Weiss Advice Issue: 171, December, 2017
Normally I address fee issues as matters of establishing value with the buyer, so that fees are seen as part of return on investment. However, there are environments in which fee is an inescapable “elephant in the room,” and must be dealt with continually.
Those environments might include government, charities, non-profits, very small and closely-held busiensses, and so on. In any case, fee is raised as a continuing issue because of rigid purchasing regulations, a true lack of money to invest, fear of being “blamed” for an expenditure, etc.
This. of you can’t use value as an offensive weapon (and you usually can at least 90% of the time), here are some defensive positions that might be helpful.
- Ask about budget firmly.
If budget is an issue, then let’s see how big an issue it is. Ask what parameters you must stay within. If they are evasive about this, just state firmly: “Look, you can’t tell me that your organization can’t afford to spend much on this project and also tell me that you’re uncertain about what that amount is! Are we talking $1,000, $10,000, or $100,000? If you can’t answer that, then let’s talk to the person who can.”
- Be prepared to cite a price.
Let’s say that you are negotiating to train 30 people for two days using materials you provide. You can’t value price this in the environments I described above. So tell the prospect: “Here are some figures for you to work with. I charge $7,500 for one day and $5,500 for each successive day. We can do this in one day or two, depending on how much actual practice and application you desire.”
- Put the onus for compromise on them.
If the contact comes back to you with “The board (or committee) has decided that we can go ahead if we pay no more than we did two years ago, which is $10,000 less than your proposal,” then you reply with, “Well, that’s a positive start, reinforcing that this work is needed here. What do you propose we do to reconcile the difference in investment required?”
- Consider non-monetary compensation.
At least some part of your fee must be in cash, but you might want to argue for the following: recording your session on video and/or audio; being introduced to the executive directors of trade associations with which the client has relationships; free advertising in the client’s publications if appropriate; service in-kind (e.g., vacation travel or financial planning); personal introductions to people in the business community; endorsements.
- Provide options.
This works beautifully with any size business. The decision makers will have the option to choose the least expensive approach, if they wish, and you will ensure that the least expensive approach is still a “good deal” as far as you’re concerned. Never provide “take it or leave it” alternatives to prospects who are sensitive about expenditures. They will almost always “leave it.”
- Consider abandoning that market.
This isn’t technically a defensive tactic, but it is a fine business strategy. No matter how effective you are parrying spending concerns in these environments, the fact is that there isn’t a great deal of money to be had. The “sweat equity” involved in trying to close a $50,000 piece of business is no different from that of a $5,000 piece of business, so why not pursue the bigger fish? Not only will you make more money, but the wear and tear on yourself psychologically will be far, far less.
These skills and tactics should not be used more than 10% of the time, or you’re either in the wrong markets or you’re not focusing on value in the right markets.