Negotiating with Clients
Do you like negotiating with clients? I didn’t when I first started. I would accept whatever terms were presented to me and whatever pay and deadline the client wanted.
While the potential market is huge, competition comes in all shapes and sizes and we have to work incredibly hard to succeed. One key part of your success is being able to effectively negotiate with clients.
I know of no teaching in “Client Negotiations” in school, at university, or a form of any design course. But it really should.
Negotiation is a fundamental business skill. No matter whether you’re a brand new tradie, freelancer or more experienced professional, knowing how to secure a deal is paramount to your success.
I have been in business for 20+ years now and have collected some powerful tips and techniques for attracting and negotiating with clients.
Top Tips for Negotiating Success
Learning how to negotiate successfully begins long before the pitch or contract meeting. It would be best to lay the groundwork as soon as you start your business or set up your design studio.
The same as you design your brand, develop a great business name and create the foundations from which you can successfully negotiate with clients.
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Successfully Negotiating With Clients
By the end of this page, you should have some actionable methods you can use right away to help you successfully negotiate your next contract. Whether you’re like me and love the web or go in a completely different direction, these tips will help.
1. Know Your Worth
Whether you’re a freelancer or run a professional business, you need to know your worth.
The first thing I want you to learn.
Yes, the market is incredibly competitive. Yes, there is global and local competition for clients. Yes, you will have to compete with other professionals and businesses in low wage labour or countries.
But you can do all these things while being appropriately paid.
I still monitor the marketplace and make sure PWD deliver what the market wants. I also charge accordingly. You can do the same.
As a professional, you will have worked long and hard to perfect your skills.
Therefore, you deserve reasonable compensation for those skills.
Just like a lawyer, doctor, chef, plumber or electrician, you have a specific set of skills that are very much in demand.
Charge for them accordingly.
Research how much other agencies or professionals charge for specific projects and services. Find out as much as you can:
- About what is on offer?
- How much are the charges?
- How do you get paid?
And set your fees accordingly.
The above questions will help when negotiating, preventing you from “negotiating” with yourself.
Self-negotiation is something many people do before the sales meeting. You have performed your research, done your due diligence, identified the value of your proposition to the customer, and set a price.
But minutes before the meeting, you’re sitting there thinking, ‘Will they pay what I’m asking?’ ‘Should I ask for more or less?’ ‘Will I be outbid by other web designers?’ ‘Can I afford to lose this contract?’
The questions are called self-negotiation. You are preparing yourself to negotiate before you even start the meeting. Don’t.
I used to do this all the time.
It never ends well. You can do better.
Set your price. Make sure it offers good value to the client and go with that. It is challenging to allow self-doubt to creep in, but it’s a valuable habit to get into if you can.
I still find myself creeping into self-negotiation before important meetings.
Once I recognise it, I take a minute to compose myself and reinforce those ideas above. You’re worth what you charge, so don’t be ashamed to charge it.
2. Know Your Market
As I alluded to above, freelancing and professional service is an incredibly competitive marketplace. It can be a local or global marketplace. There are so many exciting industries that attract a lot of talented people.
It also has a relatively low barrier to entry. All these things combined make services and products a challenging market.
You have to love the industry, and you can admit sometimes it’s a tough nut to crack.
Some industries are also incredibly fast-moving where nothing stays still.
Knowing your market is vital.
You have to compete with low salary countries. You may have to compete with cultures that are much better at negotiating than yours. You have to compete with professionals or businesses that will do literally anything to secure the deal.
But you can compete.
You can compete by offering something others cannot. I’ll discuss that more in a minute.
Make sure you identify your key markets, and you can achieve success.
You will come up against objections a lot. A client might say:
“You’re pretty expensive. I know other professionals who will do the same for much less.”
So what do you say next?
Objections are something you will hear a lot and is something you need to be able to handle.
Knowing your worth, understanding the market and the client will all feed into that.
By the way, your answer to that statement should point out:
- your value
- your qualifications
- and how you can uniquely deliver what they need.
Just because they know someone cheaper, that doesn’t mean they want to risk working with them!
If the client is negotiating with you, they are doing it for a reason, and they see other value in working with you. So if they deal with you while knowing they could get it cheaper elsewhere, that is a positive sign.
