If you were self-employed, how would you handle this ethical dilemma?

Question

You've been doing your consulting business for several years, and always billed clients by the amount of time spent. Gradually, you have developed a scale based on the time a task usually takes, and produced a rate sheet for typical tasks. Now you have bought a computer and a printer that includes a fax (MFC?), and all your work has gotten much easier. You can handle a great many more clients now, because you don't spend anywhere near as much time per task as you used to.

Do you lower your rates? Why or why not?

I'm not in this situation. It is a hypothetical adapted from "Ethics for Everyone" by Arthur Dobrin.

Answer 1

I don't see how this is an ethical dilemma. If I didn't lower my rates, then somebody else would come along and offer the same service at the lower rate and take my customers away.

Thank the universe for the free market!

Answer 2

Given the cost of electronics and most software upgrades, there may not have actually been much cost benefit that came from buying the machines. At the outset the cost could very well be the same as the time spent on the task.

The value of the work has not changed simply because the time spent has gone down. If professionals were to charge less simply because it takes less time to complete a task, then more qualified professionals would cost less than those starting out. How would that make sense?

Rates based on time alone are not a good business model to follow. All factors would have to be accounted for to create a logical pay scale and ethically, as long as customers are aware of the pricing, it is their choice to choose the service or not.

Answer 3

You could lower your rates to be more competitive and/or attrack new customers.

But ethically you don't have to. Buying the equipment & it's upkeep has it's own expenses. Plus the whole point of being self employed is to profit more.

I've done mystery shopping in the past. Many of them required alot of paperwork, time, etc. Now most of the stuff can be done online fairly quickly. So the companies lowered what they charged & in turn most also lowered what they pay the shoppers. Even with the occasional gas incentive the time traveling as well as performing the job often comes out to less than minimum wage. Thus both companies are seeing higher profits while those who labor see less.

This might not be your case. But consider everything. The PC needs software, printer ink, ld fax cost money. True you're saving time, gas, postage, etc but it's not as big of savings as you may think.

If you still feel bad about charging as much give a discount to seniors or sit aside a gratitude tithe from the profit & donate it to a worthy cause.

But personally I don't see it as an ethical dilemma as to what you charge unless you raise the rates knowing it costs you less than before.

Answer 4

I don't think you need to lower your rates unless you choose to do so in order to help clients that are less advantaged than those you started with. The reason is that your clients are getting the same level of service whether or not it's easier for you. I want to add that it's already an ethical "plus" that you're helping more clients, but I can't find a way to justify that, at least not before I get my morning coffee.

Answer 5

You must first determine how your rates compare with others in your field.

If you rates are competitive you might leave them alone. Don't give away the farm just because you have managed to lower your costs. As your business grows, fixed costs will increase.

If you want offer something additional as a benefit to your clients you might consider offering a 1% discount on invoices paid within ten days. 1% 10, Net 30 will strengthen your receivables flow and save the customer a small amount.

Always remember, it is not unethical to make profit. The increase profitability may allow you to offer discounts on certain types of jobs...possibly "template" type projects that you can complete fast.

Answer 6

Rates should not be lowered because the more one invests on gadgets like computer (with internet connection), printer and fax machine, the more he becomes an effective consultant. Clients pay for the consultant's expertise and it follows that they contribute in a way for the gadgets he purchase to keep up with the times and make him more accessible to them. Upgrading of the mind works hand in hand with upgrading of gadgets/facilities.

Private schools charge more when they upgrade their facilities. I don't see why consultants won't need to charge higher or why they should lower their rates.

Answer 7

If you present your rates to your client as time billed, then yes, you should lower your rates. If you do not, and just say "this is what it costs" and your are competitive with others in the same field, then no, I don't think you need to lower your rates. Of course, I am so neurotic, trying to please everyone I would lower my rates even more than I should just to make everyone happy and go out of business. This is why I don't ever want my own business!

Answer 8

Probably not - unless your costs directly remove significant money from others in the business.

From experience I know that the more expensive a consultant, the more valued and better treated they are. It's ridiculous, but clients assume you're as good as what you charge.

If they can afford it, they can afford it.

Of course, if at any stage you wish to give them a present, or offer them a quid pro quo for something, you can always give them a price cut on this work, but make it plain that it's because you're so damn smart you've automated the process.

CD

Answer 9

No, I don't lower my rates. I made the purchase of the devices (meaning I invested in my business, and that requires money), and became more efficient at the same task, but I still DID the same task to which my clients agreed. I'm not going to penalize myself for doing BETTER work.

Answer 10

I would probably adjust the scale to fit the new time spent, but I would also take into consideration the last time I raised rates and determine if a rate hike was due. If you're billing for time spent, the bill needs to accurately reflect the time actually spent, but there's no rule that says you can't charge a bit more for that time if you need a COLA (cost of living adjustment).