Re: Discounts for Guarantee of Work

At 03:43 PM 6/15/00 -0400, Kim Baron wrote:
 >- snipped -<
>This morning I received email from her asking if she could get a bulk discount for work done over a certain time period if she could guarantee me all of her site work for that time period. This is a fantastic offer for me, because it means steady work and steady income for a while.
>
>My question is this: How would you handle a bulk discount of this type? Should I quote her a retainer fee for a certain number of hours a week or should I offer a flat discount of 10% or 15% across the board?
 >- snipped -<

There are a few schools of thought on this, although most of the discussion centers around how to determine your hourly rate, before discounting. To keep it really simple, lets assume you have already determined an hourly rate that will 
- keep your overhead covered,
- pay you a good salary
- yield a reasonable profit.

We can also assume that this hourly rate takes into account that most free lancers and consultants average out at 168 billable days in a year, and the other days are spent in marketing, selling and administrative work.

Based on the above assumption, the net result of such a guarantee is that you will be able to work more than 168 billable days in the year, as you will spend proportionately less time marketing and selling. This can be measured exactly, if you have enough data, tracking previous years expenses, cost to acquire a client, closing rate, all that kind of stuff, or you can make an estimate based on looser numbers. 

You could do it based on your cost, or based on the perceived value of your work. I like the idea of using the clients' perceptions, because then you are more likely to keep on the good side of a valuable client. Looked at this way, I would not go below a 15% discount, anything more will lead her to believe you were over-charging in the first place. Depending on the numbers we are talking here, I would discount somewhere between 5-10% of all work, and add a further 2% discount if she paid every month in advance :).

Cheers

Kevin A. Jackson, Webmaster
mailto:kevin(at)biz-zone.com

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