NotitiesLearn Your Lines
Jonathan Stark
Dit document beschrijft hoe je effectief kunt reageren op vragen van potentiële klanten over tarieven en prijzen, met nadruk op het belang van het stellen van een vaste prijs voor projecten. Het benadrukt ook het belang van het stellen van "Waarom"-vragen om de ware behoeften van de klant te begrijpen en om de waarde van je diensten te onderstrepen. Tenslotte wordt het risico van het accepteren van deadlines voor complexe projecten besproken, waarbij wordt benadrukt dat samenwerking met meerdere partijen de controle over tijdlijnen bemoeilijkt.
When a prospective client asks: “What’s your hourly rate?” You politely reply: “I don’t have one.” That’s it. Full stop. Exactly these four words. No variation. Simple, clear, concise. Try saying it out loud. Seriously, say it out loud right now: “I don’t have one.” Easy, right? The thing is, this answer is simple (conceptually) but hard (in practice). You have to prepare it. (Location 55)
When a prospect asks you, “What’s your hourly rate?” it is very early in the relationship. Things are fragile and tentative. They are just trying to get to know you a little bit. They are highly tuned to even the smallest signals. They don’t want to hear you stumble on such a simple question, or soapbox about pricing theory, or dive into your entire business backstory. Simply replying, “I don’t have one,” immediately sets you apart from the crowd. Upon hearing your answer, your prospect will pause to absorb what you said. There will be a short silence. DO NOT RUSH TO FILL THIS SILENCE! Let. It. Hang. Even if It feels like a yawning chasm opening up before you, keep your trap shut. The client will then ask: “How do you price your work?” Success! They didn’t hang up on you, or scream at you, or burn you with fire. Do you know what did happen? You demonstrated confidence, you built a little trust, you pushed back on their request, and now you are having a conversation on your terms, not theirs. (Location 71)
Your Lines Here’s what you say: “I’ll give you a fixed price for the entire project. That way, you’ll know, prior to making a purchasing decision, exactly how much it’s going to cost you. Is that acceptable?” This answer is a bit nuanced, so let’s break it down line by line: Line 1: “I’ll give you a fixed price for the entire project.” I recommend that you deliver the first sentence verbatim. Just memorize it and practice out loud. Line 2: “That way, you’ll know prior to making a purchasing decision exactly how much it’s going cost you.” You can modify the second sentence to suit your personality and speaking style. Just make sure that it’s clear that your price will be a fixed quote, not an estimate. This will make working with you feel less risky than working with competitors who present only estimates. Line 3: “Is that acceptable?” A small percentage of organizations have rigid procurement policies that require vendors to provide hourly rates. In the unlikely event that the prospect says, “No, a project price is not acceptable,” then you should say something like: “Ah, I see. That’s unfortunate. Well... I guess we’re not going to be a good fit. Thank you for your time.” What?! Throw away the lead? Yes, chuck ‘em. Don’t worry. You’re probably not missing out on much of an opportunity. In a situation like this, the odds are good that the person you’re talking to is not the real buyer; actual buyers know how to work around rigid policies when the need arises. (Location 87)
Once you have successfully responded to “What’s your hourly rate?” and “How do you price your work?” you’ll likely end up scheduling a meeting with the potential client. In this initial sales interview, your first question should be something similar to: “Can you tell me a little bit about the project?” It’s a big, open-ended question intended to trigger a complete brain dump. The dumping can take some time. At least 15 minutes, but probably more like 30. But here’s the thing: Almost nothing they say will be of much value. While they are talking, you should: Listen patiently and attentively Jot down any key points, interesting terms, unusual language, etc Ask if you don’t understand a concept, an acronym, or some industry jargon NOTE: You should barely talk at all during this brain dump. You want it to end as soon as possible, but not before they’ve gotten everything off of their chest. You want the client to feel like they have exhausted their knowledge of the planned project. (Location 106)
Do not get excited by some novel problem that the client describes. Do not start exploring possible solutions or try to demonstrate how smart you are by describing a possible solution. Chatting about project minutiae like scope, features, and deliverables will prolong the conversation without learning anything useful. It’s just noise at this point. The purpose of this meeting is NOT to determine scope, or identify obstacles, or agree on deliverables. The purpose of this meeting is to find out why the client wants someone like you to do a project like this at… (Location 119)
At some point in your initial sales interview with a prospective client, they will brain dump about the proposed project for a while. There is usually very little helpful information in this monologue, but you have to let them get it off their chest before you can get down to the heart of the matter, which is this: Why they want to do the project at all. (Location 134)
Questioning the project’s premise before they do the dump will frustrate or confuse them. They will gloss over the answer so they can jump to the dump. So... you have to let them get it out of their system. Keep your mouth shut and let them vent. When they finally come up for air, you say: “Thanks for that. Lots of helpful information here. Can we back up for a sec?” They’ll say, “Sure!” And then you ask some variation of the following: “Why is this project becoming a priority now? Has something changed?” (Location 137)