Learn to recognise that, and don’t let it alter your approach.
You know you’re worth the price you charge. You know you offer excellent value. So now it is time to communicate that to the potential client.
If the client is all about the price, perhaps that client isn’t the right fit for you.
It might be a good time to move on.
3. Know Your Client
Every client is different, with different needs, priorities and motivations.
Learning to recognise the different types is a crucial business skill.
Some clients will be all about the price. Others will be about convenience or value to their business. If you are able to recognise which is which will help when negotiating with them.
- Some clients will want to discuss how you can help their business.
- Others will want visual aids so they can visualise how it will look, feel, and function.
- Some will take your word for things and leave you to it
- While others will want solid evidence.
Learn to recognise these factors in clients and build your pitch to suit.
Knowing your client will also show you how they value the project.
We go into value and price a little more in a minute.
Remember, the project is about the client and not about you. It’s their business and the problem you have to solve for them.
The value it offers is linked directly to how the client perceives that value. The more you get to know the client, the more you will figure out how to highlight that value in the negotiation.
Barriers to Entry
Getting to know the client also feeds into understanding why they haven’t signed the deal. These are barriers to entry.
The faster you can identify them, the quicker you can get the deal signed:
- Do they think they are getting a good deal?
- Are they unsure you can deliver?
- Do they not trust your ability or track record?
- Are they negotiating with other freelancers or professionals at the same time?
- Do they not have the cash, or do they have to wait for someone to pay them first?
Being able to understand why a client may be hesitant will allow you to come up with solutions.
If you cannot work around those barriers, you may be able to point them in the right direction of someone who can.
I still spend a lot of time researching clients and trying to identify their pain points.
If you can identify them and build solutions to them into your pitch, you’ll go a long way!
4. Know the Difference Between Value and Price
“Price is what you pay; value is what you get.”
The single most important factor in negotiating with a business client is the price.
Some clients completely fixate on the monetary cost of a project or service.
Some will want to analyse every single line item to make sure the numbers add up.
They might not be the ideal client, but you can work with that if that’s their only flaw.
Some freelancers and professionals focus too much on cost too.
It can happen on both sides of the negotiation and can be challenging to overcome.
You don’t want to have to haggle purely on monetary terms if you can avoid it.
Knowing the difference between value and price comes in handy in the negotiations.
The Price is Right
Warren Buffett is one of America’s most successful businessmen. He says the quote, “Price is what you pay, Value is what you get”.
It’s a saying used a lot in sales, and for a good reason.
It’s also a saying I have kept with me ever since I started on my own.
So what does it mean?
The price of a project or service will be a set amount designed to provide adequate compensation for your time and effort plus a little profit.
The value of that product or service could be the ability to launch a new business, for the customer to begin offering new services or enter new markets.
Therefore, the value of that product or service far outweighs the price from the customer’s perspective.
Knowing this and knowing the client as you do, you can gauge the value having the product or service you supply will have to the client.
Knowing the value of the project to the client should help you stick to your price and strengthen your negotiating position.
With these above values in mind, PWD builds and offers our customers all the products and services, and be outstanding, reliable and deliver exceptional user experiences.
5. Learn How to Say NO
Nobody in business likes to say no during negotiation. It is part of the dance, but it isn’t the most enjoyable part.
Keeping no to a minimum makes those two letters much more powerful when you use them sparingly.
It’s like swearing in a good movie or TV show. In a good film, you hear swearing rarely, so it makes an impact when it happens.
Hearing swearing too often lessens its effect in cheaper movies or lower quality TV shows and can put people off.
Saying no too often will have the same effect on customers.
NO also could be translated into “Next One.”
When to Use NO When Negotiating With Clients
These are the only times I would recommend you say NO to a client.
When they make the first offer – Never, ever accept the first offer. No client starts with their best offer, and taking the first will leave them wondering if they could have gone lower. You want both sides of a negotiation to walk away completely happy. Accepting the first offer doesn’t achieve that.
You wouldn’t accept the first offer on your house or your car. So why do it with work?
When they ask for unreasonable additions – Some clients will provide a brief, request minor changes and then be content to go for it. Others will want constant feedback, endless meetings, extra features or elements to their project for free and other demands. Say yes to reasonable requests in good faith, but learn to say no when they become unreasonable.
