Never Negotiate Your Freelance Rate

http://planscope.io/blog/never-negotiate-freelance-rate/

by jmduke • 12 years ago

143 34 12 years ago

noir_lord• 12 years ago

I like this.

One thing not mentioned that I've found over the years is that sometimes asking for the higher rate from the start increases the clients perceived value of you.

This was put succinctly by an old boss of mine "serious people charge serious money".

He was full of these another that stuck with me is "Don't charge what you think you are worth, charge what they think you are worth", on one system I built I went in with a price I thought was really high, got the job and then found out afterward I was still significantly cheaper than the other company that had bid on the contract though sometimes that is just the way it goes.

neltnerb• 12 years ago

Yeah, I particularly agree with "negotiate on scope". That's a way to make clear that you appreciate their budgetary concerns and signal that you're happy to be accommodating, but that your time is valuable. Then they're left with the only counter being that they actually don't think you're worth that rate.

I also think it's worth noting that there is a cost to them to walking away and finding someone else. As the potential contractor, you're not the only one who has put time into figuring out the project. It probably isn't worth that $10/hr rate discount to have to negotiate all over again with someone else who they haven't identified yet, don't know if they'll like as much, and who may charge just as much or more.

bdunn2• 12 years ago

I once lost a huge project simply because 1) I charged less than my competition ("there must be something wrong with them...") and 2) I didn't add a 20% annual maintenance fee my the proposal. Needless to say, I never made that mistake again.

But yeah, I can't agree more.

The amazing thing about raising rates (which I think patio11 and I talked about way back when here: http://www.kalzumeus.com/2012/10/10/kalzumeus-podcast-3-grow...) is that you make more money, get better clients, and get treated with a lot more respect.

logicallee• 12 years ago

Believe you, but how on Earth did you find this out? (For your anecdote, that those were the two specific reasons you lost the project.)

zo1• 12 years ago

I'm curious about this "20% annual maintenance fee" you mentioned. Care to elaborate a little more on it? Or is in the podcast you linked?

sparkzilla2• 12 years ago

Meanwhile, in the real world...

chasing• 12 years ago

I'm not sure that "never" is a good word to use, here. There are many cases I can think of where it'd be worth your while to negotiate your freelance rate:

- The client is a non-profit or under-funded project that has little money but you can help out because you support the good they're trying to do in the world.

- The client is offering you a huge chunk of work, and the overhead they're removing from your life (finding other clients to fill the time, for example) is worth a few bucks off of your hourly rate.

- The client can offer other incentives to offset the hourly discount. Like a client that wants you to work from the office all the time might be willing to let you work from home.

- It's a project you really want to work on and that's the only way to make it work.

"Clients obsessed with nickel and diming are pathological." This is nonsense. Clients -- just like you -- have every right to negotiate. But freelancers who are unwilling to be flexible when dealing with their clients are, to quote South Park, "going to have a bad time."

danenania• 12 years ago

On your first and last points, my general rule is that I either work for my full rate or for free. I find it much simpler and less stressful to make a clean divide between things I'm doing because I believe in them, and things I'm doing because I want to make a comfortable living and advance my business.

In the middle territory, no one wins. You'll have expectations placed on you because you're being paid something, but it won't be enough for you to put in a professional level of focus.

When you do these kinds of projects for free instead, you get a lot of goodwill in return and you aren't burdened by unrealistic expectations that can add stress and interfere with your bottom line. It also forces you to decide if it's really something you believe in, or just a sub-par arrangement that you're getting pressured into.

fizx• 12 years ago

Or, you can do what everyone else does. Set your rates 20% higher and give anyone who asks a 20% discount. Or set your rates 10% higher, and give a 20% discount for something that is valuable to you, but not necessarily valuable to the client (e.g. prepayment).

keithwarren2• 12 years ago

This is almost normal course of practice for everyone I know who works for themselves.

kevingadd• 12 years ago

For a recent project I gave them a small discount off my hourly rate in exchange for an agreement that we'd open-source a part of the software I developed for them. Works out great for all involved parties - they save money and look good, I can leverage my work for future projects (either as a portfolio piece or to solve future problems)

vishaldpatel• 12 years ago

There is nothing wrong with offering a discount. Make sure there are good reasons for offering the discount and make sure that the discount is a line-item on the invoice.

