Advice on Negotiating a Deal
post # 214 — October 14, 2006 — a Client Relations post
The timing of this post is almost perfect for me. Unfortunately, almost in this case is three days too late!
Over the last year, I’ve been working on-and-off with a trade association to do some work to solve a problem (entailing calculating a price index in a particular way based on historical data). This has all been in the “proposal stage” where we were all deciding whether what I could offer could work. (Not that my solution is particularly exceptional, but it is the best solution to their specific problem in this case and I know of very few others in South Africa who can provide all the aspects of this work – you’re gonna have to trust me on this part!). When they agree they want the work I done, I prepare a quote based on hourly billings for the team to be involved on the project. I don’t include any amount for the time already spent (amounting to about 40% again on top of the quote) because I felt that was part of the process leading up to getting the work. It was during this proposal phase where I did signficant research, both about their problem/situation and about the best solution for them.
If the results are positive (they will be based on historical data, so neither party can know this yet), the impact on the regulation of this industry is likely to mean that the member companies of the trade association will see a return on their investment in the project of several thousand percent (based on retaining pricing power and thus profitability from several large, listed businesses.
In a meeting this week that basically demanded a massive discount. Their argument for why the cost is too high? “The trade association is a non-profit company with limited funds.”
Also, based on the work done to date and the documents I prepared for them, it is possible that someone could “reverse engineer” the required calcs and do a decent job at performing the work (although if they messed up they probably wouldn’t even know it, let alone what to do about it) at a lower cost because their billing rate doesn’t reflect the expertise required to understand what calcs and formulae were needed in the first place.
So, my questions:
- What to do about the trade association claiming no money when the real beneficiaries have plenty, and how does this tie into value pricing?
- How do I get around the problem of having given away so much “free consulting”?
- How should I have approached this situation from the start, since it’s clear my actual strategy failed miserably?
- Does this sound like the sort of client that we should all avoid like the plague?