Saying no or even terminating a client is a drastic step but can be well worth the effort.
When they become more trouble than they are worth, we have all had clients we wished we hadn’t taken on in the first place.
Those who take up all our time make constant demands for progress, feedback or changes, and those for whom ‘scope creep’ is expected rather than a generous gesture. Saying NO to these clients will be difficult but it will be so worth it!
Learning to identify scope creep and other reasonable demands takes time.
Just don’t take too long!
6. Always Use a Written Contract
You would think that most professionals would know always to cover a project with a written agreement and even if you’re working for a regular client.
After the negotiations to finalise, a contract should cover and benefit both parties.
If a client doesn’t want a written contract, ask why and consider walking away. It is that important.
Too many people view contracts as a negative, but I think they are the opposite.
I have always insisted on contracts and always will.
Even the basic terms on the website form part of a contract. I believe in being fair and transparent with all my clients, and a contract helps with that.
What’s in a Contract?
All contracts should include some basic but fundamental elements.
The scope of work – A complete outline of what you’re doing, how you’re doing it and how much you’re charging. Make it as straightforward as possible to avoid confusion and prevent scope creep later.
Payment schedule – should include specifics about the total cost and how and when the client will pay. It should also cover payment methods, any interest charged or anything else concerning the payment.
Milestones – Milestones are essential for managing expectations. Outlining them in writing illustrates every stage of the project and exactly when certain elements will be completed. If the contract includes staged payments, that should be mentioned here too.
Client responsibilities – Your responsibilities will be outlined in the scope of work. Now it’s time to outline those of the client. This should cover providing images, outlines, written content, testimonials, feedback and testing. Assign dates to each of these and outline the deadlines you agree to depend on the client meeting theirs.
Intellectual property and rights – IP and content rights are the final elements of a contract. They are a common source of conflict between freelancers, designers, professionals, and clients, so covering it off in a contract protects you. Cover exclusive ownership shared rights and terms relevant to the project at hand.
Nobody likes contracts, but they are there to protect you. There are lots of sample contracts online you can use for inspiration. Lawyers will also draw up proforma contract templates you can use too for a fee.
I’m not a fan of the administrative side of the business, but contracts are one area where I don’t compromise.
It would be best if you did the same.
7. Never Ignore the Upsell
All projects and services include many opportunities to upsell. Use them all.
You could give the customer the basics and leave it there. You get paid fairly for your work and move on to the next client.
Everyone walks away happy.
However, you could also offer extras like maintenance service or anything you can think of your industry will supply and is known to provide.
That’s what we do, and it works incredibly well.
Those services offer value to the client while costing you relatively little (cost versus value).
Those services also provide an extra opportunity to deliver exceptional service and an extra opportunity to build a long-term relationship with that client.
Not all value is monetary.
Positive client relationships don’t have a monetary value but are critical to your success.
Anything that allows you to build strong relationships is a good thing.
If you make a little money doing it, all the better!
I have built my entire business on this principle.
We begin with a consultation, adding products, offering value-added services, and combining them into a single solution.
It’s a workable idea as it delivers for the client as much as it provides for you!
Ignore Your First Instinct
The first instinct of many new professionals is to close the deal as quickly as possible, as it could be robbing you of extra upsell opportunities.
Instead, take the time to outline all the extra services you offer and show the value those services could have to the client.
Take the ideas shared in ‘Never ignore the upsell’ and use them well in your negotiating procedure.
If you took the time to learn about the client, you already know their pain points, whether it’s no time, no skill or something else.
You can use those pain points to upsell, negotiate, and make a little more profit on every deal.
Some of the extra services you offer could bring in monthly extras.
That recurring income will be the lifeblood of your business.
I call it a tick-tock business and not a wheelbarrow business.
(I hope you get my point)
All answer a particular need the client will likely have while adding recurring income for you.
It’s a win-win!
8. Don’t Offer Freebies
Never offer something for free. It’s something we have all done, and many of us still do, especially if we are new to working for ourselves.
Even though I began by offering something for free, I wouldn’t advise it.
There is an excellent commercial reason for never offering something for free.
Let’s say you offer a 10% discount on a product or service or throw in free something to secure a deal.
When it comes time to negotiate again, the client will begin at that position and have that free offer already in mind before you start negotiating.
