FREE. What Will It Cost You?The True Cost of Offering Something of Value for Free
The word FREE has been used in advertising since the dawn of time. We have all heard the old adage, buy one get one free. Free gift with purchase. In fact, I worked for a company in Venice Beach that built their entire business around the free gift with purchase model. The company did millions of dollars in sales of those cheap cosmetic bags that you get when you spend $35 or more at the makeup counter in Macy's. (p.s. They cost like 50 cents to make)
When is FREE not good for your business? How do you know when FREE is actually costing you too much time and money? After over 15 years in the fashion industry, I have had my experiences with free.
As a female entrepreneur, I have attended several seminars for women-owned business. They tell you to give away something for free to attract new customers. For example, a free consultation, a few free hours of work or a free download of a popular podcast, etc.
After attending a seminar, I tried to implement this concept of free in my fashion consulting business. At first, it was a free phone consultation for 20 minutes. I had people calling in from all over that wanted to start a fashion line. The 20 minutes turned into one-hour phone calls where potential clients insisted I give them the name of my factories. I put a stop to the free calls.
Another mistake I have made is when a business owner wanted me to come in and meet with their clients in the promise of working together. I drive to their offices in good faith (3 hours away), spend money on a hotel and meet with their clients over a few days. When I get back to my office, the business owner said that she values my work and offers me commission only on any sales from my designs that may or may not happen. No.
Some years ago I had another gal that wanted me to help her in her fashion recruiting business. Due to my vast contacts in the fashion industry, she wanted me to join her company. Of course, she said she did not have the cash flow to hire me on as a full-time staff member but she drew up a contract for a generous commission structure. Fine. That is common in the recruiting industry. Two weeks after we had signed the contract and after me spending hours and hours on the phone with potential recruits for some high-level positions at a major footwear brand she decided to break the contract. Once again, I was working for free and it did not work out. My bad.
When I owned my first handbag brand I sold Italian leather handbags to all my friends at wholesale prices without charging sales tax thinking I was being a great friend. Wrong. When it came time to file my taxes after my first year in business I ended up having to pay a few thousand dollars in sales taxes on all the FREE tax breaks I was giving out. My bad. Never give your friends something for free. If they want to support your new business they will pay full price.
Oh, wait..one more for free. If a company is hiring you for a design position they may ask you to design a collection for free as part of the hiring process. Don't do it. Ever. They may take your designs and use them for free. If the company can not pay you for your time and talent then it is not the right fit.
Key takeaway? Never offer anything for free if you are a consultant or solo entrepreneur.
If you give away your time and talent for free, why should anyone pay for it? - T.S.
Note: If you are selling widgets on Amazon please feel free to continue to use the word FREE. It is common knowledge that retailers build the cost of the free shipping into their product or business model. #bogo Buy One, get One Free! #GWP Gift with Purchase #PWP-Purchase with Purchase