Refunds: When To Eat It

George Paul III

, B2B

When To Eat It

 

I had written previously about an experience with an unreasonable client whom I refused to give a refund to. This was because I had several systems and policies in place that she violated leading to the outcome we warned her about. That being the case she wasn’t entitled to a refund. Now, that doesn’t mean I haven’t provided refunds to clients when the issue isn’t my fault.

 

 

Here’s three circumstances in which I will take the loss and as they say, “eat it”.

 

When They’re Your Best Client

 

You take care of those that take care of you. Remember, you should know your numbers, which includes your client’s LCV. The more they’ve spent with you and referred you to others who continue the cycle the more readily you should provide them extras in the form of gifts, discounts and on occasion refunds.

 

 

 

My largest clients spend at least $10K a year with me. If an issue comes up that’s their fault but needs to be fixed, for the most part I just take care of it because it’s only going to cost me $100 or less. What do I get in return? Brand loyalty—more than worth it. However, I only have the freedom to do that because of the next circumstance.

 

When You Have The Margins To Do So

As a general rule of thumb you should charge 3x more what it cost you to do it. This gives you profit margin as well as the ability to absorb unexpected costs without putting you in the red. While this should be a no brainer I’m going to say it.

 

Never let your clients know what it costs you to do anything for them!

 

They WILL demand discounts and refunds because they’ll feel taken advantage of. Your cost is your cost. Built within it is staff, overhead, and the margins you’ll need to stay in business. With high margins you can absorb some costs and make them happy. So feel free to do so when you feel it’s necessary like when the last circumstance arises.

 

When It’s Not Worth The Hassle

There are times when what you’ve been paid is not worth what you’re going to lose, which can be more than money.

 

I’ll be clear and say that while the threat of a negative review
should be taken seriously,
it should never be the reason for a refund.

 

Nowadays people can be spiteful, get the refund and still badmouth you. I understand you’ve poured hours, materials and manpower into it and you want something to show for it. However, you need to think ahead at what you’re about to get into dealing with a determined and irate client. If your expenses have been covered, or you’re not too deep into it, cut your loses and sever the relationship. Believe me, if you’re professional and on top of your game it will bite them back in time.

 

One Last Tip

 

Sometimes a refund or discount doesn’t have to be the solution. You could provide warranties and add-ons that cost you pennies, but still solves the problem. While there’ll be times you have to eat it, use these principles to determine when you should. Until next time I wish you much success transforming your business into an amazing brand.

 

 

 

 

George Paul III

 

George Paul III is a branding expert and award-winning designer. He’s the Founder of Seize the Brand, an education platform designed to empower business owners by leveraging the power of branding to realize business and life goals.

 

 

 

 

 

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