How to Navigate the Negotiation Process as a Freelancer - Fora Financial
Close
How to Navigate the Negotiation Process as a Freelancer
March 03, 2020

How to Navigate the Negotiation Process as a Freelancer

Although the idea of freelancing is attractive, it’s not for everyone. Being a contractor subjects you to challenges that others simply don’t have to deal with. This includes the price negotiation process. With every new freelancing job you accept, you must navigate the stages of the negotiation process. Otherwise, you’ll lose the job, or worse, you’ll get paid less than you’re worth. Either way, the inability to negotiate holds you back. Many otherwise skilled freelancers don’t make as much as they should because they lack negotiation techniques.

However, by shifting your thinking on negotiation, you can get paid what you deserve. Also, as long as you’re ready to step outside your comfort zone, there’s no reason you can’t master negotiation skills.

In this post, we’re going to review negotiation tips and show you how to navigate the process as a freelancer.

Freelancers Set Their Rates

You, as the service provider, set your rates. No one else can force you to work for less than you ask.

For example, let’s say you visit a local boutique. What do you think would happen if you told them you could find their products at lower prices? Most likely, they wouldn’t lower their prices because of this.

The quality and price of similar products and services will always vary. The boutique, just like freelancers, has the right to align their prices with the quality of their products. If customers don’t like those prices, they have alternatives.

As simple as this sounds, it’s critical to remember. Especially when you’re starting out, clients will try to lowball you. They’ll tell you they typically pay a predetermined amount for a certain project.

While it’s important to be polite, it’s important to stand your ground. Just because a client paid a lower rate to another freelancer doesn’t mean you have to accept it.

Set your rates and stick to them. The more you believe that your rate  is reasonable, the more your clients will. If you’re really struggling to attract any clients, then you can consider offering lower prices.

Don’t Sell Yourself Short

As a freelancer, it’s natural to feel pressure to provide competitive prices. On top of race-to-the-bottom marketplaces, clients and uncertain income add even more pressure to pricing. However, you shouldn’t sell yourself short.

It’s already hard enough to make it as a freelancer, and selling yourself short makes it that much harder. In future negotiations, you’ll have to dig yourself out of a hole you created. You’ll also undermine your own confidence, which is key to successfully negotiating.

7 Effective Strategies for the Negotiation Process

It’s too easy to throw your hands up and label yourself a bad negotiator. However, it’s more likely that you haven’t practiced negotiation strategies.

The reality is, you can learn how to be a better negotiator. Of course, that means you need a sound strategy. In the following sections, we’ll summarize seven effective negotiation strategies.

1. Consider a Minimal Accepted Rate

Whether you’re a freelancer or employee, you need boundaries in your work relationships. As a freelancer, though, your rates can be a critical boundary in the negotiation process. One way to frame the process to your advantage is to set a minimum accepted rate.

For example, let’s say you’re a website designer. If you’ve been designing websites for a while, you have an idea of what a basic project looks like. Using this hypothetical project, you can set a minimum accepted rate as your starting price.

This makes it clear that anyone who wants to work with you is going to pay at least the base rate.

A minimum rate is also a good boundary for yourself. If you set a minimum rate, you commit to staying at or above it. This makes it easier to resist the temptation to undercut yourself when a prospect is pressuring you.

2. Charge Per Project

Despite what you may think, a contract negotiation isn’t purely logical. There’s always a psychological, emotional element.

In other words, people like to feel like they’re getting a good deal. By charging per project rather than hourly, you can tap into this psychological tendency. The reason for this is most people are very familiar with hourly rates.

For example, when you tell them you charge $100 dollar per hour, they’ll put that in context. The, they’ll compare you to others who charge $100 per hour.

If the client doesn’t understand your value yet, that’s a bad thing. By charging per project, though, you can avoid this comparison. Also, when you charge per project, your cost is predictable. This makes it easier for prospects to budget accurately.

In addition, you won’t have to worry about accounting for every hour you work. That means less admin for you and a more profitable project.

3. Determine Their Perception of Value

Different people perceive value in different ways. While one client might want you to take a project and run with it, another client might prefer to give you directions.

This is where understanding your prospect’s perception of value is critical. By determining what they value most, you can justify your rates.

Just remember, perception of value isn’t just about the quality of your service. It’s about how prospects and clients feel about you. In fact, in many cases, prospects may value you more simply because you charge higher rates. It seems counterintuitive, but it happens all the time.

