🎙️Show Notes for Episode 077 - Contract Negotiation Strategies for Independent ConsultantsAug 31, 2022
- You either try to do everything in your power to avoid negotiating because it feels so uncomfortable or
- you end up rushing through the process, just trying to make it go away. In either case, what ends up happening is your running a business that feels regretful since you've agreed to something that you wish you hadn't, or you question and self-doubt wondering what you may have left on the table.
- [00:39] A special thank you to all my listeners
- [01:31] Today’s agenda
- [05:16] What is a negotiation
- [11:30] Do you need to negotiate consulting agreements
- [18:36] How to preempt negotiating
- [19:35] What you should negotiate
- [27:26] Two resources that you can use to put what I'm sharing into action
- Check out the IC Business Recession Assessment: ICAssessment.com
- Click here to check out my blog post - How Independent Consultants Rates And Retainer Fees Work
- Discuss working with me as your coach - Click here to schedule your consultation
- Check out my YouTube Podcast Channel https://www.youtube.com/channel/UCUrsHqeAFDkcI8Kqc4QssEQ
If you love the content that I am providing, please consider rating and reviewing my show! This helps me support more people — just like you — to create a growing, profitable IC business.
Click here, scroll to the bottom, tap to rate with five stars, and select “Write a Review.” Then be sure to let me know what you loved most about the episode!
**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*
Welcome to this week's podcast episode. I'm thrilled you're here. And before we dive into today's topic, which I cannot wait to share with you, I just wanted to take a moment to say thank you. Thank you for listening. Thank you for sharing this podcast with your inner fellow independent consultants and other colleagues who are interested in this type of work. Thank you for leaving the most amazing ratings and reviews; thank you for reaching out and letting me know when a particular episode has been impactful for you. Or it really resonated with you. And just simply, Thank you for listening and putting the work that I share with you into practice. I hear from so many of you that you are able to take what I share with you on a weekly basis or the interviews that I do on a weekly basis are the concepts I share and put those into practice in your own business, and really start to see how it moves the needle. So I just want to say thank you today feel full of gratitude. So today's topic is the best approach to consulting contract negotiations. What a fun topic. Whenever I bring up the word negotiation, including for myself, it kind of creates that freeze response, right? No one really, very, I'll say it this way. Very few people in this world love negotiating. So you know, this can really be a topic, a concept, a part of your business process, that it creates one of two dynamics, when you think about negotiations, what usually ends up happening as an independent consultant, and this may be happening for you are one of two things, you either really just try to do everything in your power to avoid negotiating. Because it feels so uncomfortable. And you feel bad at it, probably. Or you end up really rushing through the process and trying to just make it go away. So in either case, what in what can end up happening is just a business that you're running that either feels regretful you've agreed to something that you wish you hadn't or you question and self doubt wondering, you know, what you've left what kind of money you've left on the table. And so today, I want to share with you what I believe to be and have seen in practice the best approach to consulting and contract negotiations. And quite frankly, it may not be what you're expecting. So I'm excited to share this with you today. So that you can really run a business where you feel solid, you feel grounded, you feel like that you're winning, you feel that you don't have to go through the regret and the second-guessing and question yourself all of the time, you can really get to the place with your business where you're creating a machine that generates new business that you feel really proud to execute against where you feel really fairly, if not, if not even more than fairly compensated, and where you know, your clients are getting value, you don't have to have this regret, regret engine going on in the background and second-guessing. And this also applies to not just the contracts that you're negotiating with your, you know, your consulting clients, but it can also apply so effectively, what I'm going to share with you today can apply so effectively, to negotiation or contracts that you've got with other people, perhaps subcontractors, perhaps even vendors that you're working with. So thinking about this from referral partners, it applies to all different types of contracts. And so that's what I want to share with you today the best approach to those consulting contract negotiations. So our agenda for today is four parts. Number one, we're going to talk about do you even need to negotiate consulting agreements. I think this is an important question to be asking yourself, some of you are feeling like you have to, and so you're baking that into your process, perhaps unnecessarily, or you might be in the situation where you just avoid it at all costs, and are potentially impacting your business negatively in that way. So I'm going to let's talk first about do you even need to negotiate contract consulting agreements, and Then we'll talk.
