3 Negotiation Tips to Help Entrepreneurs Win More Deals
Whether your business sells products or services, pricing is always an issue. You don’t want to set your prices so high that you scare customers and clients away. But you also don’t want to underprice your offerings and risk alienating the very people you’re trying to attract.
For service-based businesses, pricing discussions often happen on a per-project basis. Whether a professional provides consulting services, graphic design work, or some other form of service, the first question he’ll get before working with a new client is likely, “How much do you charge?” If the question doesn’t come, the awkward pricing conversation will have to happen anyway.
But how does a professional ensure he’s properly paid for his services without scaring off what could be a great long-term client? Here are a few ways a professional can ensure he wins any pricing negotiation.
Too many professionals wait to quote a price, thinking they can get the information they need by waiting it out. They search for clues throughout the conversation and hope they’ll get an idea of the client’s budget. As a result, they give the client the opportunity to set the price, forcing them to negotiate upward or downward from that.
This is a big mistake. It puts the power to set pricing on the client rather than the person who will be performing the work. Instead, a professional should be proactive in setting pricing, quoting a rate early on in the discussion, once the scope of the project has been clearly outlined.
Another mistake professionals often make is in either asking for or stating a range. An interesting thing happens when a provider quotes a range to a client. The professional may estimate $100-$400 to complete a project, knowing he’ll have the leeway to go all the way to $400. But the client focuses on the lower end of the range and will almost inevitably be disappointed when the bill comes in closer to $400.
The same thing can happen on the client’s end of things. He’ll say his budget is between $100 and $400, expecting the provider to stay as low as possible. Instead, the provider should state a figure outright and be prepared for the client to ask to negotiate that fee.[Tweet “3 #Negotiation Tips from @MikeMichalowicz that every #entrepreneur needs!”]
There will be times when the rate the client is willing to pay simply isn’t enough. When the client sets the rate, it can be easy for a professional to find himself doing services for less than he’s worth. Instead, a professional should carefully calculate his rates and be the first to put a number on the table.
In negotiations, the person who states a number first wins. By being the one to state how much the work is worth, a professional has the advantage in any price negotiation. Even if the client tries to negotiate downward, it’s important that a professional never settle for a rate he’ll later regret.
In negotiations, it’s always an advantage to put a number on the table first. By having a rate in mind going in and quoting that rate before the client gets a chance to state a budget, a professional places a value on his work that the client will likely respect.