The Consultant's Guide to Advanced Negotiation TacticsApr 18, 2023
Table of contents
- Introduction to consulting negotiation tactics
- What are the benefits of negotiating as an independent consultant?
- The 18 tactics to help you negotiate better as an independent consultant
- Three real-life examples of consulting negotiations
- Putting these consulting negotiation tactics into action
Introduction to consulting negotiation tactics
For most independent consultants, negotiating your consulting contract sounds like a good idea and something you should negotiate with your client before starting a consulting engagement.
But, at the same time, negotiating can feel scary, awkward, and risky.
It’s so common for independent consultants to talk a good game when it comes to negotiating but then to delay or avoid negotiating altogether when it comes down to it.
As one of my former corporate colleagues used to say, “They folded like a cheese omelet.” That’s likely only funny as an inside joke but I’ll say it anyway. Don’t fold like a cheese omelet when it comes to negotiating.
Negotiating has many benefits beyond just making more money.
What are the benefits of negotiating as an independent consultant?
Negotiating effectively as an independent consultant has several benefits, including increased clarity about the scope and expectations, greater alignment of expectations, setting the tone of the relationship as a peer (as opposed to a vendor or subordinate), increased trust, and more compensation.
Negotiation Benefit #1 - Increased scope clarity
As you ask probing questions during the negotiation, you’ll have the opportunity to get deeper into the potential client’s priorities, drivers, and ultimate desires.
Negotiation Benefit #2 - Greater alignment
When you approach a negotiation looking for a win-win instead of minimizing your losses, you’ll be able to find more common ground with the potential client. This increased alignment will enable you to improve the outcome of your negotiation and your overall relationship with that client as you move into the engagement delivery phase.
Negotiation Benefit #3 - Setting the tone of the relationship as a peer
Negotiating from the perspective of a peer or equal will set you up to have an equal, trusted advisory-type relationship with your client. Establishing an equal-to-equal relationship from the outset is vital to the outcome of your negotiations and to the client’s ultimate success. When the client sees you as a peer, they’ll be much more willing to include you in decisions and open up to share their goals and challenges. When you have this type of transparency in your client relationship, you’ll be better able and equipped to advise them.
Negotiation Benefit #4 - Increased trust
Thinking that one of the outcomes of a negotiation is “increased trust” may seem counterintuitive to you. It’s common for independent consultants to feel concerned that negotiating with their clients will reduce or risk trust in the client-consultant relationship. But, if done right (see the tactics further down this article), you can leverage the negotiation phase to further cement trust with your client. Specifically, if you’re thinking about the negotiation as a benefit to both of you instead of a win-lose situation, you’ll turn the negotiating process into one that builds trust with your potential consulting client.
Negotiation Benefit #5 - More Compensation
And finally, the benefit of negotiating your consulting engagement is that you’ll increase the likelihood of making more money. It’s commonly assumed that negotiating aims to maximize your compensation. However, if you think about the negotiation as a tool to increase alignment, buy-in, and trust, then the increased compensation will be a positive byproduct of your negotiations.
By applying the consulting negotiation tactics in this article, you can deepen your client relationship and earn more money without missing out on the opportunity to leverage all the benefits of negotiating.
The 18 tactics to help you negotiate better as an independent consultant
1. Define the term “negotiation” specifically for your business
It’s common to think about negotiations as a high-stakes, high-pressure event that’s necessary to get a contract signed.
Ask yourself, and explicitly answer – what does negotiating mean to me in my consulting business? What will I negotiate? And, what terms are non-negotiable for me as a business owner? Here are some examples of types of things you can negotiate with your consulting clients:
- The process by which they’ll select a consultant
- The process by which they’ll sign a contract with you
- The scope
- The price
- Timing of the contracting process
- Timing of the project itself
- Phases of the project
- The people involved in the process, from the client and from your firm (is it just you or do you have subcontractors or other support you’ll engage as well)
- Communication methods
- Collaboration methods
- Level of engagement and roles/responsibilities
2. Negotiate throughout your conversations with a potential client, it’s not a one-time event
It’s common to assume that negotiating is a specific event that occurs after you provide a consulting proposal to a potential consulting client. When you approach negotiations as a specific, one-time event, you end up putting a lot of pressure on that step and setting yourself up for a watered-down outcome.
Alternatively, it’s effective to infuse negotiations as a thread into each step of your sales process whereby you’re asking a lot of questions, offering options, suggesting alternatives, and digging into assumptions.
3. Prepare in advance for your negotiations
To prepare for negotiations, think about all the prerequisites and also brainstorm all the potential outcomes and suggestions you can offer.
First, define the prerequisites of what you’ll need to know in order to finalize a decision and ultimately the contract.
