Most service providers have been in this situation.

You “chat up” your prospect. You agree on the framework of the project. All sounds great, and then they announce that they cannot, will not, or simply want to pay the price you have asked. What do you do?

Yes, each situation is different. Are they bluffing? How badly do you need a contract at any price? What is the competition like? etc etc.

But let’s be honest. These types of questions should have been evaluated in advance. They are predictable and thus you can have your excuses well prepared.

So what’s missing? You are providing a service of value and of quality. That is why your prospect is talking to you. If that message has been delivered correctly, there should be no need to give a price reduction. There should be no need to back down.

However, it is more than delivering value that counts here. The latest edition of the “Guerilla Consultant” newsletter makes a valid point. When you agree to a fee concession, you

introduce the shadow of a doubt in your client’s mind about your trustworthiness. If you’re willing to cave in on your fee, what else will you compromise to get what you want? Plus, you should expect your future proposals to be subject to tough price wrangling.

In effect, you have “sweetened” the deal too much and the child rapidly becomes used to receiving extra chocolate for nothing. Is there a solution?

Instead of offering price cuts or scope increases, stand firm on the value you’re offering. If your client can’t or won’t pay your fee, find a new level of mutual benefit. When your ideas are good enough and your proposal is compelling, you’ll often find that clients come around and agree to the original fee.

….. In an ideal world, you would have discussed scope and the fee with your client long before your proposal is on the table. But some clients will still try to negotiate price no matter what.

There is no definitive answer. Some people see granting a discount or supplying additional hours as going the “extra mile”. Possibly. And occasionally maybe necessary. I will not divulge here my own tactic to bring the negotiations to a positive finish.

However, there is a growing awareness in management literature that those who hand out discounts tend to lose out – in fact lose twice over in the long run.