You don’t get what you deserve, you get what you negotiate

May 31, 2014

This is a cliche that is worth repeating, then putting up on your wall and tattooing on your forehead: you don’t get what you deserve, you get what you negotiate.

This is why people who are less talented than you are richer than you. And the sooner you let go of the idea that negotiating is a sleazy, “dirty”, and just-plain-terrifying process, the sooner you’ll be rich, too.

We’ve all felt the pressure of that moment at the negotiating table. How do we get beyond it?

First, understand that you’ve probably been sheltered.

In your 9-5 jobs, were you busy doing the work -- not selling the work? The sales department was in a separate area. Jobs came to you. This is true of most freelancers. Freelancers, generally, love doing.

This is why most new freelancers are terrible negotiators: you want to get the money part done as quickly as possible to get to the doing part.

You didn’t see that in your 9-5 job, the sales department’s entire job was to negotiate deals in order to support the work that you did. Sales is not dirty. It’s what made your 9-5 possible, and it’s what will make your freelance career successful.

Understand what negotiation is.

Negotiation is not the art of getting what you want. It is the art of two parties coming towards fair terms. The goal is fairness, not “winning” a big stroke against your client.

When you see it this way, it’s much easier to drop the “sleazy negotiator” image.

You are no longer an individual. You are a business.

As soon as you enter the discussion of the terms, you are no longer just Jane Doe. You are Jane Doe, LLC. You are Jane Doe Designs. You are representing your business. The money that you’re earning is going to the business, to fuel and continue to grow your business, not just to you.

Why is this an important distinction -- especially when you’re a sole proprietor and all income does come back to you?

It’s important because it causes you to distance the work and your value from yourself. Some people, especially introverts, find it painful to talk themselves up, but easy to praise someone else. So when you’re negotiating for your business, not for you, you’re talking up the services, the value they’ll bring to the client etc. and leaving yourself out of it.

Interview your clients.

There are certain things that freelancers can do well in advance of the negotiation phase that will make it much easier (especially for shy negotiators).

The biggest thing you can do is to extensively interview your clients. And your most important line of questioning is: what is the value of the project to them?

This involves questions you probably already ask, like “What’s the purpose of this project?” and “What’s your goal?” But your job is to try to come up with a rough dollar figure of this value.

This is easier in some industries than others. But let me give you an example.

“What’s your goal for the amount of traffic you’ll get on this website?”

“I’d love to have 100,000 hits a month by the first 6 months.”

“OK, that’s good to know because I have to build the website to be able to sustain large amounts of traffic. And how many sales do you want to do by that time?”

“Hopefully $50,000 a month. But by 3 years out, I want that to be at least $200,000.”

“So it makes sense for us to have a sophisticated back-end interface that supports that sales volume.”

In the scope of learning more about their business goals, you’ve also discovered the dollar value they put in their business. You’ve also learned important information to help you build the project.

When it comes time to negotiate a project fee, you have all you need. Now, would it make sense for you to come back with a $80/hour rate for a project that will take you 30 hours, for a total charge of $2400? For a business that hopes to use that website to make $50,000 a month?

Your answer should be: NO! That doesn’t make sense! Something is not right there. You should price your work based on the value that your client is receiving from your work. This makes negotiating your fee way easier. When you present your fee, you repeat back to them the value that they will be getting, and then you quote your price. Let’s go into this in detail.

Forget everything you learned about pricing based on your hourly rate.

You should be pricing based on the value you provide.

As the now-famous manifesto on value-based pricing states:

“The value that I have is based on the impact I have on my client’s business. Impact is how they value my services. So I look at pricing from their point of view. They don’t hire me to design a website for the sake of designing a website. They hire me to design a website that’s going to help them grow their business.”

- Mike McDerment, Breaking the Time Barrier

You are not your hourly rate. And if you think you’re your hourly rate, in negotiations you’re always going to be stuck trying to budge them up $10/hour, when what you should really be doing is talking about their return on investment.

Sometimes the client does not know what they want their return to be, or they won’t give you a hard figure. If you’re doing set design work for a production, for instance, your effect on the production is obvious but harder to put a $ on.

However, you can still get an idea for how important the project is, the benefits the client believes your work can have on their customers, etc. You proposal should reference these benefits.

If you want to learn more about negotiation…

Check out these great resources:

Unlocking the power of value-based pricing: Seanwes podcast

Crucial converstaions: Tools for talking when the stakes are high

Breaking the Time Barrier

How to raise your freelance rates

Negotiation tips for small business owners

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