Then, determine what’s negotiable for you and what’s not negotiable. For example, you might set a bare minimum, or floor, price for yourself. You might also set a specific period of time within which the work must be completed, to protect your capacity. You might also determine that certain engagement by the client is a must-have.
Finally, brainstorm all the potential options you could offer to the client at that phase of the negotiation. Don’t limit yourself to what you think is acceptable or even realistic. Think about creative alternatives you could offer to your client, both financial and non-financial (e.g. publicity). Instead, brainstorm from the widest, loosest vantage point to unlock your creativity.
4. Get curious
It’s important to purposefully generate a curious emotional state as you go into negotiating conversations. If you feel curious you’ll be able to have productive, advancing conversations with your prospective consulting client.
Alternatively, if you feel pressured, awkward, self-doubt, or uncomfortable, you’ll easily talk yourself out of negotiating altogether or come across as forced if you do move into negotiating.
5. Align your thoughts about yourself as a consulting salesperson
To maximize your consulting negotiations, you’ll want to get “clean” on the thoughts you’re having about yourself as a negotiator and salesperson. If you go into sales-related conversations thinking you’re bad at sales or you’re bad at negotiating, you’ll most certainly come across as awkward and uncomfortable.
Being awkward and uncomfortable is not the positioning you’ll want to have as a trustworthy consultant.
On the other hand, if you think of yourself as capable as a salesperson and negotiator, you’ll be much calmer and can then feel curious from there.
One way to uplevel the thoughts you’re having about yourself is to think about all the scenarios where you’ve negotiated outcomes with clients. I’m positive you’ve negotiated through conflicting points of view, incompatible requirements, impossible timelines, etc. when you’re in the delivery stage. You’re great at negotiating in these situations. Think about how you can be (or even already are) great at negotiating
6. Align your thoughts about your potential consulting client
We create awkwardness and pressure when we don’t have productive thoughts about negotiating with our potential consulting client.
For example, if you’re thinking the potential client wants to take advantage of you, you’ll likely feel frustrated and defensive. When you approach a negotiation with your potential client feeling frustrated and defensive, it’s virtually impossible to create a mutually beneficial result.
Alternatively, you’ll want to create intentional thoughts about your potential client to replace your defensiveness with curiosity, openness, or neutrality. For example, you might think
- The potential consulting client is open to a mutually beneficial outcome or
- The potential client is doing their best for their own company and not trying to take anything from you or
- We’re on the same side of the table, both wanting the same outcome. Let’s figure out how to get there together.
Do you see how a slight adjustment in the way you’re thinking about the potential client can lift off those less productive emotions like defensiveness or frustration?
7. Align your thoughts about the consulting pricing
Before you offer a consulting proposal or engage in conversations about pricing, it’s important to intentionally cultivate your thought processes.
For example, if you go into consulting pricing conversations using your default, subconscious thinking, it would be common for you to assume the client will view the price as too high. From that mindset, you’ll end up sabotaging yourself because when you think they think the price is too high, you’ll justify and over-explain.
Instead, you want to intentionally cultivate your thinking about your consulting pricing. For example, you might think
- The potential client has no idea how consulting pricing is handled. I’m curious to get their perspective so we can discuss it from there.
- My potential client will be open to pricing as we align deeper on the value.
You have no idea what the potential client is thinking. So, you might as well give yourself the benefit of the doubt instead of automatically assuming they’ll think the price is too high.
Do you see how your thinking about the potential client’s perspective could limit you from the very beginning, well before you even discuss pricing with your consulting client?
8. Align your thoughts about the process
When you think negotiating is hard or impossible or a necessary evil, you’ll naturally want to avoid it.
Alternatively, if you purposefully generate high-quality thinking about negotiations in your sales process, you can lighten it up and reduce the pressure on yourself.
For example, you can think:
- It’s possible to create a win-win
- This is another conversation
- This doesn’t need to be a make-it-or-break-it scenario. It’s an alignment conversation.
Do you see how your thoughts about the situation can lead to a pressure-filled, stressful set of conversations OR to a neutral, curious, aligning set of conversations? You get to decide how you want to think about the negotiations and the way you think sets the tone.
9. Build up your negotiator self-identity
Our human brains are trained to answer the questions we ask them, in the most literal way possible.
So, if you ask yourself: “why am I always so bad at negotiating?”, your brain will find a pile of examples as to how you’re bad at negotiating. Those examples are not helpful to your growth as a negotiator or consulting business owner.
The key is to redirect your question to one for which the answers are productive for you. For example, you might ask and answer - how have I been good at negotiating in the past?
Answering this question will help you to build up your identity as a good negotiator.
10. Leverage your alter ego
One simple tactic to leverage when you want to come across confidently and in control during negotiations is to use an alter ego. This is a concept created by Todd Herman in his book The Alter Ego Effect: The Power of Secret Identities to Transform Your Life.
