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Freelancers constantly face the challenge of establishing a price for their services. Many of us do not enjoy this process, and lack the skills to negotiate like a pro. Luckily, this is an art that can be honed through practice.
My partner was lucky enough to attend negotiation classes based on the Harvard Negotiation Institute, a very popular program which discusses the critical aspects of negotiation and mediation.
One of the most crucial takeaways is “be the first to anchor the negotiation.” While it may seem counterintuitive, being the first to throw out a number for your services is the way to go.
This step of the negotiation process is fundamental for freelancers that have to price their work under uncertain circumstances. Here are some key steps in anchoring a negotiation:
1. Understand all your options and opportunity costs
When entering a negotiation for your services, know in advance what your other choices are if this client does not hire you for the project. What other projects or jobs can you work on in the short term and what will your revenue be? What will you give up to take on this project?
2. Understand the ZOPA (Zone of Possible Agreement)
Ultimately, your goal is to make the most money you can on each deal. For this to happen, you need to have a clear understanding of the company's alternatives, which is basically your competition. Do your research, know your market and ask the right questions to the client. What are their choices if they don't hire you? How much would it cost them to get the work done by someone else? Now you know how far up and down the company is willing to go.
3. Be the first to set a price for your services
Once you have enough information, throw out YOUR number first. Don't go too low as you will not have room for concessions, and don't go too high as that will trigger the end of the conversation.
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4. Give small concessions
If you are asked to give a discount or forced to negotiate your price, then reduce by only small percentages -- this indicates that you are not ready to go down too far from your anchoring point and that your initial offer is firm.
Although it may seem counterintuitive, you are better off giving a rate for your services, either by hour or by contract. Once the number is on the table, the company will have difficulty moving your price too far from that initial offer. The number you throw out is the one that will mark the rest of the negotiation, so it’s best that you lead the way.
Linda Singer is the co-founder of Workhoppers.com; a free website for professional freelancers to advertise their skills and get matched with local hand-screened, vetted opportunities. She writes frequently on topics related to the contingent workforce.