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Summary:

Not long ago, all negotiations were done over a meeting or a meal. For today’s teleworkers, it’s almost impossible to do this if your clients are all over the globe. We’ve all had to make do with online negotiations most of the time, leaving out the […]

Not long ago, all negotiations were done over a meeting or a meal. For today’s teleworkers, it’s almost impossible to do this if your clients are all over the globe. We’ve all had to make do with online negotiations most of the time, leaving out the nuances of face-to-face meetings.

The good news is, our online communication tools can work equally well for negotiation – if we know how to take advantage of it.

Have a timely response. Because it’s very easy for potential clients to reach a variety of contractors, odds are you’re not the only one who received their offer. If you wait a couple of days before sending a reply, you risk losing the opportunity to be hired.

Be confident. I’m a nervous wreck. If I were to meet with my clients and negotiate over lunch, I’d be shaking so much that I might accidentally stab myself with a salad fork. The good news for people like me, or for people who are shy and soft-spoken, is that none of this matters online. Negotiations won’t turn into an alpha-dog-stare-down competition. All you have to do is be confident through your emails, IMs, or VoIP calls. This acquired confidence can help you assert your end of the deal.

Learning how to read subtext is an important part of negotiation – online or offline. Clients never say exactly what they mean. For example, the phrase “Send me a quote” shouldn’t be taken as a direct instruction.

When clients ask for a straightforward quote for a complex project, this usually means they don’t fully understand the complexity of the project. If you send them a single figure, their expectations will be built on that figure, even if your work is worth more. Sending a price range as well as an explanation why you can’t give a fixed cost for now. Of course, you should offer to discuss the project in depth with the client, so you can estimate the cost more accurately.

One of the lines I hear most frequently is some variation of “I know a high school student who can do the job for a fraction of your price. I can easily hire them!” More often than not, this is an idle threat. When a potential client tells me this, it usually means that I haven’t justified my price properly. In response to that statement, a designer I know actually said “Go ahead and hire the kid – but know that in doing so you might permanently damage your brand and never recover.” A bold move, but he was hired.

Be ready with alternatives. If your client won’t go with your initial price, it’s important to offer alternatives that he’d be comfortable with. You can offer a more flexible payment plan, or promise a small discount for his succeeding order. But whatever you do, don’t compromise your bottom line.

Opt for moving the negotiation to the phone or VoIP. Although email is a good communication tool to start with, it’s also a very easy way to mess up negotiations. For big projects, I schedule a VoIP conversation first. This allows the client to ask me any questions in real time and address all their concerns in one sitting.

Learn to say “No”. You’ve already offered payment alternatives and promised a high-quality product and the client still doesn’t take it – put your foot down and tell the client that they should just look for someone else. While a few of them may agree and leave, some will actually cave in and hire you. After all, if you’re as good as you say you are and your client knows what’s best for them, there’s no reason why they should go with someone else.

How do you handle online negotiations? What’s the toughest online negotiation you’ve ever had?

  1. A couple more suggestions:

    1. If you are submitting a fixed price, and the client balks, do not reduce the price without reducing the deliverables. After all, you’ve calculated the fixed price; lowering it without reducing the work involved represents a loss of profit to you.

    2. Offer 3 possible proposals representing different levels of value. This gives the client options, and suggests to them rather than *should* they work with you, *how* they will work with you.

    Both 1 and 2 above allow clients who feel they must beat down the price as an ego thing, a way to do just that… while allowing you to preserve your margins.

    3. Do NOT quote hourly rates. The incentive is all wrong. It is wrong for the client, who will attempt to reduce the number of hours needed, and the incentive is wrong for you, because dragging out the work increases your margin. You know what it costs to do the job…figure out a reasonable markup and quote the whole job.

    4. Be sure you are dealing with the buyer who can actually sign the checks. Don’t negotiate with gatekeepers. Anyone who says their high-schooler can do the job for peanuts isn’t serious… and/or is not invested in the project.