For example, if a client is willing to commit to hiring you (by paying up-front) for a certain larger-than-normal period of time, you may be shooting yourself in the foot by not offering them a small discount to sweeten the deal.

theorique• 12 years ago

I like Merlin Mann's take on this. Basically, charge a lot to paying customers, and give a lot of content away for free so that those who can't afford it can still benefit.

It's obviously a nice situation to be in.

For most all of my speaking, consulting, and advisory work, yes: I do charge a fee, plus expenses. And, candidly, I charge kind of a lot.

Being compensated for my speaking, consulting, and professional writing work is how I’m able to feed and clothe my family as well as fund my lavish, meth-driven, West Coast lifestyle of fast cars, fancy English butlers, and the jet packs that will not be available to normal people like you for years.

It’s also how I’m able to give away almost everything I’ve ever written or said for free. Hundreds of thousands of words and dozens of days of audio and video can only be treated that liberally if there are other ways that the freight gets paid. I don’t apologize or defend this; I just realize it’s not as obvious to everyone as it is to me.

As for how I decide what to charge and to whom or for what? It’s not particularly complicated. I charge a lot to do things I’m great at for people who know it’s a bargain. And, that’s it. Only way to fly. I don’t “dicker” and I never “sell.”

I learned a long time ago to only work for or with people with whom you have mutual admiration and respect—and who already think you’re valuable and great at what you do. In my experience, the folks who expect you to make a case for your own value make for terrible clients. They may be good negotiators and nice people, but working for them is a gut-wrenching travesty. And I don’t do travesties.

With all that said, I do a fair amount of (private, unpublicized, non-ribbon-based) work with non-profits and other deserving groups. And, no, I normally do not charge for this work. So, If you’re working for a good cause or represent an organization that’s trying to do something you know I care a lot about, please ask me. No promises, but I’ll do what I can with what I have.

So, yep. “Expensive” or “Free.” It’s a fee schedule that works.

http://www.merlinmann.com/faqs/hiring-merlin/do-you-charge-m...

DodgyEggplant• 12 years ago

An extremely useful rule is to give the discount, but hedge your risk with a limit on the hours for "undefined time". Agree on X hours for meetings, more meetings, presentations, discussions, whatever, and stick to it. This will force the client to use your time wisely, and pay you more if substantial more time is required.

keithwarren2• 12 years ago

15 years on my own and after having this discussion with clients nearly every single time we begin a relationship, I have learned to embrace rather than fear the situation.

Often times this is a pattern, the person on the other end feels like they need to get a win in some form and the easiest and most obvious to them is always pricing.

Find out why they are asking this question, find out what they really want - 8 out of 10 times for me, it is just them asking because it would be dumb not to ask. Explain your rates, be open and honest about them. If they feel like your rates are too high for them then be willing to negotiate.

It is incredibly important that you negotiate, so many other people I talk to simply balk and let their rates come down some. This is insanity, it is surrender not negotiating. I always, always ask for something in return if I am giving up something and do my best to make sure what I get in return is more valuable than the money discount they are asking for. Often time I use this as a segue with a customer to discuss retainer billing models. Most people balk at it but if it is part of a give and take over the rate they will embrace it. Give me the choice of a project with pre-paid hours at 150/hr vs NET 30 at 165 and I am choosing the 150 all day long.

Another point, if you relax your rate - sunset the change. 'I am willing to do this project at $150/hr but only for this project - future work we do together will revert to the $165/hr rate'. Put it in writing.

chc• 12 years ago

If the price is too high, you can bring it down without gutting your rate. Just tell them what can be done in their budget. (So instead of "Fine, I'll come down to $75/hour," it's "Here's how much work each component is likely to be. Cutting any of these sets will bring it into your budget range. We can always revisit them later once the project starts earning back its cost.")

jesusmichael• 12 years ago

I agree with this approach... New clients really don't know how good Vendor A is over Vendor B. They may "Like" you but that doesn't mean they are going to marry you if they can't bring in their project within budget.