The second point here that I want to talk through with you is how to preempt negotiating. So that gives a little bit of an insight into do you need to negotiate them. How do you preempt negotiating? And then the third thing we'll talk through is what should you negotiate. So things you don't want to preempt? And then stay tuned up to the end because I want to share with you two resources that you can use very tangibly to put what I'm sharing into action. They're amazing resources, so don't miss that. Okay, before we get started, I want to remind you of the independent consultants and business scaling assessment; I've had many of you say, Melissa, I keep meaning to take this, and I keep forgetting or just, you know, it's on my list. So be sure to go do that this week; I see scorecard.com; you answered 26 questions it takes less than five minutes. And from there, you're able to get a very thorough report on where are the areas of your business in a prioritized fashion that you can be focusing on to set yourself up for growth, for sustainable growth. For predictable growth. This doesn't mean that you need to go hire anyone or bring on any bench or subs or anything. by scaling. I mean, let's help you to get to the place where you're making more income, more profitable projects, and doing less in less time and less work. So that you can really enjoy the freedom that comes with running this type of business. Look, you're taking on a lot of responsibility. As an independent consultant, let's make sure that you're reaping the rewards of that, making more money, feeling more flexible, and having more freedom. Alright, so go over to icy scorecard.com and answer those 26 questions. And you'll get that prioritized action plan for yourself. All right. So with that, let's talk about our topic of the week negotiations, console consulting agreements, and other contract negotiations. So let's just start and level set. What is a negotiation? So I was like just thinking about this. Because a lot of times, we have these preconceived notions right when we think about something. So it's like, just going very back to the basics. What is a negotiation? One of the definitions that you'll find is that negotiation is an interaction between entities who aspire to agree on matters of mutual interests; the agreement can be beneficial for all or some of the parties involved. That's kind of the textbook definition of negotiation. So interactions between entities who aspire to agree on matters of mutual interests. So a lot of times, when we think about the word, the word negotiations is very loaded. We think about it from the perspective of like things, you know, think about when you hear the word negotiating, what comes to your mind. Oftentimes, it's things like hostage negotiation, like very high stakes things, right? Hostage negotiation, like life or death, political negotiations, very, like a no wins. You know, think about political negotiations; there's basically a no-win outcome, no matter. You know, no matter what your viewpoints are. Contract negotiations, when we think about those a lot of times, we think about what we see in the movies or, you know, things that we might have experienced in corporate that are involved in requiring lawyers and all sorts of, you know, really high stakes, pressure-filled situations. And it really connotes a lot of back and forth, a lot of like shuttle diplomacy in some ways, and a lot of ultimate compromises. None of these things feel good. These things all feel terrible. I don't know about you unless you love negotiating. And you're a consultant who teaches people to negotiate. Most of this probably feels bad to you. It makes you feel pressured or inadequate, right, I'm terrible at and thinking things like I'm terrible at negotiating, or you know, it's not something that I'm, that is part of my skill set. And so, of course, when you think about your business development process, and you think about the contract, the proposal and contracting stages specifically, when you think about that, and propose giving someone a proposal of a potential contract, a potential client, a proposal.
