You might not know it, but I used to be a carpenter.
Most of my youth was spent swinging a hammer.
As a young kid on a job site, I learned a lot…
Sometimes too much.
Although I was young, I was just another guy on the crew. But as I got older, I took on more responsibilities and eventually started bidding and selling jobs.
The first job I was asked to estimate was in Ponte Vedra, Florida.
The home sat on a golf course in SawGrass, where the TPC (golf tournament) comes through.
It was a huge home with a bad termite problem.
When I pulled into the mile-long circular driveway I knew I was in way over my head.
The front door opened and the homeowner, John walked out to meet me with a Coors Light in his hand.
“I want the damage repaired and a simple room addition. How much is it going to cost me?” Those were John’s first words to me.
I hadn’t done any measurements or even laid eyes on the damage yet.
After some negotiating, I convinced John to let me look at the damage and take some measurements.
Afterward, I worked up the bid just the way I’d been told: Estimate man-hours + material costs + 60%.
My boss didn’t pay commissions. You either worked with the crew, or you bid and sold jobs. You earned the same amount either way. So I took every chance to go out on bids.
When I went back and told John the price, he said “No way, I’ve got bids for half that.”
Confused, I called my boss and told him what was going on.
“Double the bid.” He said.
“What? No, you don’t understand.” I pleaded.
“Double the bid.” That’s all he said to me.
So I did it.
I went back and told John, nervous and now sweating through my shirt. I manged to spit out that my last estimate was off and I laid the new one on his table.
I tried to shake his hand but he ignored the gesture. So instead, I thanked him and walked out the door.
When I got back to the office, I asked my boss why he told me to double the amount?
He said there are a lot of reasons you raise your price in a situation like that.
“None of them,” he said “have anything to do with the customer’s financial situation.”
Because that’s what I’d thought—that he simply doubled the bid because John had the money.
I was wrong.
My boss then said something that has stuck with me ever since…
“Customers driven by price will never care about quality”
It makes sense when you think about it.
If you lower your rates (as most do) you might land that gig. Maybe. But businesses are built on repeat customers.
John Called Later and Accepted the Bid
Later on that night, after I’d left the office, John called me and apologized for the way he had treated me.
He explained that he had been burned by another contractor before.
He’d also been in a huge fight with his wife minutes before I showed up…
He wanted to go golfing with his buddies, while his wife dealt with the contractor (me).
So while I was there, John was pissed about not being on the golf course.
And to him, I was just another contractor. Same as the one that had ripped him off. Except this time, the contractor stood in the way of him and the golf course.
Not a good place to be.
He agreed to pay the rate I bid, which was only the start of our relationship.
My company went on to work with John for more than a decade until he died…
We worked on his home, his son’s first home, all John’s commercial rental properties and many of his friends’ homes.
By doubling my bid, I separated myself from the type of contractors John was so afraid of.
When I bid the job, John was thinking of other things…
He wanted to be golfing. Not fighting with his wife and dealing with some contractor.
At that point, I was a thorn in his side and John was eager to get rid of me.
Nothing I could’ve said or done would’ve changed that.
Lowering my bid would have lost my company that job and the millions in work that came after.
Freelancers who cater to price-driven clients always fail
Price-driven clients will always want more value. There will always be One more revision, or, Can you change ‘X’ to ‘Y’…
…or some other way to try and squeeze more out of your invoice.
I’m not saying these types of clients are bad people. But they are bad clients.
You cannot build your business with price-driven clients. You need to purge them, and raising your rates is the best way to do it.
If your customer doesn’t care about quality there’s not much you can do—unless you’re willing to be just another gun for hire, nothing distinguishing you from all the others.
By raising your rates you avoid a big mess. You send a clear message to the client. And you set yourself apart from other freelancers.
Sometimes the client isn’t price-driven at all, it just seems that way. Like with John.
John clearly was not a cheap guy. He wasn’t concerned with price as much as he was with quality. However, there is no way to know what type of client you’re dealing with unless you raise your price.
Maybe a psychologist could have sat in that driveway with John and got to the bottom of everything, but I sure couldn’t. And unless you’re some sort Jedi freelancer (and maybe you are), you won’t be able to either.
Raising your rates helps you filter out the good clients from the bad clients when you’re in a situation like I was with John.
Because you never know why a client complains about price. Usually it has very little to do with their ability to pay.
Often it’s about something completely unrelated.