It’s time we talked about a common industry term: a loss leader. A loss leader is a marketing strategy where an AEC consultant – or other businesses – will take on a project or sell a product KNOWING it will lose money, with the hope to win a bigger project with the same client in the future, or to sell another product at a higher price in the future.
Looking specifically at professional AEC services, service providers taking a loss on offerings in any other aspect of life would be unacceptable – so why do we think this is OK in the engineering and architecture world? For example, do you expect a qualified contractor to renovate a bathroom in your house, taking a loss –meaning they are NOT able to pay their own bills or feed their family – on the off chance that you MAY ask that same contractor to do your kitchen renovation within the next few years? How about expecting your tax accountant to do your taxes for free, in the chance they will win your business for the next three years?
And why not? The answer is simple.
- No qualified provider would EVER do work for free. Why would they? After all, just like us, they are providing services in exchange for payment with the plan to be able to stay in business and earn a living.
- There is no guarantee for them later down the road that you will even do a kitchen renovation (using the example above) and that you will, contractually, award them the job.
- It is not a fair business transaction. It is not reasonable to ask someone to work for free. Earning $0 an hour is not something that you personally would accept – outside of charitable giving. Why do you expect others to accept this rate?
Wouldn’t we all be better off if we offered our services at fair rates and paid providers fair rates for their services?
Fair Price for Offering Protects Everyone
Paying fair prices for services also protects the individuals purchasing services. After all, the adage, “you get what you pay for” is around for a reason. Quite possibly, getting something for free can cost you more in the long run thanks to the lower quality of building materials, workmanship, and even design related services.
From a provider standpoint, I ask you to forever resist the urge to provide any services for free. After all, you have worked hard to develop your skills, perfect your trade, and provide meaningful and important insight to every project you touch. You deserve to be paid for that. Do you need to charge for every little thing you do or say? – no. Just be cautious when toeing the line between simple due diligence and informational conversations and full-blown work deliverables and project solutions.
And this isn’t to say that AEC companies should not be thankful for the opportunity to provide services to a new client willing to give them a chance. But instead of providing services at a loss, I ask that perhaps clients give – and consultants accept – smaller work contracts first as a “test”, rather than expecting service providers to prove themselves by taking a financial loss.
Let’s work together to help keep our professional work experience respected and our communities safe from “free for a reason” work.