Captain’s log, stardate 20160907
Sent by Jonathan Stark on September 7th, 2016
Let’s say you’re approached by an agency who needs you to give them a quote for some portion of a project for one of their clients.
You submit a proposal and they reply with one of the following:
“We are handling the client, so we’d like you to give us a wholesale rate.”
“The client wouldn’t have budget for that.”
“The client is going to translate that roadmapping session as a very high daily rate.”
I group these into this category:
It’s Not Up To Us - Client is reselling your services to another party and wittingly or unwittingly uses your lack of direct contact with the real buyer to their advantage.
Other than a polite refusal to decrease your rates, there’s not much you can say in this scenario. Value is in the buyer’s mind, so the only way to establish it - and therefore justify your fees - is to talk to the buyer.
Working through an agency can be a good way to shore up cash flow in a slow period, but is not a good way to build a business long term. If you have to do it at all, view it as a stop gap measure while you attract your own clients directly.
Okay, so you can just use my “polite No” line from a previous message when you find yourself in this scenario, but I wanted to comment specifically on the “wholesale rate” argument above. It’s just so ridiculous I couldn’t help myself.
A wholesale discount is based primarily on high quantity sales, not the fact that the middleman is dealing with the customer. If the middleman is not buying from you in volume and paying 100% in advance, a wholesale rate doesn’t apply. They’re not retailing your services, they’re outsourcing to you. It’s not the same thing.
Furthermore, in a professional services business the client relationship is the most valuable asset. Claiming that you should agree to a lower fee because you don’t own the client relationship is backwards. You should charge MORE because you don’t own the client relationship.
Here’s what you could say:
“So if I agree to handle the client, the current rate is acceptable?”
“So, you’re saying you’d like to pay in advance for a bulk purchase of my services? If I’m not mistaken, that’s the basis for a wholesale price.”
“Not handling the client is a liability for me. It makes my job harder. Come to think of it I should probably raise my price... but if you want to move forward now I’ll honor the quote.”
This message completes the 9 types of discounts that clients ask for but I’m happy to keep going on the Learn Your Lines series... What else do you clients ask you over and over again?
P.S. Have I mentioned that Hourly Billing Is Nuts?