I'm flexible on rate based on a "fixed scope", any out of scope hours are billed at my "standard" rate. This puts the burden of "scope creep" on the side of the client.

I like to give me clients an incentive to work with me and to take the project seriously. If they get it cheap. They'll abuse you, if they feel like your rates are too high they will either move on or work with you and be very inflexible with any push back on other issues.

The rate negotiation is just the beginning of the relationship. If you're going to set the tone with inflexibility, that's what your going to get down the road, if you need some work from them.

EGreg• 12 years ago

Yes! And just like anything else, be prepared for these kinds of questions and have a suggestion that can be accepted by both parties and count as a win. Like having your rates 10% inflated up front, but then giving 10% discount for paying early etc. They want to pay less, and you want to rely on the money coming. Also you can assuage their fears from the other side by proposing intermediate milestones.

quizotic• 12 years ago

Chacun a son gout... but I agree with OP. When I've been asked to discount, I recommend two or three other consultants. I sell hard for them, extolling their work, offering to make an introduction. Someday, a prospect will take me up, I'll lose some business, and win a favor with a colleague. But it hasn't happened yet.

tryp• 12 years ago

xss sp

joshfraser3• 12 years ago

People like to feel like they got a deal. They want to be able to go back to their boss and tell how they talked you down from $250/hr to $200/hr. Why not pad your pricing to begin with and let them feel like they won? This is particularly important for dealing with people for big corporations where buyers are evaluated on their ability to squeeze vendors. In the end, you'll still get the price you need but you can leave them with that warm fuzzy feeling that you gave them special treatment because you value their business so much.

judk• 12 years ago

This practice turns off honest customers who just want good work at a good rate. Those customers will just not call you, or go to a competitor who has lower no-bullshit face pricing

joshfraser3• 12 years ago

Not always. It comes down to knowing your audience. I'm guessing you've never negotiated with a buyer from a fortune 500 company.

Noughmad• 12 years ago

People are irrational beings, and so are customers. We will rather buy something that's on sale from 100 to 80 than the pretty much same item that's selling for the regular price of 70. Stores artificially raise prices and then offer discounts, why shouldn't freelancers?

sparkzilla2• 12 years ago

Everyone wants a discount. The first thing I do when I see "fixed pricing" is ask for a discount. If I don't get one I move on to the next supplier.

lotsofpulp2• 12 years ago

Why not pad your pricing to begin with and let them feel like they won?

One reason is that if the seller doesn't need the buyer, then negotiating prices is a waste of time for the seller.

chrisbennet• 12 years ago

If they ask for a discount, let them know that you offer one - for work done on retainer (payment up front).

raverbashing• 12 years ago

Or just quote an inflated price (and don't make it public)

Does it turn away honest customers?

Sure, you want to quote the fair price to the honest customers and a higher price to those who haggle. The trick is finding out which is which.

Now, for companies, always, always quote the inflated price. And for some, there's the possibility of going 100% above. I'm not kidding.

A negotiation, even a small one, demonstrate that the parts tried to converge to a fair price. It's one thing to buy something with a price tag from a faceless corporation, another to negotiate something.

gedrap• 12 years ago

There is a good point in the post that no one seems to mention. Negotiate on the scope. Please, for your own good, do that.

It sucks so badly when you a finish a project for a nice amount of money, the client says 'oh I have this project... can you take a look? I just need a quick fix', and you believe that a quick fix is a quick fix but in reality, it's piece of crap that you are not sure how does it even work. Why it sucks? Because I feel bad to tell the client to go away after he spent $XXXX on me.

And I wish I knew about the retainer contracts when I started... Random hours for maintenance for old projects sometimes can kill you.

Never Negotiate Your Freelance Rate

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