You got the job. Now the client tries to negotiate down your fees.
I generally counsel individuals not to negotiate over email. Moving the conversation to an in-person or videophone meeting is preferable, and easy to do when the conversation is between two people. But when you’re running a small firm, the dialogue is between you, your team, the client’s project team and legal departments. It gets very crowded, very quickly.
Here’s how you can take charge when the client attempts to negotiate by email.
Our firm won an assignment from Alpha Group in a competition with two gigantic management consultancies and a global branding agency, an odd combination of competitors. The decision wasn’t based on price.
The kick-off took place: we met the whole client team and just had the first scheduled weekly presentation where we clearly demonstrated our mastery of the assignment and had shown real progress — but then this email arrived:
My name is Judy Smith and I’m with Alpha Group’s procurement org, and I work with Larry and the Charge-It team on their contracts.
I’ve taken a look at your fees for the brand/product design. They’re just a bit higher than we usually pay, so I’m wondering if we can talk/consider together how to lower these rates a bit.
Also, we notice your firm is billing the same amount ($195/hr) for a Principal and Senior Associate — normally we’ve found that a senior associate rate to be lower than the principal rate, so… I’m hoping we can discuss this too.
Email or phone is just fine — I’m mostly available today and Wednesday if that works for you.
Judy Smith J.D., LL.M.
Senior Contracts Administrator
Global Innovation Team
Shivers went down my spine as my stomach made a full turn. Recovering a bit I thought, what’s this? We’re doing this job! Are we going to get paid? We’ve just put in two intense weeks of work. What happened?
After asking Chuck, the senior associate, what he thought, I picked up the phone and called my client, told her about the email and asked if she could help me with this. She sounded very uncomfortable, even a bit evasive, “Ted, you’ll have to deal directly with Judy on this.”
“But, we have the assignment, right? The team seemed in agreement that we were on track and making good progress. We’ve been working with you for two weeks. Do you know Judy Smith? Why is a lawyer involved? Don’t we have a deal?”
“Just call Judy, Ted. I’m afraid I can’t get involved.”
Two weeks in and purchasing decides to jump in? What now? Call Judy Smith, that’s what. Then a voice from the back of my head, “No, don’t call her. Send an email and set up a time to meet.” So I responded:
Just read your note.
Chuck and I will be in your offices all day tomorrow. Could we get a few minutes to meet to discuss your concerns?
I hit send, hopping for the best. Then I printed out Judy’s original email to study and made a few notes:
- Seems like artificially friendly language.
- Judy is a procurement lawyer assigned to the Charge-It team.
- Not just a lawyer, but a lawyer with the advanced certification LL.M.
- She seems to be comparing our fees to others, but whose?
- The comparison of Principal to Sr. Associate is clear.
- Seems like she’s looking for any leverage she can get.
- Email/phone is not fine. Must deal with this in person.
- Her title is Senior not VP or SVP, just senior. Some power but not total power.
Feeling better, I talked it over with Chuck and we decided that we’d take the following approach:
- Tell Judy that we only discuss fee issues in person.
- Meet with her together so she’d see that we are qualified professionals.
- Explain that Chuck leads our product design team and I lead the branding team. The difference between us is that I’m an owner, he’s not, but there is no difference in the value that we bring to the project.
- Explain that we set fees based on feedback from our clients. We’re fully engaged so we take that to mean that our fees are acceptable.
- We know that our competitors charge $200-$300 an hour. At $195 we’re a bargain.
- We’ve found that when a consultancy lowers its fees word gets around, respect suffers and so does the project.
- Finally, we’ve found results matter, not the fee.
Chuck and I felt good about our position. Better yet, Judy replied, setting up a meeting the following afternoon. “Come to eighth floor reception and my assistant will get you.”
We arrived and had to wait 40 minutes. When we were ushered into Judy’s office she was sitting with her back to the windows with the bright afternoon sun blinding us. Feeling confident, I recognized the negotiation tricks: first the wait, now this. Why the games?
I asked for what I needed. “Judy, could you lower the blinds or could we move to another room.” We moved, we talked, she asked again for lower fees. We politely declined, after covering our pre-prepared points. She sent the signed purchase order the following week.
So what was this all about? We learned later that Alpha Group’s policy is to always ask consultants to lower their fees. And guess what, about twenty percent of the time they get the fees lowered. We already had the job, the email negotiation was a tactic to designed to intimidate us to lowering prices because Alpha Group had no other leverage. By scheduling an in-person meeting, and planning ahead, we communicated our value — and got paid what we were worth.
This article originally appeared at Dexigner.