Of course, if you feel like you're going to have to enter into some kind of negotiation in some way, it makes you feel probably horrible. So, of course, from that perspective, if you feel like they're going to push back on you, or they're going to ask you for concessions, or they're going to ask for you to change something, or reduce the price, whatever it is, of course, you're going to want to avoid providing that proposal, of course, you're going to want to avoid discussing you know, the terms and conditions, of course, you're going to procrastinate, of course, you're going to eventually send that thing over and just want to get the process of getting to a signed statement of work over as quickly as possible. So that you can start work and not have to deal with this thing that feels uncomfortable. Of course, so what I want to share with you first is really just recognizing that because what I find, even if you don't think about negotiation in a literal sense, in your business development process, what I find is this kind of freezing phenomenon occurs with so many consultants, because we just don't want to get into that awkward phase, whether you call it negotiating, or you call it something out a proposal review, whatever you wind up calling, it doesn't really matter. It's much more about, you know, having to get into that phase where you're talking nuts and bolts and getting the client over the finish line so that you can have a signed agreement and start working with them, delivering it, and getting paid. That phase of the process for most of us as independent consultants feels really horrible and feels like we're not as good at it or terrible at it, depending on your perspective. And of course, you're going to want to avoid it because of that. And so today, I want to really walk you through a process so that you don't have to feel uncomfortable about this anymore. And get really clear for yourself about what it looks like to get to the phase of a project of a business, you know, have a proposal where you're coming to an agreement on terms and moving forward and take the pressure out of the process. That's what we're here for today. All right, so let's start first. Start do you even need to negotiate? I think this is such an important question. And for some of us, we don't think about our business development process as something that we're negotiating. So you may or may or may not say this exact word to yourself. But when you think about, you know, proposing something and getting to an agreement, this is the area where I want to really challenge you to say, is this something that needs to happen? At the very end of your business development process? Should there be a lot of back and forth about what the terms and conditions are? Sometimes, you know, common thinking may lead you to believe that you would that the client, the end client wouldn't want to negotiate that you know, as a and that you might need to negotiate as I hear from people, a lot of times from independent consultants, a lot of times they'll say to me, Well, you know, business people negotiate, so I should definitely be negotiating, so I don't leave money off the table. So think about it; from your perspective, do you think you need to negotiate or do some kind of back and forth with a client, whatever you call it? And then similarly, do you think your client feels the need to negotiate in order to somehow check the box on their internal process? Sometimes, we think automatically negotiation needs to happen at the end of a contracting process. And what I'm here to say to you today is this should be the exception, not the rule that you would need to quote-unquote, negotiate at the on a final statement of work. Here's where it's more common, it's more common to negotiate on things that are time-based, like negotiate on the rates of an out, you know, an hourly rate or a daily rate or something like that. The other time that it's more common to negotiate is if your buyer or stakeholder is procurement like that's in their DNA, they feel like they are not doing their job most of the time. I'll generalize here if they don't negotiate. A lot of times, they are measured internally on what amount of cost savings they created by negotiating. But for the so let's put those two scenarios
aside for a moment and we'll come back to them in a few minutes. But for the most part, you don't if you execute your business development process in a collaborative way. You won't need to negotiate at the end. So let me tell you more about what I mean by that. If you're getting upfront buy-in, as you go through the business development process from the first conversation all the way through to a proposal, and the proposal is treated more of a check the box, then have a tool to get alignment, then you're not really negotiating at all. What you're doing in what you're actually doing, instead of negotiating, is really aligning, right? If you do this in a way that you're aligning from the very first step, and CO creating from the very first conversation, all the way through to getting, you know, getting verbal agreement on what the approach is, then when you put a proposal in place, it's more of a check that box in the sense of, you've written down everything that you've agreed to, and there's no negotiation needed. So what that might look like is really getting yourself to the place where you're asking questions and getting alignment and understanding what that potential client values and how they would quantify the impact of the work that you're doing both qualitatively and quantitatively. And getting all of that real depth, the in-depth conversation going throughout the process that you've got. So that when you write it up in a proposal, at most, you've got a couple of options that you're providing to them things that they've already really contributed to co-developed with you. And then it just gives them the ability to decide which do I want to go with, Option A or Option B, and, and move forward; there's no negotiation needed. Because you're taking the negotiation, you're not using that proposal as a tool for you to drive a conversation about what it is that the client wants; you're using that that you're using the proposal as a formality. And instead, moving the conversation upfront front, voting it so that you're co-creating, collaborating, and creating a pro approach that both of you have contributed to, and so there's no need to negotiate.