For example, people regularly buy new homes for significantly more money than an older, comparable home. This isn’t because a new home is inherently more valuable than an older one. Instead, it’s because people are willing to pay more for the “feeling” of buying a new home.

4. Tell The Customer To Name Their Price

Since negotiation can be stressful, many people are tempted to rush through it. Yet, a key part of negotiation is gathering information. One of the most important pieces of information you need is what your prospect expects to pay.

While you can’t expect to get a straight answer every time, it’s always worth asking. Ask your prospect to name their price, and see what they say. If you’re lucky, they’ll name a price higher than you intended to. If not, you’ll have gained important information.

From there, you can more accurately evaluate how you want to approach the rest of the conversation. If their price is far lower than you’re willing to accept, you have work to do. It’s up to you to help them understand your value. Or, you might decide that their desired price is too low and isn’t worth your already limited time.

5. Start As High As Possible

If you’re certain that your first proposed price will be accepted, something’s wrong. You should always be pushing for more. Not because you’re greedy, but because starting high helps you in two critical ways.

First, you don’t know where your price ceiling is if you don’t keep pushing higher. Finding out the highest rate your clients will pay can help guide your business.

Second, starting high will benefit you because of the anchoring bias. This bias describes the tendency to put too much weight on the first number offered in a negotiation discussion.

For example, let’s say you start your negotiation by asking for $100,000 per year. Your client may have entered the discussion expecting to pay $50,000. However, since you started at $100,000, the potential for agreement will have narrowed in their mind.

6. Leave Some Room To Negotiate

In his book, expert negotiator Dr. Chester Karrass explains that you should always leave room to negotiate. There are two big reasons for this.

The first reason is that people will often reject your first offer. They assume you’re not going to give your best offer first. As frustrating as this may be, you have to play the game. Otherwise, you can hit a stalemate before you even get started.

The second reason leaving room is important is more nuanced. By giving yourself margin for error, you may be able to reach an agreement.

For example, other details under negotiation like deadlines or payment may be valuable to you. If you can gain concessions on these other valuable details, it may be worth coming down on price.

However, if you start with no room to bargain, you lose the chance to gain those concessions.

7. Mutually-Agreed Conditions Beats Mutually Assured Destruction

It’s important to recognize that negotiating isn’t just about setting a price. In fact, you can also set the stage for a successful project. To achieve this, aim to reach mutually-agreed conditions for the project by answering questions like:

  1. What deliverables should the client expect and when are they due?
  2. When is payment due?
  3. What’s the scope of the project?
  4. How will you handle out-of-scope tasks?

It’s easiest and most effective to answer these questions in the negotiation phase. Otherwise, you may have to stop the project to address these things.

This adds unnecessary pressure to the relationship. Due to this, you should try to get it out of the way early.

Plus, while your client may be itching to get started, they’ll appreciate your thoroughness in the long run. Even better, you can work more efficiently when you’re not bogged down with admin issues.

Additional Negotiation Tips for Freelancers

  1. Fill Your Pipeline

Whether you’re a good negotiator or not, the ultimate leverage is the ability to walk away. Of course, you can bluff, but that might not be your style. Your alternative then is to do so much prospecting that you can afford to say no.

When you do that, it’s far easier to decline clients who aren’t willing to pay your rates.

  1. Know Your Market

You’re not supposed to turn every prospect into a client. Therefore, if a prospect isn’t ready to pay your rates, you don’t have to haggle with them. In many cases, it may not be worth your time.

Your time is better spent looking for and working with people who understand your value.

  1. Understand the Other Side

Everyone is different and every company has different internal structures and politics. This also means that people tend to have a variety of incentives you can play into. That’s why understanding your prospect’s perspective can help you so much in negotiations.

For example, if a prospect needs budget approval from their boss, that’s useful to know. You can position your offering in a way that helps the prospect pitch it to their boss.

Our Final Thoughts

Whether you’re negotiating a real estate lease or a freelance contract, negotiation remains the same. Of course, as we’ve shown in this post, the details and specific strategies do change.

As a freelancer, it’s critical to learn and follow these strategies. Negotiation is a crucial skill for any business owner. Plus, doing it well will make you significantly more money.

If there’s one thing you should remember, it’s to develop your own style. Don’t be afraid to use a mix of these strategies or select a few tactics you like.

As you’re searching for that perfect style, sign up for our newsletter!

Subscribe

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Fora-Logo_TEAL-KNOCKOUT
Post by:
Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].