Laying the groundwork to earn a respectable wage in any service business can be a cat-and-mouse game. I’d like to share a few tactics I’ve picked up over the years that have helped us root out the answer to the queen mother of all biz dev questions: “What’s your budget?”
So, um, what’s your budget?
Finding out the budget for a project can be like trying to get into a speakeasy. Prospects can be very hush-hush about how much money they have to spend, which is very different from how much money they want to spend. We’ve encountered a number of scenarios, including…
- They have an arbitrary number in their head, and they expect you to hit that number without going over. It’s like “The Price Is Right.”
- They have fiscal budget dollars which must be exhausted in a “use it or lose it” scenario. I won’t lie: when this happens, it’s almost as good as having your own Donut Robot. It’s a gift from above. You usually get paid right away—sometimes even before you do the work. In these instances, a prospect is usually pretty up-front, because they want to start quickly and they don’t want to lose funding for the next fiscal year.
- They are basing their budget on quotes they’ve gotten elsewhere, but they don’t tell you. A “we have a number in mind” kind of thing. This makes me insane.
- They simply say “we prefer not to disclose”. Okay, then.
I won’t give you a strategy to overcome each of the above examples, as that’s more of A List Apart kind of thing. But I will share a few nuggets.
We always ask prospects to share their budget with us. It can be as uncomfortable as asking someone to the prom. It’s especially squirmy when it’s the first question you ask, and I believe it should be. Why? Sharing budget information upfront can save inordinate amounts of time. It short-circuits the potential to get mired down in minute project details, meaningless tangents, and back-and-forth emails that don’t lead very far. Time is money. Ask the budget question first and then ask the other questions. When you meet with a Realtor®, they ask what your budget is right up front. You can want all the three car garages, swimming pools, and gourmet kitchens in the world, but if you don’t have the budget for it, the conversations you had getting there are totally moot. They waste energy. We’ve been bitten by the spend-eight-hours-on-a-proposal-to-find-out-they-only-have-two-grand too many times. We don’t stick our finger in that outlet anymore.
A website isn’t an impulse play. It’s not a luxury. It’s usually the cornerstone of a marketing and communications strategy, and in many cases, it’s the entire business. Even if the prospect tells you they don’t have a budget—oh, they have one. And if they’re not willing to tell us what it is, we’ll likely move on to the next opportunity. You’ll see this happen with Requests for Proposals (RFPs) all the time. Some RFPs will want you to fill out background checks for all of your employees, but they won’t tell you what the project budget is. Next.
Brian Hoff does a great job of articulating some reasons why asking for budget information is important. Check it out.
No. What’s your budget, really?
Consider the following. A client says they have $50K for the project. You say that will be tough to hit—not because you’re trying to be a jerk, just because it truly will be tough to hit. So you run your numbers. You come in at $200K. Not even close. If you’re timid or try to be overly accommodating, your immediate instinct is to chop that down closer to $50K, because the client said so.
Stop right there. The art of negotiation requires that one, well, negotiate. Getting budget information is all about having a dialogue. No one likes a business partner who doesn’t ask questions. Tell them nicely that your price is a sucky $200K. The key here is to do so candidly, like you’re sitting on their side of the table and have to approve the budget with them. Admit that you’re way over the mark, and essentially apologize for it. I’ve said, “If you want to tell us to get lost, we understand”. Be on their team.
When you do this, the prospect can say, “Well, we can’t do that—we have to limit it to about half of that.” Half, huh? So the budget isn’t $50K, it’s now $100K. Interesting. So, you go back to the drawing board. Maybe trim some rates a bit if you can, and reduce the scope a bit. You come back with $150K, and you say “That’s the best we can do. Still likely too much, we know, but we really made the effort because we would love the opportunity to work with you”. This scenario has resulted in more than a few prospects saying to us, “Thanks for working with us on this. We’ll re-allocate some dollars to make this work.”
One last quick example. The prospect says, “We’re accustomed to firms charging $75/hour”. That’s fine. I’m accustomed to my martinis slightly dirty. Just because you’re accustomed to something doesn’t make it a rule. Explain why your services cost what they do. Explain what truly differentiates you from your competition. And if you told them your services are $150/hr., come back with $140. It shows you’re making an effort but doesn’t discount your expertise.
Don’t be smarmy. Don’t be curt. Be respectful, be honest, and inform your prospect during the sales process. If you do it right, right from the start, you’ll build mutual respect and communication into the entire project.
We’d love to hear about your techniques. We encourage you to write a response on your own blog and link back to it on Cognition using our handy “Respond on your blog” feature above the tweet box below.