4 Guidelines to Follow When Clients Push Back on Your Fees

"Your fees are too high. Can you do it for less?"

In the highly competitive marketplace we hear dreaded phrases like this all of the time. The easy thing to do is to offer a discount, but that cuts into your profit margins and sets a precedent for the future. You don’t want to become a victim of discounting gone wrong.

So what do you do when clients push back on your fees?

Focus on your value. It's trite, but true. If what you're selling is worth it, clients will pay for it. But when faced with price pushback, many sellers are at a loss for what to do at that moment. 

Here are four guidelines to follow the next time a client pressures you on price:

1. Don't backtrack: I recently played golf with some friends. One of them is an attorney who was speaking about his services with another friend who runs a hedge fund. Without being asked, he got to price and said, "My fees are $300 per hour, but if you need me to, I'll work for less."

Here's an example of backtracking before even getting pushback. (I'd hate to see him in court, "Members of the jury, he's innocent! Unless, well, you don't think so. OK, we'll plea bargain with opposing counsel…")

Sellers are tempted to backtrack when the buyer says, "But I can get it from XYZ at a lower price." At this point, many sellers give the indication that they're willing to negotiate prices.

Instead, acknowledge that other prices are, indeed, all over the map and leave it there. You're basically saying, "I acknowledge their prices are lower than mine, but my fee is my fee."

Sometimes buyers might walk. That's just a risk you take. Many times, however, you'll simply set the foundation for continuing the sales process at your preferred fee level.

2. Don't start talking cost structure: Imagine your firm won a $15k/month retainer. Some clients will ask, "Well, how did you come up with that price?"

The seller then pulls out a scope sheet and the technology costs are X, the implementation rate is Y, and the monthly service fee is Z, so here’s the fee. Heading down this path is a slippery slope and leads to nickel and diming here, there, and everywhere.

In Fees and Pricing Benchmark Report, we found that firms of various price and profit levels use retainer pricing. However, those firms that achieve premium prices and profit levels do not share the underlying fee structure nearly as often as the other firms.

Think of it like this: if you went to buy a car and asked what the exhaust system cost or how much the dashboard set them back, you would probably get laughed at. In the same vein, you should not lift up the hood simply because you're asked what your costs are.

Continue reading the final two guidelines here.