Hopefully, this is really resonating with you. In some ways, you're probably doing this already. And today, I'm challenging you to Front Loaded even more. So oftentimes, I work with clients and ask them, you know what, they give me a proposal and say, Melisa, can you read this proposal for me and give me feedback? And when I start asking them questions about what went into the proposal, what do they know about why the client wants to do this project? I mean, truly, why not? Because quote, unquote, it needs to get done, you know, or they don't have anyone internally to do the work. But the true reason why is the business reason behind why they're doing the work? And what is the value that that client attaches to doing the work? And what is the value? What is the impact, monetarily and non-monetary intangibly, of not doing the work? When I start asking those questions, as I review proposals, a lot of times, my consulting business owner, clients don't know all of the answers that they wish they knew the answers to, they don't know, they haven't really gone into those in-depth conversations up front. And so then they're using the proposal, trying to use the proposal as a vehicle to get that type of alignment, and then potentially setting themselves up for some form of negotiation on their rates, on their fees on the pricing structures they put in place, versus what we start working on is really getting to the place where you're able to ask those high-quality questions upfront, get really meaningful dialogue and understanding about why they want to do this work, why it's important, what the business impacts are, how they the client would value, the results that you're working, that your you know, the work that you do is creating, and then moving forward from there. And using the proposal as a, as I said, just a final confirmation of all of that dialogue that you've had. Okay, so really, the answer today of how is the best way to negotiate a consulting contract is two things. Number one, not thinking about it as a negotiation. And number two, it's more of an alignment or a collaboration. And number two, really getting to the place where you're gaining buy-in and CO developing a proposal co-developing an approach so that you're pre-empting the need for negotiation at all. All right. So that's it It is really important to look at in terms of your business development process. And then from there, I'm not telling you, just don't negotiate anything.
There are times when you want to negotiate. So, for example, you might want to negotiate if you're still doing time-based rates, there's no shame in that you're still doing hourly rates or daily rates. It's not a problem; you may want to revisit your business model over time. But you may also get to the place where right now in your business, for example, you might be gaining work from marketplaces like Catalin or something like those MBO partners, of those, and you may be in a position where you need to negotiate the rates, or you may be in a position where you need your belly, your invoicing or creating structures with your end clients that are more value-based or project-based. And you're negotiating rates with subcontractors, in whatever case you are, are in, there are times in your business where you're going to need to quote-unquote, negotiate. So I want to walk you through a four-step process here of really taking, you know, getting to the place where this is not a problem, where you don't have to freeze or panic or feel inadequate when you get to this spot in your business. So the first step of this process is for you to diffuse the word negotiating, right? Like I was saying before when most of us think of the word negotiating, some horrible scene in our mind starts playing out like a hostage negotiation, right? Like, that's just not setting you up for success, when you start thinking about like, I've got to go into a negotiation, or this call is going to be about negotiating our rates, it creates that freeze response or flight response in your nervous system. So instead, think about it from the perspective of a couple of things; you're just aligning, right? You're aligning whatever word it is that you need to use to basically take down the pressure and get yourself into more of a curiosity state than panic or 10 states. And then really recognize that there's no win or lose here. A lot of times, some of us, we think, like, Okay, I'm going into a negotiation, and I really, you know, one of the undercurrents there is that I need to, I need a win, I need to come out on top. And a lot of us have a competitive spirit. I know I do. I know if you're listening, you probably do too. This isn't about winning or losing. So we're just like the first step of this when you do need to go into negotiations in terms of best practices, is really to defuse that term negotiation in the first place. Because it's just not setting yourself up for success when you think I've got to go into a negotiation, or I've got to go negotiate this contract. So choose a term or a concept that really takes down the level of intensity a few notches for yourself, and then do some mental prep around this; I like to use the word getting, quote, unquote, clean, like you're mentally clean as you're going into a process and getting mentally clean is a lot of the work that I do with my own, you know, with my clients, like my consulting business owner clients, to help them get to the place where your mindset, your mental models are so much more effective than what they might be just working off of autopilot. So by cleaning, I'll give you a few strategies here. What I mean is really looking at three things, the thoughts about you. Things like going into a conversation where you agree to terms and conditions. If you go in thinking, I'm terrible at this; I hate this, this is horrible. I'm you know, this is not something that I was born to do like those kinds of thoughts, of course, you're going to go in with a less than effective approach. Now think, instead of things like I'm you know, I'm getting better at this, I'm learning how to navigate this. I do this every day when I'm delivering to, you know, consulting work to clients; this is just a different scenario that can really lighten up that pressure that you've been