How we think about negotiations
Price negotiations are a bit of a black art, and the best negotiators make the client feel like they are getting a great deal while also bagging a tidy profit for you. At We Are Wizards we follow a few simple rules that have served us well.
Fundamentals
First we always check the fundamentals of potential new projects:
- Profitability. At what price point will the work be profitable? This is something only you can answer. Do you have enough cash? Do you have capacity? You know the drill.
- BATNA. The best alternative to a negotiated agreement is your estimate of the value of walking away from a deal. If you absolutely need the cash, and soon, then your BATNA isn’t good. If however clients are queuing and your bank account looks shiny then there’s no reason to accept a bad deal.
Explaining value
Often the reason for getting hired is that your clients don’t know how to do what you are doing. They may have some intuition but you know all the details.
This means your clients need to trust you that you are charging them fairly, and for the right items. They can, and often do, check with your competition but for complex projects the exact price is only one of many factors for the final decision.
To build trust we always explain the various parts of our work, and why they add value. For example, instead of slapping on a generic ”10 days of project management” we instead split the project management cost into smaller units like sprint or demo meetings.
A sprint meeting is a weekly meeting where we decide on work items for the next week based on the goal.
No tricks
When we first looked up ideas for negotiating we found lots of sites with tips like:
- Don’t be reasonable
- Mention your client’s name a lot
- Be quiet to make your client uncomfortable
We have a pretty low opinion of these used-car-dealership tactics. Any substantial work means interacting with the client over a longer period of time, and if you play dirty on first contact it’s probably going to be a sad time.
Offer extras
The client most likely has a budget in mind, and we structure our initial offer so the client can see how far their budget gets them. We always put the substantial core work first, e.g.
- 15 days — website
- 3 days — animations
- 1/2 day — Konami code Easter egg
This often allows us to max out the clients budget without explicit asking for the limit, because they just pick items they like until they have no money left.
Maxing out a budget is good for us because starting new projects comes with significant overhead. Fewer, larger projects are more profitable.