    5. Much more on this in Alan Weiss’ “Value Based Fees” book, which I’ve found invaluable.

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  2. Clients never say exactly what they mean. For example, the phrase “Send me a quote” shouldn’t be taken as a direct instruction.

    I can assure you, I say exactly what I mean. If I ask you for a quote that is exactly what I want. I gave you all the specs, now you do your part. I don’t want a confernce call to discuss the project. Any vendor who wants to waste my time “discussing” the project at a very early stage immediately gets ruled out. I have much better things to do that listen to you try to schmoze me.

    I’m not going to waste my time or your time until I can be sure we are even in the same ballpark as far as costs. If you are going to charge me $20K for a project I only have $5K budgeted for, then you’re not the right vendor for the project. And that may be just as much my fault for asking you to quote on it. So give me the quote, let’s agree you’re never going to get the job and we can both move on. I’ll find someone who can do the work for $5K and you’ll find a client who needs your particular skills. If you respect my wishes and follow my instructions I would certainly consider you for a project that was a better fit. If you don’t do that you’re not going to get a second chance with any future work.

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  3. Thanks for your kind reference to my work.

    Alan Weiss
    http://www.contrarianconsulting.com

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  4. Peter – I can respect your approach and your valuable time, but I have found some scenarios where they may lead to problems.

    Peter said: “[vendors]…waste my time “discussing” the project at a very early stage immediately gets ruled out.” … “I’m not going to waste my time or your time until I can be sure we are even in the same ballpark as far as costs. If you are going to charge me $20K for a project I only have $5K budgeted for, then you’re not the right vendor for the project.”

    If a project is very early stage, then it often does not have enough definition to give a firm quote. I am honest with my clients because I don’t want them to get surprises down the road. But if there is not enough information to quote with confidence, or if it appears the RFP has a mistake then it is a business. Remember that the person you are getting a quote from is typically the expert. It is always possible that your budgeted amount is simply not appropriate for the project described (size, quality, etc.) If this appears to be the case, a vendor will want to clarify requirements to make sure they aren’t making a mistake.

    Every industry is different, of course, but if this is happening to you frequently then perhaps you want to have a specialist review your budgets and RFPs to ensure that you have clearly covered all the significant parameters and have a realistic figure in mind.

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  5. Steve – I think part of the problem is that we are all talking about projects that vary widely in scope.

    I agree that if the project is “market my business” or “build me a website from scratch” I am going to need to sit down with the vendor and discuss it and agree on the scope of the project before either party can talk about real needs and pricing.

    If the project is “write me a 500 word press release from these provided notes” then there is no need to discuss it, just give me a quote.

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  6. The problem is dealing with real economic buyers. If you have $5,000 in your budget and want talk costs before value, and are concerned with preserving budget over results, you’re merely looking for a vender, not a business partner. True economic buyers find the investment money they need to obtain the results they desire. RFPs are institutional, bureaucratic nightmares because all the wrong people are measuring all the wrong things.

    Alan Weiss
    http://www.contratianconsulting.com

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  7. Alan – You make economic buying sound like a bad thing. I’m sure you would agree that not every project requires a “business partner.” Sometimes you just need a vendor who can get the job done and there is no real additional value anyone can offer.

    Just because I don’t need or want a “partner” doesn’t mean I don’t care about the results, I just may not be interested in paying for any real or perceived additional value you may or may not be able to provide.

    Sometimes you go to a fancy sit-down restaurant where you take a client to discuss a big project. Sometimes you grab a sandwich at a deli by yourself. Both provide food and both provide value in the specific area they serve. Just because the deli is cheaper and more economical doesn’t mean it doesn’t fulfill it’s intended need and do a good job of meeting that need.

    The key is knowing which situations require a partner and in which ones a simple vendor relationship will suffice.

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  8. I think both Alan and Peter have it right… I work for a large IT vendor, and the way we see this is that there is a spectrum of different kind of clients: some want to buy a price, while at the other end, the clients wants a true partnership. What’s important as we want to ‘win’ a project, is to understand where it fits along this continuum and act accordingly in our sales & marketing efforts.

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