Negotiating what you're worth! | Conversations | Advicetap

Sue - can you expand/clarify on the "win the deal without compromising my services".

I find most companies (except for agencies) don't have a budget in mind. Even larger companies may have a total budget for a period or department, but not for a specific project.

I'd say it's better to focus on the value the result will deliver for the client. If you had 10 new customers a week how much would that be worth to you? Or if your supply chain got product in 2 days faster what would that mean to you in financial terms.

This strategy makes justifying higher fees much easier.

We try to ascertain a client's budget prior to pricing a job but often they have know idea or only know what they paid last time for something similar.
To counter this we try to offer 3-4 options, each increasing in content and value. We have been trialling pricing from the highest price down on the basis that this is the best option, but it hasn't been very successful.
We find that where we offer 3 or 4 options we always get option 2 and often option 3. In the last 18 months we have found clients are focusing more on price than understanding value, but are sticking to our guns matching price to value.

Personally, I have found this to be one of the biggest learnings. I 100% agree with Margaret. I am also attempting the "options" route, and what I am thinking will end up happening is that prospective clients will still remain fixated on price because it's short-term, it's now, regardless of the long-term proposed value they will receive With the options, I am connecting price to products, rather than to time. We actually had a conversation about sales and pricing awhile ago on Advicetap, and I remember Tom Searcy talking about having your own "internal calculator" of what you would want to charge in an hour and then figuring out how much time it would theoretically take to deliver something, and then you tack a price for that product. You still essentially price out based on time but the client doesn't know any of this. All they see is price for product delivered. Finally, I think a big part of how I approach sales is using real case studies that clearly show how you added value through client results that matter to them. If you helped streamline costs by 10% and the cost of the project was 4% then this becomes a no-brainer for clients when they see this....... theoretically!!! :):)

I've recently upped my rates and have been on the edge of my seat as I press "send" to each new prospective client. So far, not one client has declined my rate or my estimates.

Why? I think that, because I'm more experienced (and frankly, faster) than many of my competitors, I'm able to bid lower than other consultants and not compromise on my rate (which in essence is my competitive advantage). I would also add that 90 per cent of my business comes from referrals by people who've already worked with me or know me by reputation, or from previous collaborators or clients. As a result, my clients have a high level of confidence to deliver results. In other words, the experience of quality work in the past makes me worth the price.

Having said all that, my stomach is still in knots as I wait to meet with a new client tomorrow who's offered me a retainer. And I'm working on a quote that is bound to get sticker shock from the client because they've got no experience working with a PR consultant before.

The key - like anything else in life - is to hold firm and have a bottom line. If they go below it (as one prospective client did to me a few weeks ago), take a deep breath...and turn down the work. We do neither ourselves nor any other consultant in the market a favour by driving down the value of our services.

HI Lesli
Your clients probably value the fact you are faster quite highly - which is probably why they aren't objecting to your price increases! In most cases we find clients are prepared to pay a premium for faster turn-around.

We have the same problem with clients who come to us with no experience of working with another firm. During the recession we have lost existing clients who shopped around on price. The good news is that once they understand the value we are delivering they come back.

If we are asked to reduce price we also reduce the value of services provided. It is one of the reasons that offering options works so well.

Agreed - especially for newbies, it's good to provide options: $XX for A + B + C, $XX= for just A + B (which I also do). So many people value marketing and PR but don't realize that most of our costs are in our actual labour (ironically, clients are much more willing to part with tens of thousands for a media buy than to pay for us to get them earned coverage!)

Lesli, I don't think it really matters what kind of consulting you do because the challenge will always be to have clients truly understand the value you offer. I have the same problem with my business and employer branding. I was always talking about the solutions and was never talking about the "so what"... what do the solutions mean to the client in results? I also agree that the best business is a) repeat business and b) through your close network. I think with both a and b, the conversation more quickly shifts to implementation because the questions/concerns over your ability to deliver and add maximum value have been answered (I think). Regardless of the kind of consulting that you do, I think focusing on presenting a case for cost versus realized value is the way to go.

Agreed - the value of consulting can sometimes be unclear (and consultants who don't deliver, once again, drag down our value), because they're paying you for advice and ideas, not "stuff".

I've paid the price of not doing this well, where an initial project, poorly quoted, ended up earning me about $1.50/hr after all was said and done. I learned from that experience a few things about pricing, though:

1. Never undercut yourself unless you know how much it's going to cost you in the end;
2. Some customers can't afford to pay for your services, and you can't afford to have them as customers;
3. Try to price things (whether in the quote or not) in as detailed a list as possible, so that you have room to negotiate components of the contract for dollars;
4. Don't forget to factor in normal time spent communicating with the client - this can really add up, especially if you aren't explicitly billing for it;
5. When a project has gone over the allocated time, immediately bring it up with the client and figure out how you will finish in the minimal amount of time possible (when doing project-based billing).

I agree re: time overruns (there's always those unexpected events that demand more of your time). On the client side, what I hate is when a consultant quotes for a contract and then announces - after the engagement is over - that they went way over their quote and would like more money. Tell the client BEFORE you've used up the allotted time, so they have the time and ability to decide what to do next (including finding more money!)

I also indicate in every quote I make that all hours required by the client will be billed at the hourly rate - tell clients up front so they don't think this is a flat-rate project (unless you're comfortable agreeing to that).

Excellent point regarding the timing of informing the client before the time runs out. But I was referring to when you think the project will take 100 hours, and then you hit 100 hours are realize that you need at least another 50. So you need to tell the client that - even if you were charging a flat fee. It's not asking the client for more money, but telling the client that they shouldn't expect extras.

In my field, I can't always charge by the hour. If I'm building a standard website, for example, that's going to be a flat fee. However, building the website is not the core of my business - figuring out what type of website is needed, helping with marketing models and income models for that site are.

As a result, my clients usually get a quote in two forms - one part flat for the standard component (for example, putting up a customized WordPress blog) and an hourly rate for the custom portions. If I go over on the standard component, I'll be out the difference. If I go "over" on the custom portion, it costs the client more. I try to estimate the number of hours for the client, but I indicate that my estimate is exactly that, it's my best guess based on past clients.

I think, however, that what makes the biggest difference in all this is keeping open communication with your clients. Yes, there will be some clients who want to get as much as possible for as little as possible, but I've found that most of my clients are fair - they aren't expecting the world for a few measly dollars, and they don't mind paying the extra fees to get the service they want.

Elie made a great point - it is not a limbo competition of "how low can you go" !

We always include a clause that says if we get into the project an encounter something unexpected we can come back to the client to renegotiate. We very rarely use this, but have occasionally when a new client hasn't disclosed everything. When we go back to the client we explain the problem and how much extra it will cost for us to sort it out, then give the client the option to sort it themselves.

One of our key indicators is the average hourly recovery on a job, i.e. fee divided by actual hours taken. We then use this to review how we can do it faster, cheaper and better next tim