with Aliza Sherman
If you own a business - home-based or otherwise - this is the blog where you'll find practical tips and smart ideas about entrepreneurship. I've started and run 4 different businesses so "been there, done that." I'll also invite successful entrepreneurs to share their best advice with you.
To learn more about Aliza, check out her profile on Work It, Mom! and her website, www.mediaegg.com.
I’ve been thinking about the debate I have occasionally with other business owners about when to give away services versus when to charge. Some are of the mind that you should never, ever provide services for free. Others, like me, feel there is a right time and reason to provide services gratis but that you should apply sound business thinking to your decision.
For me, giving services away is not something I take lightly. I have to be careful how much time I spend on pro bono work, and as selfish as it might sound, I must be able to leverage the job to directly benefit my company - and my bottom line - in the long run.
Here are some tips for giving it away - when to do it, how to do it, when not to do it - and if you have any others to add, feel free!
1. A Good Cause. I think the main reason to give something away is when it helps a cause that you believe in and want to support. Many nonprofit organizations accept in-kind donations. This means that you can get a letter from them stating that you contributed to their organization in the form of services or product at a value you determine (fair market value). This can be used for tax purposes. Check with your accountant. But before donating services, estimate how much that time will cost you and make sure it doesn’t put you into a cash flow crunch.
2. A Barter. Bartering is a great way to get something for something other than money. It really isn’t giving it away because you are getting something in return, but sometimes it is much easier on the cash flow to provide a service or product in return for an equal value service or product than forking out the bucks. The key here is equal to make your investment worthwhile. Choose products or services from others that can further your own business in some way. And example of this would be providing public relations services to someone who designs a brochure for you.
3. A Loss Leader. There are times when doing something for free pays off in larger dividends in the long run. People just starting out in business often give away some product or services as a way of building business and a portfolio. While some people argue this sets a bad precedent, the main thing to remember to do is to set a parameter on what will be free and for how long and to make sure the terms of your agreement are kept confidential by both parties. Nobody needs to know what you charged or what they paid. Let everyone assume you did the work at your normal rates.
When should you NOT give it away?
1. Doing a Favor. I totally believe in doing favors for people, but not when it comes to giving away my services on an ongoing basis. If there is no mutual benefit - if you are just giving them away just to be nice - you are setting yourself up for business disaster. Sure, I do a favor once in a while for a good friend because they are in a bind. But I set limits. Even friends can take advantage of friends and often unintentionally at first, but once the pattern starts, it is hard to break on either side. Friendships are not based on one person providing another person with free services or product from their business. If so, I’d question the friendship.
2. Blood Ties. If your family can’t respect the fact that you have a business and your time is valuable, then who can? Again, I will always offer to help a family member with something they need as a one-time short-term easy project, but I expect that if they need more services, that they’ll become a paying customer like anybody else. In reverse, when I ask my sister who is a very talented graphic designer to help me with a project, I pay her. She tells me that her own friends and colleagues don’t even pay her going rate, but I make it a point to do so because she deserves it even if she has trouble asking for it.
3. Cash Flow Crunch. If you can’t afford to do the work that doesn’t bring in the cash, don’t do it. I’ve been honest with nonprofits, friends and family and simply say “I’d love to help, but I’m in a crunch right now and can’t do it and do it well.” People respect someone who can set boundaries and who wants to do a good job and is honest when they know they cannot. Saying no is far better than saying yes then screwing things up.
When do you give it away and when do you say no?
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