Once you’ve started asking these sorts of “Why” questions, you keep doing it... “Why do this now? Wouldn’t it be better to keep an eye on the issue for a few months?” “Why hire someone like me? Couldn’t you save a ton of money by outsourcing this to a company in an emerging market?” “Why not use something off-the-shelf? Wouldn’t that be cheaper than paying for custom code?” etc etc etc. Don’t stop asking Why questions until you are convinced that you are - or are not - a good fit for the project. (Location 150)
Having The Why Conversation sort of feels like trying to talk the prospect out of hiring you because... well, you kind of are trying to talk the prospect out of hiring you. If you CAN talk them out of hiring you, then they didn’t need you that badly (i.e., the perceived value of your engagement was low, which means you couldn’t have charged much). If you CAN NOT talk them out of hiring you, then as they answer each Why question, one by one, they’ll be convincing themselves that you are the best option. If you conduct The Why Conversation successfully, you’ll have something to base a value price on because you’ll have learned: Why the project is urgent to the client What they think will happen if they don’t do the project The feared business impact of failing to act now Why they think you’re a good fit for the project Why they don’t want to do with a cheaper option (Location 159)
Early in the sales process, it’s common for a prospective client to ask: “Can you give me a ballpark on what this might cost?” To which I reply (with a big smile on my face): “Between five thousand and five hundred thousand.” This usually gets a laugh, which is what I’m going for. (I deliver this line with a smile on my face, even if I’m on the phone... people can hear you smiling.) You should adjust the numbers up or down into a realistic range for your services, but the high number has to be WAAAAAY higher than the lower one (e.g., like, 100 times higher). (Location 173)
If a prospect comes straight out and asks if you guarantee your work or offer refunds, it probably means that they don’t wholeheartedly believe you can deliver the desired results. (Location 187)
I offer different sorts of guarantees for different sorts of services. For example: Custom projects - Case by case, but usually, my guarantee is along the lines of “I’ll keep working until we’ve reached the stated goals” rather than “I’ll refund your money.” (This only works if you give a fixed price for the project, of course.) Advisory retainers - I offer a full refund at any time during the first month to make sure we’re a good fit—no refunds after that. Private speaking gigs - I do not offer refunds, even if the client cancels prior to the event. They are allowed to reschedule at no charge, however. Online training classes - No refunds, but students can retake them for free. (Location 194)
For relatively fixed scope dev work (e.g., a productized service) that I can finish quickly, I’d offer a 100% money-back guarantee on my sales page. (I’d also price the service accordingly, but that’s another story.) So, for a short engagement that takes maybe a half day or less (e.g., SQL performance tuning, a boudoir photo shoot, a SaaS onboarding analysis), I’d offer a 100% money-back guarantee if they were unsatisfied with the outcome. (Location 203)
What should you say when a prospective client asks: “Have you done work like this before?” This is a pointed question. It is meant to disqualify you. But if you’re ready for it, you can use it to your advantage. (Location 221)
The client says they don’t have the money, but you have reason to believe that they do have it somewhere. In this case, it’s a priority issue, not a resource issue. Here’s what you say: “C’mon... You guys are probably spending more to have the trash cans emptied. What’s the real objection here?” (Location 357)
If you believe that the client has the money allocated and is just in the habit of asking for a discount regardless of the situation, here’s what you say: “Thanks for asking, but I just can’t make a business case for lowering my price. PLMK if you’re willing to move forward at the quoted amount. If I haven’t heard back by this time next week, I’ll assume you’ve gone in another direction.” (Location 364)
“Thanks for asking, but I just can’t make a business case for lowering my price. PLMK if you’re willing to move forward at the quoted amount. If I haven’t heard back by this time next week, I’ll assume you’ve gone in another direction.” Alert readers will note that I used this line in a previous scenario. You’ll likely see it again in a future scenario. It’s my go-to reply when saying NO to a request for a discount. It’s a good one to practice out loud and commit to memory. (Location 388)
A word of caution: if you want to compose your own variation of this line, keep it short (20-40 words max). If you respond with a long message, it comes across as defensive and needy. You don’t have to make a case, justify your position, or explain your reasoning. A polite No will suffice. (Location 420)
Typically, non-profits are mission-oriented organizations dedicated to making the world a better place rather than creating profits for shareholders. The fact that they don’t create profits does not mean that they are broke. (Location 441)
I take an organization’s mission into consideration with all prospective clients regardless of non-profit/for-profit status. Working with a group that is dedicated to changing the world in a way that aligns with my worldview decreases my cost, which means I can offer a lower price without sacrificing profits. (Location 454)
Pay Your Dues - The client suggests implicitly or explicitly that giving them a discount now will result in some combination of more work, more notoriety, more clients, or more profits at some indeterminate point in the future. When a prospect makes such a request, what I hear in my head is: “If you agree to this crappy deal now, we promise to offer you more crappy deals in the future!” Um... no thanks. The Stability Carrot The carrot they are dangling in front of you is stability. Giving in to this sort of request will instantly create a destructive client relationship dynamic. (Location 465)
