: IPs should make a habit of giving themselves away for free. The time and the place you select to do so -- and the form that these freebies take -- depends on the state of the long-term business relationship with your clients.
Unlike most other kinds of businesses, many IPs don't advertise their services. For the most part, we rely on referrals from happy clients to bring in new business. And if for whatever reason, your clients aren't happy, then you're not going to get a lot of referrals to potential new clients. The way I see it, doing work for free is a kind of advertisement, a marketing cost that should be anticipated, budgeted, built into your rates, and then happily extended when you feel the time is right.
Instead of getting pissed off when your client asks for a freebie, get happy! When your client asks for something for free, it means that the client really loves you -- enough to ask you to do him or her a favor. And it means that you're building a strong, long-term business relationship.
Of course, you can't do all of your work for free -- that's a one-way ticket to a negative cash flow and bankruptcy. And, unfortunately, there are more than a few unscrupulous clients out there who would love nothing more than to have you do lots of work and never pay a dime for it. But for every lousy client like that, there are many more for whom an occasional freebie will work wonders. It all comes down to balancing your cost of doing the work for free with your assessment of the long-term potential of the relationship.
So, the next time your client asks for a free lunch, don't just blurt out an immediate answer -- think about it first. Is doing the work for free worth the investment of your time and money? If the answer is "yes," then by all means, do it! If the answer is "no," then tell your client that he's got to pay -- just like all the rest of your clients!
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