“Everything is negotiable. Whether or not the negotiation is easy is another thing.”
The problem with selling time is that the buyer knows margins are high.
When I ran my consultancy, I was constantly pressured to negotiate down our rates.
Our formula was pretty simple: We had a client rate, and then we had what I paid my staff. The difference is what paid me, our non-billable staff, outfitted our office, and whatever was left was profit.
The intuitiveness of this formula meant that savvy clients, almost all of which were business owners, knew that it can’t hurt to ask for a discount.
And I totally get it.
Let’s say you’re hiring someone to work on a 3-month project (480 hours) at $100 an hour. A $10 an hour discount saves $4,800 — not a bad return for taking a minute or so to ask a question.
But what I’ve come to discover (which I’ve been guilty of myself) is that almost all of us cave and lower our rates when asked.
It’s usually because we don’t want to shoot ourselves in the foot at the last minute.
We’ve worked so hard to get the client to this point that we don’t want to lose them over a $10 rate difference.
…And that $4,800 goes up in smoke.
Two big takeaways that you MUST commit to memory right now:
Almost everyone who asks for a lower rate will pay what you originally quoted
Because I work — both directly and through osmosis — with literally thousands of freelancers, I can tell you it’s pretty rare to find a client who walks because they can’t score a last minute discount on a project.
Also, this is the surest way to degrade your professionalism. Professionals hold fast to their prices; amateurs don’t. If your goal is to build the best damn company in the world (and if you’re following my work, this should be your focus!) then never, ever lower your standards.
Clients obsessed with nickel and diming are pathological
You want to only work with clients who treat you with the professionalism and respect you deserve. If your client sees you in the same light as their kid nephew who “builds websites”, then you’re setting yourself up to be screwed over. Trust me — the only bad clients I’ve ever worked with were bad from the start. There was always something unsettling about how our engagement was drafted, and not trusting my gut always led to a nightmare situation at the 11th hour.
Your bandwidth is limited — you can only work on so many projects at a time. And while fear often irrationally leads us to accepting whatever we can get, it’s always better to suffer short-term (and do a little more lead generation and cultivation) instead of working long-term with a toxic client.
Never negotiate your rate. Negotiate on scope (i.e., what you’re going to do.) If the math doesn’t work out with what they want to do and the budget they have to do it, do less. Never let your client dictate the scope and the cost of an engagement.