Bad clients don’t magically turn into good clients. In fact, it’s tough to convert bad clients into good ones. It’s easier to attract good clients than to transform bad ones. (Location 474)
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You’re The Most Expensive - The client explicitly states that they have received lower prices from other vendors. Marketing Fail If you get hit with this one, you need to up your sales and marketing game. Do a better job making it clear in your messaging that you are a premium option (i.e., the best, not the cheapest). You can do this simply by publishing your prices on your website. If you don’t want to publish your prices (or can’t because you only do custom work), you can add some copy to your contact page that indicates the minimum investment that they should be willing to make. Something like: Custom projects start at $20,000 and can go as high as $200,000. Can you presently afford this level of investment? [YES/NO checkbox] You can further cement your position as the premium option once you have a prospect on the phone by trying to talk them out of working with you. For example: “Why not outsource this to a cheaper team overseas?” “Have you considered using something off the shelf?” “Why not do this project in-house?” Assuming they reject all of your suggestions, they will have explained to you (and themselves) exactly why cheaper alternatives are not viable options for them. (Location 484)
True buyers can work around rigid policies. If you’re not talking to the true buyer, you’re not going to have much luck overcoming these sorts of objections. (Location 559)
Working through an agency can be a good way to shore up cash flow in a slow period, but it’s not a good way to build a business long-term. (Location 571)
I NEVER lower my prices once I have submitted a proposal. Seriously. Never, ever. Since I refuse to budge on price, I need to give myself room to negotiate in other areas. This is where my payment terms come in. In case you haven’t read through my proposal template yet, here’s a typical example of the payment terms I offer: TERMS AND CONDITIONS I never assess an hourly or daily fee since you should not have to make an investment decision every time my assistance may be needed. This is a unique feature of my consulting practice. The pricing for each option is as follows: option 1 is $5,000.00, option 2 is $12,000.00, and option 3 is $25,000.00 USD. Please note that these are fixed prices, not estimates. You will not pay a dime more than your selected price. The fee must be paid in full on acceptance to schedule the project. I am available to start on Monday, January 6, 2024. This quote is good for 14 days. Roughly 80% of the time, clients agree to these payment terms without question. In the 20% of cases where a client doesn’t, their reply is usually one of the following: “Are you CRAZY?!” (aka Sticker Shock) “How about 50% now and 50% on completion?” (aka 50/50 Terms) (Location 592)
In the “How about 50% now and 50% on completion?” scenario, my prices are in the ballpark, but I haven’t built up quite enough trust with the client. To mitigate their perceived risk, the client offers 50/50 payment terms - i.e., “How about we do 50% up-front, 50% when the work is done?” My reply to them looks like this: We can discuss, but I don’t think it is in your best interest. A custom project is like a lake freezing - at some point, you are sure it’s solid, but you never know exactly when it happened :-) In other words, we are not going to know exactly when this project is done. Tying the final payment to the delivery date will put pressure on you to sign off too soon. (Location 609)
Ultimately, asking for 100% up-front is better for you, better for the client, and better for the project. (Location 630)
Instead, explain to the client why setting a deadline would be bad for them: “A deadline will put pressure on both of us to sign off before we’re really done. This will almost certainly lead to maintenance charges after delivery.” “A deadline like this will create the illusion of certainty. This would be a very bad thing if you’re planning to schedule other things based on that date.” “There are many unknowns at this stage, but I’d be happy to draft a timeline with the known dependencies. This will be a living document that we can review and update on our weekly calls. The timeline will give you visibility into and some control over the process. It will likely expand quickly in the early stages, but over time, the velocity of change will decrease, and a realistic delivery date will start to come into focus.” While you’re at it, you could consider mentioning that anyone who promises to meet their arbitrary deadline is probably doing so out of inexperience or opportunism. (Location 641)
So why would you answer differently when a potential client asks you to commit to a deadline for a big, complex project? Any project of the slightest significance is a collaboration between at least a dozen (or more!) people. You – as an outside consultant – have no more control over the responsiveness of the participants than you do over the weather. Not even the client’s CEO can guarantee an on-time delivery for the project! There are simply too many variables. Nobody has even a modicum of control over all of them. (Location 669)
One last thought on deadlines... I’m sometimes asked: “Are all deadlines bad?” No, some deadlines are fine. My stance on never agreeing to deadlines is specifically with regard to complex projects. My reasoning is that no one can control the deadline because it’s an ongoing collaboration, often between quite a few people. (Location 679)
Lumping a list of tasks into a two-week sprint is fine because the work is broken down in a very granular way. The number of people involved in each task is often just one or two. This drastically decreases the potential number of interactions, which increases the chances of the estimates being accurate. So, not all deadlines are bad. (Location 690)