In the Alter Ego Effect, Todd teaches you how to design an alter ego that you can employ whenever you need a boost of self-confidence. For example, Clark Kent transforms into Superman every time he removes his glasses and dawns his superhero suit. He’s the same person but he has so much more confidence and power.
You can generate your own confidence on-demand for negotiations by leveraging your own alter ego.
And, you can find this at 10 other books consultants should read by clicking here.
11. Ask a lot of questions, even if they’re uncomfortable questions
It’s common for independent consultants to avoid asking uncomfortable questions during the sales process. We don’t want to come across as pushy or stupid.
So, we avoid asking the important questions. And then, when we sit down to craft a consulting proposal, we’re missing important information required to finalize the consulting proposal and to negotiate its terms.
For example, you want to ask questions throughout your consulting sales process so you have an understanding of the background and drivers behind:
- The consulting client’s budget range
- Where the budget is coming from
- What department and who specifically would be paying
- What the approval thresholds are for your engagement sponsor
- When would procurement get involved (and what would keep them from getting involved)
- Who else would need to sign off and what does your sponsor think they’ll say?
It’s important to ask a lot of questions throughout the sales process so you can best support your potential client in getting what they want. It’s not in either of your best interests to be surprised at the 11th hour.
Click here to read the article - The 36 Questions Consultants Should Ask Their Prospects and Clients.
12. Offer three options
Co-develop and offer three options to your potential consulting client, so they don’t feel they’re stuck with a take-it-or-leave-it offer. Building up several options will give them the opportunity to see the difference in what they’d be getting from a value perspective, and will also help them make a strong internal business case.
13. Pick your battles
When it comes to negotiating a consulting agreement, you’ll want to pick your battles. As consultants, it’s common for us to be very detail-oriented and precise. When you over-index on making every last letter as accurate as possible, you’ll end up adding more time and friction to the consulting negotiation and close process.
Ask yourself - “why does this matter?” before redlining or negotiating anything.
14. Anchor the price
Price anchors give the consulting buyer a frame of reference for valuing the service.
The most common frame of reference a consulting buyer has to go by is their calculation of what they might pay a full-time employee to do the work you’re discussing with them. As a result, they may be setting a mental price that’s much lower than what you charge on an hourly, daily, fixed fee, or value-based basis.
You can set a price anchor in many ways, including giving a range in early discussions and/or offering three options (see Tactic #12 in this article) to help anchor the client to the range of consulting prices you can offer.
15. Avoid procurement
It’s important to understand the factors that would trigger procurement to get involved in your consulting negotiations. Procurement is incentivized to negotiate down your rates through mechanisms such as competitive bidding and comparing your work to pre-established rate cards that are likely not relevant to the type of work you do.
Avoid procurement getting involved.
You can do this by talking with your consulting buyer to understand what would trigger procurement to get involved vs. what the consulting buyer has the signing authority to approve.
With this knowledge, you can take approaches such as:
- Breaking your contract into smaller engagements to stay under the approval threshold
- Working through a pre-approved vendor as a subcontractor (it can be on paper only for a marginal fee)
- Other ways your consulting buyer has leveraged in the past
16. Avoid legal
Similarly, you want to avoid getting the Legal Department involved in your contract. They add extra time and complexity.
To avoid legal, you can:
- Ask your consulting buyer for the company’s standard templates, such as Master Services Agreement (MSA) and Statement of Work (SOW)
- Use your consulting buyer’s paper whenever possible, meaning you write up the MSA and SOW using their template to specify the scope and pricing of your work
- Limit any redlines to anything that is a deal-breaker from your lawyer and/or accountant.
- If the client doesn’t have a standard consulting contract template, then use your own but keep it as simple as possible. Limit the legal jargon to the very bare minimum required by your own lawyer. And, focus on the scope, pricing, and other business terms needed to make the engagement successful.
17. Be okay with walking away from a consulting deal
Your goal as an independent consultant shouldn’t be to win every deal. If you’re winning every deal, you’re likely leaving money and the table and/or taking on non-ideal clients that are miserable with which to work.
Clearly define and establish your non-starters and then use those as your floor when you’re negotiating. You will not consider going below your floor from a pricing perspective or for any other terms.
18. Ask for a lost-deal post-mortem call
When you do lose a deal (and there’s nothing wrong with that), don’t assume you lost a deal on price. When you assume you lost a consulting deal because you’re bad at negotiating or because you priced it incorrectly, you run the risk of making unwarranted changes to your business model such as lowering your price.
Instead, ask your consulting buyer for a post-mortem so you can better understand their decision and use it to improve your own process moving forward. Most independent consultants never ask for a post-mortem on a lost deal. And, by skipping this step, you leave behind a wealth of knowledge and opportunity.
