So you’re talking to the right people, you understand what the client wants and it’s time to seal the deal. This next phase can be a dance between you and the client and the goal is to make sure both people leave feeling great and walking away with exactly what they wanted.
Here are some tips for how to negotiate, pricing your work in a way that honors you and doesn’t price you out of the clients budget and some thoughts on contracts and clauses to put your best professional foot forward.
Negotiations: You’ve given them your pitch and they’re hooked on what you can do for them. Now it’s time for the money dance.
There is no steadfast answer here or 100% guarantee. Different clients are going to want different things and your job is to find the balance between your needs and their wants. The key is listening. During your conversations it’s good to get a sense of budget. You may not feel comfortable asking directly, but asking for at least a range can be helpful in making sure you’re at least in the right ballpark.
Pro Tip: every time you hear a war story from another consultant, get in the habit of asking how much did you charge for that engagement? Or How much did X subcontractor bill you for that work? More often than not, you’ll get an answer that isn’t a dollar amount, but it’s good practice to get comfortable talking about money, and in the event the other consultant answers you with a dollar amount, you’ll keep building your understanding of what the market will pay for different kinds of services.
When presenting your proposal and scope of work, it’s useful to provide a general sense of scope, or even estimate of hours committed to each phase, but be careful in how that gets presented so as not to give the impression your proposal is a menu of items for them to choose from, rather than a comprehensive package. One of our master consultants, Ron J. likes to get the client hooked on the scope of work before even presenting a budget. LINK
Pricing your work: Now it’s time to talk money. Your fee is a flexible rate based on a variety of constantly changing variables. Honestly, your rate is whatever you can get people to pay you and the name of the game is to make as much money as possible. If you’re not at the stage of charging whatever you want yet, here’s an easy formula to get started on determining.
Generally terms get spelled out on either a project rate or an hourly rate. Start by figuring out your hourly rate and then daily rate which will help you in estimating project costs.
A few estimates:
- 229 eight-hour business days in a given year
- 25% of time for Business Development
- Leaves approximately 172 billable days or 1,374 billable hours
Bad news, one of your problems will be hitting that 172 billable days goal. In my case, I use 125 days to model my billable days goal (or 1,000 hours).
To calculate your rate divide your annual revenue goal by 1,000 hours and then multiply that number by 1.5 (to cover insurance and tax burden) to ballpark the minimum you need to charge by the hour. Remember the feeling that calculation just gave you if you ever feel like not attending a networking event or a coffee with a former colleague.
Working Days Calculation
|Total Business Days||229 Days|
|(Assume spending 25% of time on Business Development.)||-57|
|(Assume you won’t hit a 100% billable rate)||-47|
|Total Billable Days||
Contracts: Not every client is going to require a contract, but it’s important to put your agreements in writing so that deliverables, timelines and expectations are clearly communicating between you and the client. Contracts put the legal protections in place to make sure that both you and the client make good on your agreement.
Sometimes clients will have a standard contract used for independent workers but don’t count on it. Plus having your contract gives you a professional face and shows the client you know what you’re doing.
Some basics to include in your contract:
- Services: make sure the deliverables you’re providing are clearly articulated.
- Terms of agreement: Include project start and end date
- Terms of payment: Articulate full payment and payment terms (payment due dates, amounts and how payment is accepted.)
I also like to include a clause for late payments, a nonexclusive agreement to clarify the agreement as non-binding and if I might collaborate with someone for outside help will include an assignment clause that establishes a process and agreement for how to reassign work.
Know that for any of these clauses the client may push back and just make sure you go into the conversation knowing what’s your bottom line. Good luck!