In a recent Forbes post, I wrote about negotiation strategies for the underpaid employee. As an entrepreneur, you also negotiate – when you make a sale, when you decide on specifications or customizations on an offering, or when you change directions on a project. With all this negotiation practice, you would think it would get easier. But it doesn’t, and it won’t, unless you consciously work on it. Unfortunately, there are lots of sneaky ways entrepreneurs unconsciously lose money for their business by failing to negotiate persistently enough. Here are four scenarios, where the best negotiation tactic might be walking away:
Say NO to pro bono work
When you launch a business, pro bono work can get you started with referrals and testimonials. As your business grows, you may continue to do pro bono work for publicity, to test out new offerings, or as goodwill for your audience. However, if you need to grow your revenues, you will need to limit, if not cut out entirely, your pro bono work. Your time, mental bandwidth and emotional capacity are limited. This is your business inventory, and you can’t afford to give it away. Set a maximum for how many hours or how many clients will be served pro bono, and say NO to every other request.
Say NO to scope creep
Let’s say you are disciplined enough to only take paid work. That’s definitely an improvement but it’s still only profitable if you don’t give away more than what you’re charging. Some clients will tack on extra requests or change parameters forcing you to do additional work. This project “scope creep” costs you money. You need to be mindful of where this happens in your business and negotiate via payment policies or change fees that limit your downside in these cases. You might have to train your clients to take up less time with meetings or to limit their access to you. Don’t be afraid to say NO altogether and fire unprofitable clients.
Say NO to friends and family favors
Family and friends expecting freebies is a particular danger in services business. You might be a realtor so your house-hunting friend asks you run searches on the MLS. Or you’re a college admissions coach, so could you help your friend’s HS-age daughter on her essay? Remember that your time, mental bandwidth, and emotional capacity is limited. If you say yes to a friend, you say NO to another paying client. Decide in advance how many hours or requests you will accept, and refer the rest to experts they can pay for (or refer them to your website where they can register and pay)!
Say NO to bartering for food
Maybe your family and friends don’t ask outright for a freebie but couch it as a lunch invitation that ends up being a professional services session for them. So you’re not working for free, but you are bartering for food. Is this a trade you would be willing to make outright? You can’t run your business on calories, so protect your profits and your waistline and stop transacting business over lunch.
For the record, I do pro bono work, throw in extra bonuses for my clients, offer friends and family rates, and share advice over lunch (sometimes even just coffee). When I do, I do this willingly. But I also readily say NO when I’m too busy. So I’m not saying to never do this if you have the capacity and the interest. However, if you’re feeling underpaid or undervalued as a business owner, then start negotiating your pricing and offerings to everyone – non-profits, repeat clients, friends and family alike.