Yes, you can negotiate as a consultant, temp, freelancer, or small business owner. Don’t assume that just because you’re not full-fledged staff, you have less influence. Don’t assume that since it’s just you v. a bigger company that you don’t have leverage. Don’t assume that a company can’t pay more, even if they insist they have no budget. Do not accept a lower status or accept constraints as fact. Take everything that is said as an opening to negotiate. Stay creative and look for alternatives that work for both of you. Listen actively to what your client is saying – what is their most urgent need, what is their first priority? Learn how to create flexible arrangements with the following seven levers so you can craft a win-win solution to your next negotiation:
Negotiate your base rate
However you quote your fee, there is an hourly equivalent for your time and effort on an assignment, and this is your base rate. Make sure that your base rate takes into account all of your costs, such as taxes, insurance, and the opportunity cost of not accepting another assignment. By being certain of your true base rate, you can negotiate the right price to begin with and not have to try and move a number upward, once you realize you didn’t factor in all the costs. You can also point out to the company how much of the cost burden they are saving – no employment taxes, no benefits, and their staff can focus on other things.
Negotiate your fee structure
Even though you need to know your hourly base rate, you don’t need to charge hourly. You can create a package fee that bundles specific services or charge a project fee that is tied to a specific assignment or get paid on results – e.g., the PR consultant who charges by media placement or the direct response marketer who charges for leads generated. If a negotiation gets stuck on price, you might play around with the fee structure. A client that may balk at paying $100 per hour may feel better paying $1,000 for a project – if you know you can deliver that project in 10 hours, it’s the same to you.
Negotiate for performance incentives
A client that negotiates hard on price might insist that payment be tied to results. But that shifts all of the risk onto you. The PR consultant paid on media placement still needs his or her client to be media ready and have high-quality ideas and marketing collateral the consultant can pitch. In order to share the risk but still be accommodating to your client’s concern for results, you could offer to split the fee between a guaranteed portion and a portion based on results – specific performance targets or a share of revenue gains or a bonus for early completion (sometimes the client’s main concern is timeliness!).
Implement change fees
Asking for a guaranteed fee is one way of asking your client to share the risk with you. Change fees – if the client is late delivering something you need or if the project changes mid-stream – are another form of protection for you. Change fees ensure that the client keeps its end of the bargain and protects your time since project scope, schedule and outcomes are never 100% certain. When you negotiate on price, make change fees a part of the arrangement (it could be as simple as an overtime hourly rate) so you have additional items to negotiate back and forth.
Offer related services
When I coach job seekers on negotiating for salary, I point out that they can grow the job to grow their salary – i.e., increase the scope of the role (or how the client perceives the scope of the role) to justify the higher salary. Similarly, a consultant, temp, freelancer or business owner can carve out additional, related services and grow the project fee without focusing on the fee. A strategy session to kick-off a project or training for in-house staff to take over after the project ends are examples of additional services that you might throw in to justify a higher package price, or that you might charge for individually. Both can result in a larger total fee to you.
Play with timing of payments
When you get paid might be just as important to you or more important to you than the actual amount. If you need the cash flow, you might offer a pre-payment discount. If the bulk of your hours on a six-month project will occur in the first three months, you might structure payment in full over three monthly payments, rather than at beginning, middle and end. This way, you collect closer to when you’re investing the time. On the flip side, if you don’t care about the timing of your payments, your client might. Keep timing as a separate factor in the negotiations. This way, if the client pushes back on price, you can hold fast but give them more time on the payments. You don’t care so it costs you nothing, but the company feels like it’s getting something.
Negotiate for volume
As a consultant, temp, freelancer or small business owner, you eat what you kill – you have to sell on an ongoing basis. For some contingent workers, the certainty of having work is more important than the fee. If a monthly retainer or repeat business is a priority, you want to negotiate your pricing to incentivize volume. Offer a discount for a block of hours or consecutive months or after a certain number of projects. For previous clients, you might offer a repeat-business discount to restart working with you again. If volume is not something you care about, don’t unnecessarily lower your price if the client asks for a volume discount. Don’t assume they’ll go elsewhere — stick to your value and your pricing priorities.
Similar to the job seeker, there are many levers that a contingent worker can flex to create the right compensation package for that individual, practice or business. Even the ones you don’t care about might come up with in your negotiation, so look at the full array of options so you can readily go back and forth with your next client.