‘Mates Rates’
It sounds great doesn’t it?
It sounds friendly, and fun, and like something you would want to be a part of.
But wait, eek!
What exactly are ‘mates rates’? 🤔
I first heard of ‘mates rates’ when I was growing up. It was a term used when a friend would carry out a job, usually a tradesman type job, for less money than it would usually cost.
They may have been able to offer discounted rates because they were not putting it through their books. For them it meant they could save money because the job was not official, meaning they reduced their income tax or VAT bill.
So ‘mates rates’ was a two way street. The person doing the work ‘the seller’ was saving money and so was their friend ‘the customer’. But what happens when the seller isn’t getting anything out of the bargain?
What happens when the seller isn’t getting anything out of the bargain?
There are so many more small businesses now than there was when I was a kid.
With the internet came a shed load of micro businesses being run from people’s homes. It opened up a new way of working. Stay at home mums could run a business while looking after their kids, workers on low incomes could run a side hustle to bring in some extra dosh.
So many opportunities!
Buuut, this is where things start to change.
These micro businesses may not be turning over enough money that they need to pay much income tax or have to register for VAT.
So what are they getting out of the ‘mates rates’ deal?
Naff all. That’s what.
Mates rates with a micro business is often just the customer getting a bargain at the expense of their friend.
Wow, read that again.
Mates rates is often someone getting a good deal at the expense of their friend.
That doesn’t sound very ‘matey’ does it?
So why do so many people do it?
It’s just something people have always done, but they haven’t updated their thinking when dealing with a small or new business that doesn’t have the resources to absorb the cost of giving a discount.
If a friend asks you for mates rates, have a think about what you might get in return.
I’m all for bartering services and helping each other out, but it needs to be a two way street, not just you giving your time and resources away. If your friend has a small business or a skilled trade like being a plumber or electrician, then mates rates are a fab way to do business. But if they don’t, then ask yourself if this is a deal to suit both of you or just your friend.
You can offer a discount relative to the amount of help they can offer you if you need their trade services or something that they sell. If your friend works as a data entry clerk in a large organisation or on the shop floor of a factory, they are unlikely to be able to pass on any perks of the job because anything the company produces is not theirs to give away.
If your friend had a steady job with a great employer who pays them holiday pay, sick pay and gives them time off when they need it, it’s not really fair of them to expect you to give a discount purely because they happen to know you.
As self employed business owners we don’t get paid holidays, annual leave, sick pay, industry perks, we have to work really hard to earn enough money to be able to afford to take time off work if we need to. Why should we have to support our friends who are in a much better position as an employee of a company?
Answer is… we shouldn’t.
If you have a friend who is very dear to you and you love them very much and want to help them, then go for it. But do it as a gift of kindness, not mates rates.
A true friend will understand that ‘mates rates’ only favour them and so they should not expect any subsidies from you. Friends need to support each other and that means not expecting mates rates when they have nothing to trade with.
Trading services is a fab way to build your business and help fellow business owners out, but make sure it’s a fair exchange. Whatever service they are offering needs to be on a similar scale to what they are expecting to have discounted from you.
So what can we do instead?
Start by having a conversation. It may be that your friend simply hasn’t thought about how giving a discount might affect your business. If they don’t run a business themselves then it is quite likely they don’t realise how much of an impact it has on you.
Start by explaining where your business is at. If you are a new business you can remind your friend that it’s incredibly hard to get started and grow a successful business. There are so many more costs involved when you are running a legit dance costume business and not just doing it on the side.
Tell your friend you are putting all your profit back into the business so that you can ensure you have a business that is profitable. Remind them that small businesses need a lot of support, particularly early on, and that you are counting on them to help by being understanding and not expecting to gain anything from you.
Talk about how important it is to you that your business is run professionally and not just as a side hobby. Tell them how passionate you are about making your business a success and that there isn’t enough profit to start offering discounts.
Most reasonable people will understand if you explain it clearly. If they still choose not to support you, then perhaps take a look at your friendship. Are there other areas that seem a bit unfair? Are they really a friend or do they just want something from you?
Next time someone asks for ‘mates rates’ you might need to have a little conversation with them about what it means to discount your work and how friendly ‘mates rates’ actually are.
If you want to know more about how you can create a pricing strategy in your dance costume business, then have a look at my Pricing Toolkit. It’s an online course and calculator that helps you work out how much you need to charge to ensure you are making a profit from your work.
