Negotiation Q&A: Who Goes First?
‘Who’s on 1st’ is a comedy classic. But there’s nothing funny about the question ‘Who goes first?’ for business owners. Should you make the first move when it comes to sharing your proposed price? Or wait for the other guy to put a number out there?
Often, this dilemna devolves into either:
- Everyone being frozen in fear of saying/not saying a number, or
- A cycle of ‘you tell me yours’ ‘no I asked first’ ‘no really, I insist’…
Either way, it’s not helping move the deal, or your business forward. So here’s my take on who should go first.
You should share your price or proposal first.
Here’s why.
We’ve already addressed posting your prices on your website as a way to inform your potential clients, but once you’re in the consult call or meeting, the most dangerous question you can ask before you’d provided your proposal is “What’s your budget?”.
This question is dangerous because:
It’s a hopeful budget.
Your potential client will start off by saying a number far lower than what they could actually pay, to help them save money. Your potential vendor will start off with a number far higher, to try and maximize their profits. They’re going to be ambitious, so it may not be an accurate representation of where your deal could really end up.
The number will have little link to outcome.
Asking for a budget is just about money, and there’s a lot more that goes into the work you do. Diving into the benefits and outcomes they’re looking for, the scope, or timeline of the project will all give you a better sense of what sweetness you can pull into your proposal.
Their budget is uninformed.
Not because they’re dumb, or because they haven’t done their homework, but because it hasn’t been linked to the quality of the work you provide, or the outcomes they’ll achieve. They aren’t the expert in what you do (that’s you!) so the budget they’ve come up with could be wildly inaccurate based on the value of your work.
This number is going to influence you.
Even if you started the consult call or conversation 100% confident in your established pricing structure and the value you’re bringing, you’ll be influenced by whatever number they say. So instead of giving the quote you were planning on…you lower it so that it doesn’t seem greedy, or over-the-top, or unrealistic (admit it, this has happened). In negotiation nerd speak, this is anchoring. They’ve anchored you to their budget, and now you’re being pulled in that direction.
So here’s what to do instead
Take time to explore their needs.
Having a potential client answer a few basic questions about their business via email before you’re on the phone with them gives you time to poke around/research/snoop on their business and start to formulate your expert plan. This way, you come to the table with at least a partial sense of what they’ll need.
Ask lots of questions.
Well, except for ‘what’s your budget?’ that is. Ask about their ideal outcomes, the challenges they’re facing, the parts of their business that they love the most (or the least). The responses will help you figure out where priorities will lie and how to shape your proposal accordingly.
For example, if they’re frazzled and under a lot of time pressure, you’d frame your work in terms of how it will help them free up more time, be less stressed, and get more done with less panic.
Propose your best solution.
Finally, provide the potential client with your expert opinion on what solution will take them where they need to be. Identify the key actions you’ll take, how they’ll create impact, and state your price clearly. Get it right out there. The investment for your custom help is $XXXX. Voila. You’ve made the first proposal.
The key with presenting your proposed solution (and price point) to the client before asking what their budget is, is that it allows you to focus on creating the package of services or products that will work best for them and their desired outcomes, rather than trying to shave and squeeze and shove some services into the tiny budget they’ve given you.
But Devon, what do I do when they aren’t able to pay the full amount? How do I deal with them asking for a discount?
I’m glad you asked! The best part of being a business owner is that you can choose how you respond the requests for discounts or smaller budgets. I covered a few options you can explore in my Dealing With Discount Requests blog post.