When “Giving It Away For Free” Becomes “You Will Never Get Paid”
I know that a popular lead generation technique is to give away services for free in exchange for potential paying business in the future. If you’re going to do that then provide zero-based invoicing to establish your value.
Unfortunately “free” is very intoxicating to prospects; know when to say “last call”.
Today, I cut off a large prospective customer. This lady had been calling me on a quarterly basis to chat and ask my advice. She’s a millionairess. She worked with me several years ago when I partnered up with her adviser on a temporary project. After the project was over, she stayed in touch. At first, it was to thank me for saving her about $30,000 in a tax mistake that her CPA made. Then it became an ongoing review of the advice her CPA and financial adviser were providing. She would hint that she wanted to transfer her account to me and then would proceed to give me details of what her advisers proposed and asked my opinions about their recommendations.
I happen to like her a lot as a person. She’s a nice elderly lady and I would not want to see her be hurt financially. However, the reality is that she is not a client. I am not being paid to handle her finances. By asking me to advise her, she’s making me bear the risks without being compensated.
I finally said no to helping her out any further in order to protect my business.
This is not fair to me nor to my existing clients. I have finite resources. There are only so many hours in a day and there are things that my staff cannot handle. Basically, she is asking my clients to subsidize her problems.
I drew the line when she asked me to give her an opinion on a comprehensive Roth IRA conversion for her and her family. Both her CPA and financial adviser were unable to explain to her why they thought she should convert or how they would be affected by taxes. She’s not happy with their services but she’s more afraid of change.
To be fair to her, the fault in this relationship and why I don’t have her account is mine. She offered me her business several years back after I finished the project. At that time, I declined because of my personal code of ethics. I did not feel that it was appropriate for me to take business from a colleague even if it was unsolicited. I called the financial adviser and informed him about his client’s wish to defect so that he could save the account.
Unfortunately, I did accept subsequent phone calls from this woman and answered her questions. This set up a precedent that she took advantage of. In her mind, she knows that she’s in the wrong because she’s now hinting about her account but when I ask her directly for the business, she has an excuse. Why change your life when it’s working well.
My time is valuable because I am the person who brings in business for my firm. We need to focus on making profits with so that people stay employed and to cover unexpected emergency. I’m all right with a random answer here and there that takes me seconds to answer with no need for thinking. Anything else past that is determined to be “work” and must be paid for.
I think one of the best business advices comes from Kenny Rogers’ The Gambler:
You got to know when to walk away and know when to run… The secret to surviving is to know what to throw away and knowing what to keep. Cause every hand’s a winner and every hand’s a loser.
In business, sometimes the best way to make money is to say no and walk away so that you have time and resources for paying customers. The worst that can happen is that you’ll have more time for a personal life.
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Very well said – I have the very same problem with a large prime contractor who always calls me up whenever he has to respond to an RFP and continues to use my insights every 3/4 months for a few hours, for free. As you said, everyone has a limited time and the situation isn’t really fair for my existing contracts, and probably this is a deal that I need to walk away from.
Amrinder,
I do send out a detailed bill now with most things I do pro bono. It opens a lot of eyes about what it costs me to provide the service. It’s always bad when I don’t let people know what they’re actually getting for free.
Yes, that is a great idea. At least when they open the invoice, it would be good for them to see the 0$ itemized invoice, and perhaps prepare them to see an invoice with a positive balance next time.
Amrinder,
I don’t put $0 itemized. I put the actual costs in there and then note in red pen across the bottom next to the total invoice amount, donation or pro bono. It also allows me to document and write off the costs as a donation. In many cases, especially for charity, I am actually paying staff salary and for projects out of my pocket.
I do the same with existing clients as well for extra work that I choose to do above and beyond the services covered by the retention fee.
I see. That’s actually even better – I just wasn’t considering the tax angle, and even aside from that, the positioning becomes much better too. Looking forward to your next article.
I do the same that way they know that it took time and resources.
There’s a reason why it’s called “Spending” time.. It’s worth something. One of the things you touched upon in this post that is so important is that when you are giving it away for free it puts your other clients in jeopardy. (my words because that is how I see it as well) It’s not fair that your other clients have to pay for your services while someone else does not. I try very hard to balance providing good advice to people to give them the trust factor they need to hire my services, but once it becomes an issue where they are simply calling me for help and not signing checks and contracts I draw the line. It’s important to set a precedence early in the relationship so that not only does the customer/person know what to expect your output stays consistent. On a side note giving away your services for free is not only unfair but it also puts your other customers in jeopardy. If you continually give away services or discount you are cutting into your ability to operate. If you go out of business because you give people deals what will your other clients do who depend on you. This is what I tell people when I need to cut them off. It usually hits home with them.
Raquel,
I absolutely agree with you that it affects your other clients and is unfair to them as well. I know that in this particular case, I let it go on for longer than I would for anyone else because the individual is an elderly woman who is going completely blind. There was a lot of sympathy on my side because a relative is going through the beginning stages of blindness as well. She also called me whenever she is about to descend into depression. I try to balance between business and basic human kindness but I did cut it off when I felt that I was being taken advantage of.
Excellent article Kim! I have a *slightly* different take on it (while agreeing with the general concept that work done pro bono should not be taken for granted). Sometimes, we all do work gratis, and that is for a few different reasons – as marketing (spreading the good word around), or relationship building (in hope that some work will come in future). So, if we can manage and track our time spent accurately, and if we are within our budgeted range of “gratis time” (say 15%) that we have allocated for marketing and similar needs, then it may be OK. Of course, the choice still remains on which client/work did we do for free.