9 Mistakes Self-Employed Consultants Make During Price Negotiations (and how to avoid them)

Written by on October 6, 2019

“If you approach a negotiation thinking the other guy thinks like you, you are wrong.” – Chris Voss, Author of the best-seller “Never split the difference”.

Whenever I meet a fellow independent consultant, I’m instantly curious about a lot of aspects of their professional life. Where they work, what are their rates, any area for collaboration…

But if I would have to ask one and ONLY ONE question and drop others

I would always ask how they negotiate.

You can never stop learning about negotiation. Time spent on it is by far the biggest return on investment. You learn so much about the person, their trade and their clients just in one question.

Top point in any negotiation is to have the upper-hand.

And retain it throughout.

A small mistake can ruin all the hard work.

These basic mistakes are common even after years of freelancing experience.

By recognizing them in your own patterns you can avoid falling into these traps.

  1. Being unprepared for negotiation

There is always a negotiation. It is safer to master it than be sorry.

Researching the company beforehand (or interim) is key. What does the client want to get out of this project? How strategic is the project? Do I have any contacts in the company? Why do they want to hire a freelancer, what are their expectations?

What rates do they historically pay?

These are all must-haves BEFORE going into the negotiation room.

Ok, I’ll prepare. What’s the best source of information?

In negotiation, if the information is king relevant information is king-maker.

Most relevant information source is other freelancers in your network.

This part of the preparation is key in setting your price, as it gives you direct market insights.

When you know less qualified PMs are charging more than you, you’ll inevitably be more confident.


2. Burning Bridges

In 711 AD, muslim forces invaded Iberian Peninsula.

Commander Tariq bin Ziyad ordered his navy to burn the ships.


Why?

Because he wanted to show that turning back is non-negotiable.

We aren’t invading any peninsulas anytime soon, are we?


Yet many times we are captives of our emotions and shutting down doors.  

Look: I don’t mean that we should undervalue ourselves. On the other hand you don’t want to scare the client away. It is a tough balance.

You’ll inevitably be asked to give in at certain points. It is not personal.

It is in the nature of negotiation.

Instead of cutting off negotiations, come up with counter offers and search for win-wins. 

For instance: Client might want a shorter-term contract. You can see it in 2 ways

1) They don’t trust your judgement on project’s duration.

2) They want to cut costs, but they are ill-informed.

Assuming the 2nd case is beneficial for both parties.

  1. Not appreciating the Client’s point of view

The Client is obviously trying to hire the best candidate at the most efficient price-point. Fair and square.

Understanding why client is hiring YOU in the first place will keep you calibrated during the negotiations.

Putting yourself in the client’s shoes is key in coming up win-wins. Here’s a real life example of a win-win from one of my clients.

What is the real reason behind their ask? Are there any mutually beneficial ways to achieve the same results/or even better?

  1. Not Leaving any room for Negotiation

Starting where you want to end is a top mistake.

Yet we do it all the time.

If you start any negotiation with your absolutely non-negotiable end price, you will get stuck quicker than you expect.

Same goes for your Statement of Work. The more stringent requirements you have without justification will hamper your upper-hand.

Know what to give, know what to take. In advance.

  1. Giving up too quickly

Setbacks happen.

Easiest pattern to fall into is to see them as negative and a showstopper.

A much better approach is to see them as an area to demonstrate your solution-oriented side. I.e. Is Budget a problem? Instead of saying NO directly check if the project could be achieved with less hours by cutting some scope. This is just one example. 

  1. Not taking new information into account

More often than not you will learn new information during the negotiation.

The project might suddenly be super-interesting. They might be offering remote work. They might be offering a chance to step up for higher roles and more projects.

Sticking to your guns doesn’t mean ignoring other beneficial facts

Take time to digest if you need to. The last thing you want to do is to enter a negotiation room with a fixed mind.

  1. Using your employee salary as a base negotiation

Your employee salary is past. Now you are an independent.

There is a lot of horrible advice on the internet throwing in formulas to project your rate from your current salary.

Your employee salary is not the market. You are almost always leaving money on the table if you go into this route.

A much better approach is learn the market by asking other independent consultants and adjust accordingly.

  1. Negotiating based on a disadvantageous Fee Structure

The fee structure can be as limiting and as dangerous as a toxic contract if you don’t pay attention.

Is the client pushing for a fixed price? Then you need to absolutely make sure contingencies and extra times are well defined.

There is no point in negotiating a higher fee when you are stuck in a horrible fee structure. It is the epitome of starting on a wrong foot.

  1. Going for a one-size fits all

All clients are different. All agencies/interims are different.

Except when they are same.

If your client is a multinational that pays higher fees there is no point in thinking about “share compensation” like you would do in a start-up deal.

If the interim is paying high fees it doesn’t mean that this is a dream contract. They might be charging your client way more at your expense. The client will expect the results for what they pay, not what you get.


“Negotiate in their world. Persuasion is not about how bright or smooth or forceful you are. It’s about the other party convincing themselves that the solution you want is their own idea. So don’t beat them with logic or brute force. Ask them questions that open paths to your goals. It’s not about you.” – Chris Voss.


Now: A Question for you

Are you interested in becoming a Freelancer PM, Tech Leader, or Technical Person?

Want to find out more? Check out the full guide on How To Become an Independent Project Manager!

In this comprehensive guide You’ll learn:
🚀 What you need to be prepared for an independent life
🚀 How to see your self-employed journey as a project and create your customized roadmap
🚀 How to prepare a CV that gets clients
🚀 How to test waters BEFORE diving all-in
🚀 How to get clients and sort out your preparation
🚀 Set the mechanics right from the beginning for a successful, satisfying, long freelance career


And more! Are you ready? Then, read on


 





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