Asking for money. It’s scary and uncomfortable. You haven’t been in this position very often, and might not even know where to begin. It’s completely natural to be nervous, especially because you don’t know how much you should even be asking for! What are your peers making? What did they hire someone for in the past? These questions go unanswered, and you’re left feeling uncertain. We get it. We’ve been there, and we’ve worked with thousands of people in your shoes.
First, let’s set the table that you’re in good company. It’s normal to feel this way. Second, it’s going to be okay. The absolute worst thing a client can tell you is “no.” Or maybe they tell you your rate is ridiculous. Can you handle that rejection? We think you can. In fact, if you don’t get a “no” at some point in the negotiation, you could’ve gotten a higher amount. You’re actually seeking a “no.” See what we did there?
With your newfound mindset, let us help you get you a good offer.
Step 1 - Know your floor
It’s okay if you’re not 1000% sure what it should be, but you need to pick a number that you’re not willing to go below. Knowing this before the conversation makes it easy to be intentional about accepting the project or not. If your client is unable to accept your proposal at your floor and wants to go below, it’s an easy decision for you to walk away. Don’t skip this step - it’s crucial.
Once you have your floor, you can come up with different scenarios so you’re prepared on the call. What are you willing to accept, where should you start the negotiation, etc. These can be a combination of hours and rate so that you’re not lowering your hourly rate too much. You can reduce hours to reduce total cash outlay, but not reduce your hourly rate below your floor.
Step 2 - Think about the negotiation as a fact finding exercise
Stay with us here. Your primary goal when going into negotiation is to gain information. The more information you have, the more leverage you have, and the more strategic you can be as you look to navigate closing the deal. Further, by gathering information in a curious way, your client is feeling “heard” by you. Yes, you’re building an emotional connection with them. If they feel heard, they’re more likely to give you what you want because you “get it.” Author of “Never Split the Difference'', Chris Voss, puts it best, “Negotiate in their world.”
The more information you have the better. The best way to do this is by asking questions, mirroring, and labeling to get them to keep talking. Here’s a quick overview of what we mean by that.
- Mirror - mimic the last 1-3 words of the end of their sentence. They’ll likely explain further.
- Example: so if they say, “our marketing department is really holding on by a thread.” You could respond “holding on by a thread?” And they’ll go, “yeah well, we lost XYZ person and…”
- Label - label what they’re saying by starting with “it seems like...” and summarizing what you heard them say. They’ll likely elaborate if you’re right or if you’re slightly off, and you can hone in on what’s exactly going on.
- Client: “We had to fire our head of marketing because he wasn’t getting the job done and now we’re struggling to calculate our costs to acquire a customer.”
- You: “Got it. It seems like you’re frustrated with tracking around your current marketing efforts?”
- Client: “Yeah, and we need these metrics to raise our next round of funding, which is crucial to our continued operations.”
You see that the client further elaborated on the issue, and allowed you to gain new information. By diving further into their challenges, you can better identify where you can help them, and use their challenges as goals for your consulting engagement.
Take great notes here, and try to write down as many of their actual words as possible. Use their exact words in your proposal: it will resonate strongly with them.
Essentially, you're being curious and genuine in wanting to know their pain points and reservations. This may seem obvious, but M]make sure you’re conscious and present in your conversations as well. New York Times Bestselling author Neil Patel estimates that “About 57 percent of us fail to accurately estimate how assertive we’ve been, and most of us only remember 50 percent of what the other party said.”
Step 3: Go first, be confident, and anchor
Everyone has a different viewpoint if you should go first in a negotiation or not. In our experience, you should go first and set the tone UNLESS you think it’s possible they offer you a higher number than you’d ever dream of throwing out there. If I was negotiating with a hedge fund or Softbank, I’d let them go first. With a Series A start-up, I’m going first.
Now, let’s figure out what to throw out there. Think of a spectrum between “home-run” to your floor. Using an example, maybe your home-run is $20k for the month, and your floor is $12k for the month for 20 hours per week of work. In this case, we’re using $250/hr, and calculating a monthly retainer based on that hourly rate. If your home-run is $20k per month, we recommend you go with a specific number just above that. In this case, I might go in with $21,350. It’s specific, it looks calculated, and it’s possible they say that’s a little high (you go your “no!”) and they ask if you can accept $20k. If they think you’re WAY high, they will tell you that. But don’t negotiate against yourself.
Step 4: Don’t negotiate against yourself
Assuming they say “no” to your first number, make them go next. They might tell you that it's more expensive than they can afford. In that case, tell them you completely understand, and ask them to counter. This is a common place where consultants will just throw out a lower number. Don’t do it!
They can keep saying “no” until you’re down on your own floor. Give them an opportunity to throw out a number, and see what they propose.
Step 5: Handle common client push-backs like a pro
We’ve heard it all.
“I could hire a full-time employee for that rate.”
“Let's keep in touch.”
Or worse, they keep asking you for more information and material from you without paying you
With each question, your responses can be empathic, but matter of fact.
- Client: “How did you get to that number?”
- You: “From past companies and clients, this is a calculation of my compensation. What do you think is a fair rate given my experience and expertise?”
- Client: “We worked with someone much cheaper in the past”
- You: “I understand, and I do not want to strap the business for cash. That being said, I need to be cognizant how I spend my time, and this is the rate I charge. What do you propose?”
- Client: “That’s simply more than we can afford.”
- You: “I hear you, and want to find something that works both for your business and for me. What do you propose?”
Negotiating with clients, especially early on, is about seeing what works and doesn’t. There’s no reason to get discouraged. Again, the worst thing someone can tell you is “no” and then you keep negotiating or you move on. You might even find negotiating to be fun! Like a chess match where both players go back and forth until you both agree on something that makes sense for you. I’ve learned to really look forward to it, and I think you will too.
Lastly, if they keep asking you for more information and material from you without paying you, you can call it out. Tell them that you’re happy you can add value to them, and once you have a formal arrangement in place, you’re happy to tell them everything they want. Don’t work for free, and don’t let a client take advantage of you.