Hey startups community,
I find myself in a bit of a bind and could really use some advice. I recently closed a business deal, only to realize afterward that I severely underpriced my services—about 25% of the market rate. The price negotiation is already a done deal, and now I’m feeling pretty awful about it.
Has anyone been in a similar situation? How did you handle it without damaging the client relationship or your business’s reputation? I’m worried that this might have long-term consequences, and I’m not sure how to navigate the aftermath.
Should I approach my client and try to renegotiate the terms, even though we’ve already agreed on a price? Or is there a way to make up for this mistake without jeopardizing the entire deal? Any advice on damage control and salvaging the situation would be greatly appreciated.
I know I messed up, and it feels like a major setback. If you’ve been through something similar or have insights on how to bounce back from such a situation, please share your experiences. Thanks in advance for any guidance you can provide—I could really use some support right now.
You can’t put a price on integrity. If you want to build a business long term, suck it up and don’t do it again.
It really depends on what has happened.
Is an agreement signed? Is this client essential?
What are the legal repercussions for not following the contract?
Then you need to consider whether you cannot deliver at the price or did you just realize you could have earned a lot more?
Also, how did you end up not knowing your pricing was so off beforehand? It sounds like you might have some internal issues that need to be worked on as well.
Good thing or bad thing – the agreement hasn’t been signed yet. So, no legal obligations exist yet. Just negotiations have crossed the pricing part, and agreements are expected to be signed before the middle of next week.
I could deliver at the current price; however, I’m undercutting myself by a whopping margin. Not just 30-40 percent, but by 75 percent.
I got to realize about our price mismatch because of a seemingly simple difference between how we calculate our pricing vs theirs. We used an in-house model of cost calculations; however, that’s different when they (the client) pitched to us with their own simple solutions. And we thought it’s easier to go that way. But when we compare our pricing to the existing clients, putting in the backdrop of their simpler pricing, we realized we fucked up big time.
If nothing is signed, it’s not a deal yet. Everything is still malleable. Bring it up now and make changes or suffer the consequences.
If you’re past the pricing part of the conversation, add into the conversation that you expect to know the expectations and for the client to be a reference in the future. If you’re a startup that can be more valuable than the money you’re missing out on
Good insight. Thanks
You haven’t signed anything. It’s not too late. It’ll be very very uncomfortable and you may lose the deal, but then you’re not stuck in a commitment and can move on. Perhaps find a middle ground. Time-box the deal for the first few months and set a mutual out and for renegotiation.
That’s a good point. I’ll definitely keep in mind for the next meeting this coming Monday.
If it was 25% higher you might not have been chosen to do the job. If you’re operating at market rates, why would anybody hire someone with no experience (a.k.a. previous jobs) vs someone that has done this tens of times?
Do your job as best as you could and take your recommendation, next time ask for a higher price and you’ll be sure you’ll get it.
That’s what we call legacy customers. Everyone has some that hang around. Once you’re more established with more customer paying market, you can tell this customer that prices are going up at a renewal when you’re not as afraid of pissing the off.
Good point. Hopefully we’ll find good middle ground for both parties.
I think it depends a lot on your business model. If you are still making a profit at this price it is very different than if you are charging less than your costs due to an error.
Since you seemed happy with this price before learning what competitors charge, I’m assuming it is profitable for you. In that case, I would stick with it.
In my work we’ve always had a focus on making the client happy and renegotiating at this stage I feel would leave a bad taste in their mouth. Since it is one client of many, since it is for a limited time period, and since (I’m assuming) you still make a profit, I would focus on the asset you are creating of a happy customer with future revenue potential.
You may want to have a talk to them about what a great deal they are getting and you hope you can get a testimonial or something. And you also may need to start preparing them to expect a higher renewal rate.
But as someone who has also been on the buying side, I would not be happy at all with someone coming back with a big price increase after that part has been settled.
Some really good insights. Thanks for your suggestions
I’d tell the client that you made a mistake, that you are going to honor your price, but that future work will be priced independently (i.e., the current price is a one time deal). Or, don’t even tell them and just live with the price you negotiated. The burden for this mistake should be carried by you, not the customer. The upside in telling them it was a mistake is that they may open the door to re-negotiation. But let them bring up the idea. Regardless, under promise and over deliver.
We had a meeting today. Good thing we found a mutually acceptable middle ground. Thanks for your insight. Really appreciate it
I’m assuming it’s still profitable or you wouldn’t have quoted at that rate.
I’d love to know what market is making >75% profit