This topic can apply to any business owner in any industry. Plumbers, electricians, hair salons, a handyman, painters, etc.
Discounted services are something you see all the time, whether someone is promoting new a product or service, just opening up a new shop, or just trying to drum up more business. While this might sound like a great idea, it can hurt you more than help.
Now, I’m not talking about not reducing the number of hours you’re going to bill a client. For example – maybe you quoted a client setting up two computers would take two hours and instead it ended up being four. Take off two hours (or maybe one, depending on what you can work out with the client) and send the invoice. Show on the invoice the time you removed – but the hours you charged for should still be billed at your normal rate. Don’t reduce your rate from $100 per hour to $50. Your rate should always stay consistent for your sake and for the clients’. Your rates are set in stone!
You’re Setting a Precedent
If you are discounting your rates, clients will get used to it. At some point, if you want to stay in business and maybe even make a little money, you will have to raise your rates. How many clients based their decision on using your services solely on price? You’ll find out after your raise your rates.
And depending on how deeply discounted your rates are, bringing them up to a more realistic level could take time. And along the way you could lose some clients (which is actually a good thing if they don’t want to pay a higher rate).
This is the one time where referrals might be bad! If your client, whom you’ve been providing service for at a discounted rate, refers your to a friend, they will tell them how great your prices are. Then you’re stuck giving them the same discounted rate.
You Can’t Make Any Money
Not only that, but you’ll have a hard time breaking even. Right now, I don’t have a retail repair shop. But I still have overhead. Advertising, fuel, insurance, tires, car maintenance, tools, software, computers, business cards, magnets – anything related to running this business.
You need to be able to cover your business expenses as well as take money home for yourself. In addition, you need to factor in what the market is like in your area. What are other repair companies (your competitors) charging? If you find you are significantly lower, it’s time to get your rates up where they need to be.
If you’re in business already, or thinking about going into business, you probably want to be profitable – or at least I would hope so. Discounting is going the opposite direction. Doing good work at reasonable rates (for both you and your client base) sets you on a path to profits.
It Hurts Your Industry
I keep an eye on local competition and see discounted computer repair companies come and go. There could be lots of reasons they go out of business. But when I see “$19 Virus Removal! We’ll come to you!” or “I’ll repair anything and give you a free copy of Windows all for $39!” that’s a red flag. Just check out your local craigslist ads. Look for computer repair and then look at the ridiculous prices. This isn’t good for them (how can they pay their bills?!) and it’s definitely not good for you.
When people see these ads, they expect those prices from you as well. So when they ask what your rates are, they’re surprised at your response. What they don’t know is the reason why they can offer such discounted services is because of the shortcuts they take in repairing PCs. A lot of times their “fix” is to wipe the hard drive and reinstall Windows (which is fine in some cases, but not as a fix-all solution). They then proceed to install bootleg copies of Windows, Office, Adobe products, etc. – offering “value” to their services. This is a bad way of doing business because it puts not only the computer repair tech at risk but the client as well.
Proficient, responsible, professional computer services are worth every penny. Guys who charge significantly less than the norm will sometimes trash the competition as being over-priced and a rip-off. These are the guys who don’t stay in business long. If they botch a repair, are they going to fix it again? If they do fix it again, are they going to fix it right this time? (and without losing client files and without installing bootleg software?) Usually these guys have a full-time job and are looking for extra money doing one-off side jobs. They don’t end up doing good work or make themselves available when needed. I don’t have a problem with starting out doing side jobs while working full-time, but the services still need to be priced appropriately and jobs done correctly.
It Kills Your Business
I’m never surprised at the rate of which I see computer repair companies go out of business. From the very beginning it’s like they were treating it as a hobby. Big mistake. Giving huge discounts + “repairing” computers the short-cut way = no money and a bad reputation. How can anyone stay in business doing this? They can’t.
The clients you want will 1) recognize good work and customer service and 2) won’t have a problem paying your rates. If they don’t, they’re not your client. Move on.
Charge What You Are Worth and Stick to It
Your clients are getting more than just your time. They’re getting your knowledge and experience. The value of your work should be taken into consideration when helping a client. A repair or a service call is not just about how much time you spent working on the problem. It’s about knowing what the problem is and solving it for them. Whether it takes five minutes or an hour, you still need to charge your rate. They’re hiring you because of your technological skill-set – something they’re lacking.
Some people fall hard for sob stories. A little old lady who gasps at your prices is enough for some to give huge discounts and turn what was going to be a profitable service call into a big money loser. This is one reason why I clearly quote my prices over the phone or email before heading out to see a new client. In the case of the little old ladies (or anyone else with a sob story) I try to remind myself that they had no problem buying the PC in the first place, paying $40/month ($480 a year!) for internet access, $50-100/month for cell phone services, McDonald’s for lunch etc. Heck, fast food restaurants don’t give discounts based on how much money each customer has in the bank, so why you should you?
Now, I DO plenty of work for free. Giving away services and time is something I think is great to do at times. But, I do it for free, never a discount.
Hopefully I made my case. This seems to be a topic that comes up often in any business. The bottom line is: you need to charge what the going rate is (and what you’re worth), do great work, give great customer service and don’t undercut yourself. This will be the basis of a profitable business. Set your prices based on value…not costs.