When I started my first small business, my lawyer gave me some memorable advice. “Rhonda,” he counseled, “I’ve never had a client dispute a bill for professional services. People willingly pay thousands of dollars in hourly fees without complaint, but if I bill them $2 in mailing charges, they’ll get upset. It’s small items that alienate clients.”
He was right. We all hate being nickel-and-dimed. Surprisingly, you’re often more likely to lose a customer over a small extra charge than a big fee. When I worked as a consultant, I never charged clients for items such as photocopying, delivery services, or parking expenses. Those were routine additions to consulting fees, but I preferred to treat them as part of my cost of doing business, rather than potentially aggravating clients.
I rediscovered the annoyance of nickel-and-dime charges when I remodeled part of my home. While I originally gulped at the cost of a large job, once I made the decision, I didn’t have a problem writing the check. It’s the little fees that drove me crazy, like multiple delivery fees when the store makes one trip for three appliances.
As a small business vendor, you’re often far better off eating those charges yourself—or wrapping them in to the overall charge—rather than piling one small fee after another small fee after another.
When not to charge for extras:
- No perceived value to the customer. If I spend a few dollars more per yard on carpet, I understand I’m buying higher quality. But what value do I perceive in the extra cost for moving my couch? Sure, I know the carpet company incurs expense in the time spent moving even a small amount of furniture, but I still react poorly to an extra fee that likely applies to 99% of their customers.
- Inflated prices. If my lawyer bills me 25 cents per page for photocopying documents, I’ll know I’m being overcharged. I’ll then suspect I’m being overcharged for professional services as well.
- Normal costs of doing business. I might pay a graphic artist $3,000 to redesign my marketing materials and, if she does a great job, feel like I’ve got my money’s worth. If she adds $300 in print shop costs, those also seem like reasonable charges to pass on to me. But if I see a $5 item on my bill for parking lot fees, I’m going to feel she’s unprofessional.
- Your competitors do it. If the other guys routinely lower their real prices by adding hidden charges, you may feel you must play the same game. Be warned: you may get the customer, one who’s likely very price sensitive, but competing on price this way gains you the most complaints and the fewest referrals.
- Hard-to-understand fees. My reaction to extra charges is also going to be influenced by how much I understand the fee itself and whether it’s out-of-line.
This isn’t to say you should never add extra charges to a base price, just that it’s important to use judgment every time you add another line to your bill. Obviously, if there’s a major additional fee, discuss that with your customer before you incur the cost.
Here are some legitimate extras to add:
- Highly variable costs. A rule of thumb with small extra charges is to assume normal, predictable amounts and charge only for items that are unusual or highly variable depending on the customer.
- Easy-to-understand fees. If the add-on fees are transparent or easily understood, the customer is most likely to accept them willingly. Adding court costs to a legal bill is expected. I charge travel expenses when I fly to a speaking engagement. Just delineate them on your bill clearly.
- Added services or products. If you’re a hairdresser, you can’t charge for shampoo, but you can add on charges if the client agrees in advance to extra conditioners, straighteners, highlights.
- Let them know. When you do eat costs for items your competitors charge for, let your customers know. List those items on the bill followed by the word, “Complimentary.”
Remember, extra fees—usually encountered at the end of a transaction—often leave a customer with a sour taste. Is that the last impression you want to leave? Instead, try to make the last interaction with a customer the most pleasant. So go ahead and move that sofa for free.
Copyright, Rhonda Abrams, 2018
This article originally ran in USA Today on January 17, 2018