The Ins and Outs of Client Negotiations
Making the choice to forgo an on-staff position, you’ve dared to be your own boss—an independent contractor. You’ve got the education, certifications, experience, skills and knowledge. Now what? You need a clientele. Unfortunately, most IT independents are not nearly as well-versed in business skills as they need to be—particularly in negotiating.
Professor Robert Bontempo, Ph.D., faculty director of the negotiation program at the Columbia Business School, explained, “The more technically sophisticated an individual is, the less savvy they are going to be about negotiating. Negotiating is a set of behaviors that can be learned, and you can get better at it.”
So how can you get better at negotiating what you can give to and get from a client? “Focus on building a relationship. Ask lots of questions, and really learn to listen. By figuring out that relationship and asking questions, you can understand what is most important to the client and make sure they get that. And in return, you’ll get what you want, which is profit,” said Lee E. Miller, managing director of NegotiationPlus.com.
Miller emphasized the importance of how the IT individual needs to do what may not come naturally, but is essential to growing their business: selling themselves. “They have to change their mindset. They have to think of themselves as salespeople, because that’s what they are. When you’re selling, you want to get the potential client or customer to fall in love with what you can provide. It’s about letting them know what you do in terms of what it is they need. You have to listen to their needs. Understand what I call their ‘you perspective.’ Once you do that, sell yourself in terms of their needs.”
Carol Frohlinger, co-founder of Negotiating Women Inc., said that she can’t stress enough the importance of doing your research before negotiating a deal with a client. “There’s a myth that great negotiators sort of do it in the moment. The reality is that is that it rarely, rarely happens. At least not for us mortal people! People are successful if they do their homework,” she said.
Bontempo echoed the sentiments of being prepared, but explained that there are two different sides of the necessary preparation. “The mistake people make is the focus on their own case. The skill is finding out the agenda and priorities of the person on the other side of the table. Unsophisticated preparation is about you, sophisticated preparation is about the client and what they really want. Make a list before going in. You don’t want to leave the room thinking, ‘Oh gee, I should have asked that.’”
Eventually, a significant part of client negotiations is when the discussion comes around to money. That is the point, right—to make a living? Miller explained how vital it is that you know what your time, skills and knowledge are worth. “(Independent contractors) need to prepare, to know their value in the market,” he explained. “They need to know what similar people doing similar services are charging. You can do that through research, trade organizations, networking, but you need to have a good sense of what the market value of your services is. I like to quote Yogi Berra, ‘If you don’t know where you’re going, you’re going to end up someplace else.’ You have to know what you’re worth.”
Frohlinger makes a similar affirmation, and details some tips for finding your value. She explained that you can determine your rate through “networking in terms of professional groups, the boards and so forth. If you don’t know that going in (to a contract negotiation), then you absolutely won’t be successful. I do a lot of consulting work, and I have a ‘healthy’ per diem that I charge. But one of the things that I tell people, which is very true, is that I have a lot of experience and I’m a very fast learner. That’s explaining your value. If you feel you’re being pushed back on the way you feel the project should be priced, try to come up with (reasons and examples of how to prove your worth). It helps to make people feel like you’re on the same side of the table. It shows that you’re collaborative, and that you are willing to advocate for your own interest. The main thing is communicating and establishing a process that works for both sides.”
Selling yourself can be difficult, but Miller said that it’s not about cost, but value. “If they care most about time, emphasize that you’re always on time. If they care most about price, don’t be cheap, but talk about how efficient you are. It’s not about being cheap, it’s not about being the lowest-price seller. Because typically, people don’t want the lowest price, they want value. They know that if you pay cheap, you get cheap. Start with selling the value before you ever talk about price. It’s like selling a car. Once a salesman gets you driving the car, and you fall in love with it, all of a sudden price becomes less important.”
Bontempo said that when it does come down to talking about what your work will cost, it’s important to be the one to take the initiative. “People that are nervous, insecure and unsophisticated tend to be uncomfortable and want to let the other person go first. At some point you’ve got to talk about compensation. You should make the first offer, and make it extremely high, because it’s never going to up, they can only talk you down.”
Walk the Walk, Talk the Talk
“It’s hard to exaggerate the importance of professionalism,” said Bontempo. Miller concurred, “If you don’t look professional, and if you don’t act professional, you may lose the deal. Being professional says a lot about your work. If I’m hiring someone to do my IT work for me and they send me an agreement and it’s full of mistakes I’m going to think twice about whether I just made a mistake here.”
Part of that professionalism—aside from dress and demeanor—is having the proper documentation. Frohlinger, who is a lawyer as well, explained, “The way to protect yourself and the client is to put something together. It doesn’t have to be done in legalese, but a simple letter of understanding. Raise as many issues as you can think of that will be important. Present it and say, ‘This is how I usually work with clients. Why don’t you take some time to look at this, I’ll be happy to answer any questions.’” She explained that there are many message boards and Web sites, such as www.nolo.com, that give sample documents to guide independent contractors through their foray into the legal realm of business.
Miller concurred, “Keep the information about what you’re going to do very clear. That’s where problems arise. The person you’re contracting with thinks you’re doing one thing, you think you’ve agreed to something else. I always recommend that (the contractor) be doing the drafting, not the client. Normally, all you really need to document is exactly what you’re going to do, and that’s very important. Document what you’re going to do, the time frame it’s going to be done in and the price. Do what I would call a ‘memorandum of understanding.’” Again, Miller stressed professionalism. “Your documents need to have a letterhead of some sort, even if it’s just your name and address in a nice font,” he said.
“Formulating boundaries, setting parameters and developing a process,” Frohlinger said, are all things that need to be addressed. “Being very clear about what those variables are and how that will impact your timeline and delivery are all part of the negotiations,” she said.
Are You Ready to Seal the Deal?
“Remember this,” said Miller. “Every negotiation has three components: price, timing and specifications—and you can negotiate all three. The one piece of advice that I’d give to IT consultants is that they’re businesspeople, and the