You’re already losing potential income before you even start.
That doesn’t mean you cannot offer value-added features to a deal. You have to make the client work for it.
For example, you can offer that 10% discount on products or services, but they have to take extras too or service. Or you sign up for 18 or 24-month and give a discount value only for the first six months.
Then they are still getting something for free as an inducement, but they have to offer something in return.
It feels free but isn’t.
You can offer consultation services as part of the initial deal. Then built it into those early products and services.
It cost me nothing except a bit of time but offered value to the client. They get something for free as part of the deal when they buy the products or services or other arrangements.
It works for everyone involved!
9. Avoid Breaking Down the Cost Wherever Possible
We’re back to cost versus value again. I told you it was necessary!
And this time, it’s treading a fine line between being fair and transparent and being a good business person.
You won’t come across this type of client all the time, but if you do.
When putting an offer together for a product or service to a client, it’s a good idea not to include a complete breakdown of costs if you can avoid it.
Some clients demand a complete breakdown, and that’s fine. If you can avoid it, do so.
The effect is called the “Salami Effect.” Salami slicing tactics, also known as salami slicing, salami tactics, the salami-slice strategy, or salami attacks, is a divide and conquer process of overcoming opposition.
The Salami Effect
Let’s say you break down a proposal of $3,500 for a product and Service, $250 for a years’ licence, $600 per month for Service, $250 a month priority support and $350 per month email outreach or content marketing.
So far, so good, right?
Not so much.
A particular client can then say, ‘well, I can get the year licence cheaper elsewhere, so take that out, and I can live without priority support, so remove that. I can also get Service elsewhere, so remove that.’
You have lost $1,100 off the deal in less than two minutes with no real opportunity to leverage it back in.
That’s why I recommend avoiding cost breakdowns where at all possible.
Had you outlined the deal as a total cost that includes all these outstanding services for just $4,950, there is no room for the client to remove elements to bring the price down.
If you use this alongside offering something for free-not-free, you provide the illusion of value and being approachable while still making a profit.
What’s not to like?
I’ll admit, this one is difficult to work into your business.
But I think it’s important enough to make it work if you can.
There’s a big difference between $4,950 and $3,850!
10. Ask Why if a Client Changes the Tempo
When you begin negotiating with clients, you will quickly learn there is a different tempo to proceedings.
This can vary by the client, but you should soon realise there is a recognisable tempo to the regularity of their replies, calls, and meetings.
It’s like a pattern or a rhythm.
Learning to spot this with every client can be an essential deciding factor in how profitable you are.
Some clients will regularly respond the next day, while others will periodically take longer.
Once you recognise it, remember it.
If the client changes that tempo, be aware. Very aware.
There will usually be a reason a client changes the tempo during the negotiating procedure, and you need to find out why.
It could be something benign, such as an impending vacation, public holiday, or more serious.
You’ll want to know both before it’s too late.
There are two reasons clients can change the tempo that you need to be aware of:
You have made a mistake during negotiation – This is a popular reason for clients wanting to sign the contract. The client wants the deal signed before you notice or change your mind. You made a mistake in the negotiations and offered something you didn’t want to or a price you didn’t initially quote.
They see something you don’t – Clients will often speed up negotiations if they perceive an advantage in the deal you have yet to recognise. For example, a popular Item is about to double in price, and they know you don’t. Or they know that the servicing company you use is about to be bought by a larger company with a habit of increasing prices across the board.
A change in tempo is not usually a buying signal.
The client often notices a mistake or knows something you don’t, which is their advantage.
If a client changes tempo, go through the contract and study the negotiation carefully.
They have a team member sanity check everything if you can.
You may be good, but you are also human.
It’s better to spot the issue early and admit your mistake than lose out on potential revenue.
You’ll also lose a bit of respect for yourself and your client.
Client Negotiating Skills
Those are some critical tips for negotiating with clients, and these tips could effectively work with any negotiation.
However, I have picked up a lot through experience and by asking experts over the past decade.
I was hoping you wouldn’t make the same mistakes I did over that time and utilise as many of these as you can.
You’ll be so happy you did!
Do you have any practical tips for handling negotiation? Want to share them? Tell us about them below if you do!
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Latest Update on December 01, 2023