Three real-life examples of consulting negotiations
1. Project scope negotiation example
In this example, the independent consultant (one of my coaching clients) had identified a targeted consulting client for whom he wanted to work. He knew this client would be a valuable client, both financially and for his portfolio.
Initially, his consulting buyer was asking him to come in as a subcontractor, or even a full-time employee to fulfill an ongoing function in the organization.
My client had no interest in working as an “extra pair of hands” or a full-time employee. But, he did want to get his foot in the door at that organization.
So, he decided to negotiate the scope of the engagement, to set himself up to take on more strategic work while also helping the client ensure the day-to-day tasks were covered.
My independent consultant-client offered an ongoing monthly retainer as a fractional COO where he would provide
- Proactive strategic direction,
- Serve as a sounding board for the CEO and CFO, and
- Provide a day-to-day resource (a subcontractor to my independent consultant-client) who would take on all the detailed execution for the consulting client until they were able to fill the role with a full-time employee
This recommendation was a win-win for both my independent consultant-client and to the end consulting buyer. My IC client was able to take on more fulfilling, impactful, and high-paying work while the consulting buyer was able to get their wide range of needs filled with the right-sized resources.
This is a great example of a consulting scope negotiation. The consulting buyer asked for a solution and was adamant, at first, that the independent consultant give them what they wanted. My independent consulting coaching client was able to leverage the tactics of curiosity, high-value questions, and being willing to walk away to formulate a fit-for-purpose solution that was the best solution for their business and for their end client.
2. Consulting project price negotiation example
In this example, the independent consultant (one of my coaching clients) wanted to negotiate a value-based price with her consulting client. She didn’t want to be tied to charging by the hour, or even the day.
The challenge was that her consulting buyer had always paid hourly rates for consultants and contractors in the past. They didn’t understand or initially buy into a pricing model that was anything other than time-based.
My independent consulting client was initially reluctant to redirect her consulting client to a value-based pricing model. Instead, she was trying to justify to herself (and to me) why the time-based model could work. She was excited to work with this client and didn’t want to rock the boat.
My client, the independent consultant, implemented consulting negotiating tactics #11 and #13 from the list above.
First, she asked a lot of questions to get a deep understanding of all the impacts the consulting engagement would have on her consulting buyer’s organization and directly for her consulting buyer himself.
Then, she used this data, both qualitative and quantitative, to formulate a business case for the potential consulting client.
Finally, she drafted four options to present to her consulting buyer to show them the various ways she was looking at the engagement and quantifying the end results. She leveraged these four options as a mechanism to fine-tune and narrow down the final consulting proposal to 3 solid, value-based pricing options.
The client ultimately agreed to proceed with her second option, and she made 38% more than she would have if she’d charged on an hourly basis as the consulting buyer initially requested.
3. Consulting agreement negotiation example
In this example, the independent consultant (one of my coaching clients) was working as a subcontractor through another independent consultant, where they were collaborating on a client project.
The primary independent consultant had already negotiated the overall contract with the client and was pulling in my independent consultant-client to do a portion of the work. Because the overall contract was already executed, there wasn’t a lot of wiggle room for my client as she negotiated her subcontractor contract with the primary independent consultant.
First, my IC client made her negotiating plan upfront (per consulting tactic #3). She defined her floor bill rate, as the minimum rate she would be willing to agree to on a daily basis.
Then, she identified non-financial negotiating areas she could offer in return for agreeing to the lower end of her consulting pricing range. Specifically, she wanted to negotiate media and publicity rights because the end consulting client is very high profile and she wanted to make sure she was associated with the project and could leverage the company’s logo in her marketing and sales collateral.
Ultimately, my independent consultant-client was able to negotiate 10% above the floor she established for herself, and also secured publicity and marketing rights alongside the other independent consultant.
Putting these consulting negotiation tactics into action
In order to negotiate effectively, you need to get clear about your consulting business goals, define what you are (and aren’t willing) to negotiate, uncover what your consulting buyer wants and needs, and purposefully cultivate an effective consulting negotiation mindset.
For more resources to create this clarity, mindset, and effective consulting sales and pricing processes, here are six more resources to support your consulting negotiations.
6 More Consulting Negotiation Resources
Here are 6 resources to help you improve your consulting negotiation skills, and make more money with less stress and anxiety around the consulting sales process.
- Click here to listen to Episode 077 - Contract Negotiation Strategies for Independent Consultants
- Click here to read the article on The 36 Questions Consultants Should Ask Their Prospects and Clients.
- Click here to listen to the 10 Questions for More Valuable Discovery Meetings.
- Click here for more on How Independent Consultant Fees and Retainers Work
- Click here for more on The 6 Strategies to Turn a Lost Consulting Deal Into a Benefit for Your Independent Consulting Business.