Have you ever settled for too low a price in the negotiation process with a client?
If a deal closes at the cost of underselling, it’s not really a winning deal. Because services don’t sell at fixed prices like tangible products, negotiations are an undeniable part of an agency’s sales cycle. If you walk into a negotiation unprepared, you won’t just lose sales, your overall profit will also suffer.
So, if you’re the one who negotiates on behalf of your agency, or if you negotiate for your own services, watch out for these common negotiation mistakes. As they say, DON’T LEAVE MONEY ON THE TABLE!
The biggest mistake that a party can make in the negotiation process is to NOT negotiate. This happens when you take your client’s quote for a project and accept it without giving your proposal. Or when you take the project scope as defined by the client and accept it the way it is.
Now, of course, you don’t need to negotiate if the client’s proposal is fair.
However, don’t always assume that’s the case, because there are many clients who might try to lowball you, give you an offer based on the pricing of the cheapest service providers in your niche, or try to get more work done for less money. It’s not sensible to indulge with all such clients, but for those who look reasonable, it makes sense to negotiate.
If you avoid negotiating, you’ll either say no to the work, or, if you say yes, you might end up regretting it after working too many hours for too little money.
It might be that all you need is a little negotiation to make both the parties happy.
Not Pre-Determining What You’ll Settle For
To enter the negotiation process without fixing the lowest working settlement is like driving without really wanting to get anywhere. Needless to say, you get nowhere. When people make this negotiation mistake, they end up leaving money on the table.
If you don’t want this to happen to you, calculate the minimum project fee for the project being discussed. Setting this number before negotiating will prompt you to get up and leave the talk if it doesn’t seem to work out. Without it, though, you’ll continue to ping-pong and the conversation will head nowhere.
If you’ve been in business for sometime, you’d already know how much to charge for different projects. But if you aren’t sure, if a project looks different than what you’ve done until now, or if you simply want to double check, check out this helpful article on calculating fees.
Focusing on Just the Price
A lot of people make the mistake of haggling over only the price in a negotiation. Focusing on just the price in the negotiation process is a way of taking positions, making it impossible to find common ground to work out an arrangement.
Here’s how a typical price-based negotiation proceeds:
Client: I’m sorry but we have a budget.
You: This is our quote – the lowest we could do this for.
Client: I understand your point, but we can offer repeat work.
You: I’m afraid I’ve given our best offer.
Client: Are there any discounts for advance payments?
Fisher and Ury, authors of Getting to Yes: Negotiating Agreement Without Giving In call negotiating on price unhealthy and explain its downsides as:
[Price-based negotiation] does not tend to produce good agreements. It is an inefficient means of reaching agreements, and the agreements tend to neglect the parties’ interests. It encourages stubbornness and so tends to harm the parties’ relationship.
To avoid this mistake, explain why you’re quoting what you’re quoting and how you will help the other party. Also, try to come up with creative solutions like offering a discount for consistent projects or offer some relief for hiring on a retainer basis. See if there are some services in your package that could be removed without impacting the results that the client expects. Or as a friendly gesture, throw in another service that could make the package irresistible to the client.
Not Doing Any Homework
Going into the negotiation process without doing any homework is another common mistake that negotiators make. This one’s a surefire way to lose. Without this little exercise, it’s not possible to know the items that are negotiable or non-negotiable to either side. Doing a little homework can help identify what items you’re willing to give on.
As Inc contributor, Erik Sherman says:
If you’ve prepared correctly, you know which issues are low priority for you and which are higher. Make concessions on low-priority items, not high.
To identify the factors you can budge on, use information like the client’s budget and the project scope. Perhaps the price is acceptable but there is a problem with clauses like “unlimited revisions” and more. Once you’ve identified such factors, categorize them as high or low priority items.
After setting your high and low priority items, move on to research about the other party.
Look for things like:
- What are the results they’re trying to achieve?
- Have they switched services in the past? If so, why?
- What options do they have?
- What are the things that they may not budge on?
When you’re equipped with information about the other party, you can negotiate better. Like Margaret Neale highlights:
If a potential client says they will pay you X for a job, having done your research allows you to counter with, “But the last three people you contracted with similar experience were paid Y.” Preparation gives you the information you need to “to get more of what you want.”
Not Thinking Win-Win
Another common mistake that people make when entering a negotiation is forgetting it’s a negotiation and not a competition. In a negotiation, there shouldn’t be a single clear winner.
When people start negotiating with such a competitive spirit, even if they have their say, they don’t really build a relationship, and the other party might perceive them as an inflexible firm to work with.
To avoid making this mistake, always think of how much business a repeat client can mean for you. Then decide if the one up in the first round is worth trying for.
Marissa Martinez puts the benefits of a win-win negotiation like this:
Win-win results are the most stable outcomes of negotiations; since both parties are happy with the result, they have little reason to back out at a later time. Both parties have an incentive to negotiate with each other again, laying the foundation for a mutually beneficial working relationship.
Avoiding these five common mistakes in the negotiation process will put you and your agency well on your way to winning more projects and maintaining happier customers.
Have you ever lost clients or business due to the above mistakes in the negotiation process?