putting on yourself. The other thing is. Similarly, you want to think about thoughts about them. You think about the different ways you would show up if you went into a conversation with someone where you're negotiating or whatever; where do you want to use those terms and conditions? When you think, well, they're just going to try to get as much from me as they can, versus I know that they're interested in a mutually beneficial solution. Think about the different approach you would take from one of those thoughts, which is they need they're taking as much as they can from me versus I know I am gonna give them the benefit of the doubt that they want a mutually beneficial solution. It's a completely different approach you would have, so you want to get really clear on your thoughts about them, your thoughts about you, and your thoughts about the process. So I just walked you through a few examples of how to do that. And then also one trap that I noticed a lot of clients falling into is feeling rushed. Like I just need to get this contract signed so that we can start the work and get going. The clients getting frustrated that this is taking so long, and those types of thoughts, one of the mental models that I want to share with you is, you know, what, if you started thinking about this, as the work has actually started with the first conversation, you're helping that client to get clearer and clearer, you're helping that client to get more aligned on what it is they want the outcomes to be. And even though you might not get be getting paid at that moment for your business development work, you're creating value for them from the beginning. So rushing yourself through a process and therefore skipping some of this alignment work is not going to serve you. And then, finally, be a prep process for these times where you do feel like you need to negotiate. Ask yourself some really high-quality questions. What is my walkaway kind what are what are the things that I'm truly going to walk away from? And don't write down something that you don't really mean. Be honest with yourself. Like,
what is it that if this happens, I'm truly this is not good? No good project for me? Or a good situation for me? And then what are my better good, four categories here? Walk away good, better best, just really thinking through what that might look like? Ask yourself; a lot of times, we forget this very simple thing. What does my stakeholder truly care about? And why? Like thinking about it from a big picture perspective versus like specific terms and conditions can really help? Like, what is the big picture here so that you can unlock some creativity? And a lot along the same lines? What options could I provide? To them, that might be an alternative; maybe we're kind of locking horns on a certain thing; what if we just offered something completely different, a different option to get to the same results? So really thinking about it in advance, whatever the conversation might be, where you need to come to a final agreement on how to move forward, these four concepts can be really valuable for you to get into a productive, effective, less pressure-filled mindset. So that's really important. Number one, if I were to recap what we talked about today, and then I'll share those two resources with you. The first thing is really thinking about your business development process. And setting it up in such a way that negotiation isn't really even part of the process at all. Because you're co-creating, you're creating alignments as you go through each step of your business development process, and treating the proposal as a formality to encapsulate everything you've already agreed to, and perhaps giving them a couple of options that they've bought into, and helps them to finalize whatever their decision is and move forward. In the time, so that's the first thing. And then in the times where you do need to negotiate some form of terms and conditions. Situations like below, you know, hourly, or daily rates, or where you're working with, you know, your own subcontractors who are, who you're paying hourly or daily, or other service providers, really getting yourself to the place where you are, quote-unquote, clear about what you're doing in that conversation, and taking down the pressure, so that you can really think creatively, and show up in a way that you already know how to do, because you are a consultant, this is what you do every single day is help people get to agreements and move forward in some way you just start maybe labeling them negotiating. So that's what I wanted to share with you today. Hopefully, that's really helpful for you to continue refining your business development process and starting to take a lot of the fear and avoidance out of it. That I hear you struggle with this on a daily basis when you're working in your business. Sorry, working on your business, not in your business. So with that, let me share with you these two resources that are really valuable. The first is a book that's called never split the difference. You may have read it; it's by Chris Voss. He's actually I think, a former Yeah, a former FBI hostage negotiator. So super helpful. I think the stories that he shares in the book are really valuable but what I Really love the most is the appendix; there's a prepare a negotiation one-sheets. So really, really helpful if you do nothing. But if you never even read the book, I personally find that part of the I'm just looking at it right now as I'm talking with you. I personally find that so valuable; that appendix alone is worth buying that book. And then the other resource that I want to share with you is a blog post that I wrote for this purpose. It's called how independent consultants' rates and retainer fees work. So it's on my blog, you can go to Melissa lieberman.com resources, and you'll see the blog there. We'll put the link in the show notes as well. But it's a really comprehensive blog post about all things rates and retainer fees and value-based pricing and negotiating. So you want to go read that blog, and you can see what we've talked about today, but so much more about pricing strategies in your business. So with that, thank you for tuning in today, and I look forward to seeing you again next week. Take care.