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How to Negotiate Agency Fees and Good Contract Terms with Clients

6 May, 2021
5 min read
Lizzie Davey
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Pricing is a controversial topic in the agency world. Owners and freelancers often spend hours fretting about how much they should charge and regularly find themselves waiting with bated breath to hear back from a potential client.

Did I quote too much? Have I completely undersold myself?

The self-doubt is real.

This is because there are no set rules for agency fees, so it becomes a free-for-all and, let’s face it, a bit of a guessing game.

While throwing spaghetti at the wall and seeing what sticks seems like the only way to go, it can lead to negative outcomes. Getting low-balled by clients can cause resentment, and constantly hearing “no” because your prices are too high can make you wonder if you’re really cut out for the job.

So what’s the solution? How do you set your agency fees so you get paid fairly for your work?

Negotiation is key. It can be scary if you don’t know how to do it right, so here’s our guide to getting it spot on.

Why negotiation is important as an agency owner

The thought of negotiating can break agency owners out in a cold sweat. If you’re imagining loud, dusty scenes of haggling in a busy market, you’re not alone. But negotiating for a service is a completely different ball game.

At the end of the day, you’re running a business, which means you get to set the prices not your clients. Your plumber doesn’t ask you what your budget is or how much you’re willing to pay.

Only you know how much work is involved in your clients’ projects and campaigns, and therefore only you know how much you feel comfortable charging.

It’s daunting and can feel confrontational, but if you think about it as communicating the benefits of what you’re offering and attaching an appropriate price for those benefits, it becomes much easier.

How to skillfully negotiate with new and current clients

Negotiation is a skill. The more you practice it, the better you get. To help you out, we’ve pulled together some top negotiation tips from freelancers and agency owners around the world.

1. Have a set rate range

It can be hard pulling numbers out of thin air when you’re in the throes of a client call. Instead, have a set rate range in mind for each service you offer and publish that on your website so potential clients have a ballpark to work with.

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2. Lay out the benefits

It’s easy to start justifying your rates to new clients, but it can often feel like you’re trying to convince them. Rather than justify, lay out the benefits of what you’re offering and the outcomes you’ll generate.

For example, if you’re a web design agency, highlight what clients will get out of having an optimised, beautiful website.

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3. Start talking about prices early

Set expectations from the get-go to avoid wasting anyone’s time. There’s no point dragging a conversation on if nobody is happy with the end price.

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4. Build negotiation skills

Negotiating is a skill that can be learned. It can be daunting trying to haggle on price, but the more you do it the easier it becomes. Work on staying calm and clearly stating your expectations and invite a conversation with the client. After all, negotiating is a two-way street.

Then, it’s simply a case of practising. The more you negotiate, the easier it becomes, and the quicker you learn what works and what doesn’t.

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5. Be prepared to walk away

The quickest way to avoid resenting low-baller clients is to simply walk away. Easier said than done, right? But saying “no” to a bad-fit client will leave space for a good-fit client to swoop in and pay you the price you want (and deserve!).

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6. Cut back on scope not cost

Sometimes, there will be a client you really want to work with that just hasn’t got the budget you need. In these instances, it’s best to negotiate on the scope of the project rather than the price to make sure no resentment brews on either side.

This might mean slashing a few features of your service or reducing the project to a smaller version of its original self.

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How to negotiate other important details with clients

Price isn’t the only thing you can negotiate as an agency owner or freelancer. There are plenty of other aspects of working with clients that might need tweaking in the onboarding process.

How to negotiate contracts

Coming up with a contract for each specific client sometimes means negotiating different parts of your contract. Have a standard contract that has a baseline of details you need to stick to and leave room for negotiation on other elements.

For example, all of your contracts might say that clients must pay in a certain number of days. But for one contract, you might negotiate the payment method with the client because it’s not as much of a big deal.

Think about what you can afford to ditch from your contract too. I once had a prospect who wanted a clause in the contract that said I couldn’t work with any other SaaS company. As a SaaS writer, this was not doable for me at all and we had to re-work that part of the contract.

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How to negotiate additional work

Upselling your services can be a great way to bring in more revenue from the same client and extend your contracts. This means you don’t have to constantly go on the hunt for new work.

But how do you bring up the prospect of continuing a contract? Start by providing small increases in upsells so the client doesn’t feel like they’re being forced into a huge investment, and make sure the additional work is relevant.

For example, if you’ve created a website for a new e-commerce brand, you might encourage them to sign a contract that lets you carry out monthly updates and reporting.

You can also use the results generated from the initial project to spark a conversation about potential future projects. If you’ve written an ebook for a client that has performed particularly well, lead with the results when discussing the next ebook or additional content creation services.

How to approach discounts

Some clients will ask for discounts. It’s the nature of the business. While it can be tempting to say “yes” right away so you don’t lose out on work, it’s important to think about whether it’s worth it to you.

If the work still takes the same amount of time and effort but you’re locked into a lower rate, would you grow to resent this particular client?

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I’ve had clients in the past try to claim a discount on a bulk order of articles. But the reality is that the articles still take me the same amount of time and energy to produce.

In these instances, it’s easy for me to decline the offer of a discount by saying it would affect the quality of my work. Frame it as something that would be detrimental to the client rather than something that would be detrimental for you.

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How to set a timeframe for a project

Ever had a client that needs something done right this moment?

If the answer is yes, you’re not alone. Every agency owner and freelancer will experience this at some point, as there are a lot of people out there who struggle to manage their time. But don’t let this become your problem.

Setting time boundaries with clients is crucial if you don’t want them knocking on your digital door at 9pm at night with a 9am-the-next-day deadline.

Clearly set out your packages and timeframes well in advance and make sure you discuss your lead time with new clients, as well as how long it usually takes you to respond to requests. This is usually in the 24-48 hour range, which eliminates the chance of clients popping up in your inbox needing work completed ASAP.

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How to negotiate a pay increase with clients

If negotiating pricing in the first place is daunting, negotiating a pay increase is even scarier. But, if you want to continue to grow your business while working with loyal clients, it’s something that has to be done.

Lead your negotiations with the benefits the client is receiving and the results you’ve got for them so far before positioning your new rate - think of it like pitching your services.

Most clients will actually expect you to increase your rates at some point - after all, everyone does regardless of what industry they’re in. Inflation is a real-life thing, so don’t be apologetic about asking for more money after working with clients for a set period of time.

Negotiation skills are crucial

Negotiating is a skill that not everyone is born with. But, for agency owners and freelancers, it’s crucial for getting paid what they’re worth and streamlining their working process with clients.

Becoming a successful negotiator won’t happen overnight, but the more you practice, the better you’ll get at setting rates you’re comfortable with and building great working relationships.

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