Today, 1 in 3 working Americans are freelancing. That’s about 57 million workers from a force of 160 million, up 4 million (13%) since 2014.
Freelancers are experts in their own fields, but they are also business managers: branding themselves, marketing their services, managing finances—and negotiating deals with potential clients. Those conversations can be challenging for independent contractors. But freelancers who fail to negotiate well can miss potential revenue, delay the growth of their project portfolio, and lose future opportunities that might otherwise come in through with the referrals that come from successful relationships with clients.
In my 25 years of advising corporations and independent contractors on how to negotiate, I’ve found that three specific areas often trip up freelancers in their work with clients. First, they focus on the business aspect of the relationship to the detriment of building a personal rapport; second, they attempt to differentiate themselves from their competitors with price discounting, and third, they waste their negotiation time on the wrong clients. Let’s look at each of these.
Make it personal
Relationships and authentic connections drive business. People do business with people they know; familiarity is the basis for trust at a chemical, physiological level in the brain.
This principle is particularly important for freelancers, for whom trust and confidence are table stakes. In a large corporate negotiation, the desire to let a relationship drive a deal might be tempered by the needs of the parties’ bosses or their shareholders. But if you’re a freelancer, you stand on your own. A client’s relationship with you is your business. From initial discussions with a possible client to the moment you seal a deal with them, the success of the negotiation hinges on their decision to invest in and engage with you.
As a freelancer, then, when you enter into a negotiation, build the relationship as the reflection of your own brand and values. Do this by telling your own story, describing your unique qualifications and abilities, and finding common ground to build connections.
Here’s a simple formula for your narrative:
- What do you believe? Begin with an idea that stems from your passions and fuels your approach. For example, a public relations freelancer could begin by saying, “To me, PR is about understanding an audience and giving them a good story.”
- What led you to this? Then, help your counterpart understand how you got to this point and why you are qualified to help them: “When I studied investigative journalism at Penn State, I first began honing my interviewing skills with local news outlets and student groups on campus. And for the last decade of my professional career, I have worked with industry leaders and have worked with several Fortune 500 companies, like Verizon Communications and Bank of America.
- How does it drive what you do today? Finally, connect it back to them, rather than ending on something about yourself. “The story you have is something people need to hear, and I can see it making an impact in a publication like Time.”
You can keep much of this material consistent no matter which client you’re pitching, especially the initial belief statement. But your story should never be fully canned. Weave in tidbits related to the specific project you’re pitching, the organization the project is for, or the person with whom you’re negotiating. This is your opportunity to establish common ground.
To identify those tidbits, take note of details in your small talk and begin looking for links between your world and theirs. Use these links to allow the conversation to meander organically. You both love rescue dogs? Or the same baseball team? These short digressions can build a rapport that leads to deeper substance: the person’s struggles, stressors, and aspirations. Look for your opportunities to say, “We are cut from the same cloth; your goals are my goals. We pursue the same dream.”
Resist the temptation to discount
Building a relationship doesn’t guarantee a win: the terms of the deal still matter.
When pursuing a partnership, big corporations can undercut competitors with steep discounts; because of their size they can absorb and recoup the loss over time. Many freelancers also offer discounts to win work but doing so is less sustainable.
Let’s say you’ve determined that $50/hour is your standard rate. To attract clients or win a project you feel passionate about, you may consider dropping that to $40 or even lower. But that sends a message that your work is worth less. And especially in online freelancer forums like Upwork where potential clients can see your previous rates, it becomes difficult (if not impossible) to later increase your rates to their true value –even as you gain experience.
Instead, I encourage freelancers I work with to offer a specific fixed fee for each project. This allows you to define the unique scope and deliverables for a particular project and client while maintaining your hourly rate. It also positions you well for future negotiations with a similar scope.
Clients tend to like fixed-rate projects, too, because of the clear expectations established for a price and scope of work. They are guaranteed a set of deliverables with no risk of overages if you end up working more hours than you anticipated. This is especially helpful if a client has reservations or concerns about the rounds of revisions needed to produce a polished final product. (Of course it also means that you bear the risk of any time overages.)
One final way to avoid lowering your price is to offer more at your standard rate. This might sound like a raw deal for you, but it can be as simple as finding other ways to charge for work you are already doing. For example, if your typical process involves secondary research, you can easily compile your sources into a dossier to provide to the client as a value-add. You maintain your premium pricing; they get more for their money.
There are some situations in which you may want or need to offer a discount, whether or not you offer a fixed rate. But to keep these situations to a minimum and to keep them consistent, set your criteria in advance. And limit the discounts to those that have a built-in reason for you to restore your established rate for other projects. Common discounts are based on referrals (if your client brings you a new opportunity, they get a discount), location or proximity (local clients don’t require you to spend on travel), or simply first-timer discounts to mark a new relationship.
Don’t spend time negotiating with the wrong partners
It can be tempting to treat every potential client like royalty during the relationship-building and negotiation process. But this can be costly. Many freelancers we work with express frustration at how much time they spend on potential clients only to lose them in the end.
As you begin courting a new potential client, consider two key criteria to determine how much effort to devote to them: pay and value. Pay is simply the amount of money you stand to receive if the contract goes through. The greater the likely pay, the more time and energy you can justify spending on the negotiation. Value is more nebulous: it can refer to how much your client acknowledges your work, or how much personal passion you have for the project.
These two factors create a grid:
Obviously those clients in the top right quadrant—loyal customers who value your work and pay you well for it—are your first priority. Acknowledge and appreciate them, respond in a timely manner. Don’t take them for granted. Likewise, the only reason to keep clients in the bottom-left quadrant on your radar is if you have reason to believe they’ll soon move elsewhere on your grid: if you’re going to start offering a service they’re interested in, for example.
The other two quadrants are more interesting. In the bottom-right quadrant, there’s a productive contract in the offing but the relationship is off. Perhaps your work styles conflict or you have failed to establish a personal relationship. Potential clients often enter this quadrant when their negotiator is given instructions that they personally may not agree with, or when they fundamentally disagree with their company’s leadership. You should treat these negotiations with a grain of salt—they’re more likely to disappear.
The top-left quadrant is the most dangerous. Here there’s a mismatch between the freelancer’s offerings and the client’s needs, despite a potentially fruitful relationship. The freelancer is often trapped currying favor and doing odd tasks for little or no pay, on the tenuous promise that paying work will eventually come. The freelancer justifies it because the personal relationship feels valuable; their counterpart’s words can be affirming. But it is critical to stay vigilant for these toxic negotiations, keep them at a distance, and if necessary, shift them to the bottom-left quadrant until they are able to pay for your work.
To this exercise add questions like whether there is a firm budget set aside for the work, how many stakeholders are involved, and who ultimately makes the decisions. Ultimately what matters is making informed decisions about where to spend your time.
By building relationships, maintaining your rates, and allocating your negotiating effort appropriately, you can find the autonomy you seek as a freelancer while building a pipeline of rewarding work.
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November 25, 2019 at 09:01PM
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How to Negotiate as a Freelancer - Harvard Business Review
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