Freelancers, independent workers and new entrepreneurs have to constantly face the challenge of establishing a price for their services. Most of us don’t like to be put in that position. Only a few enjoy the process of negotiation and even fewer are naturally able to negotiate like a pro. But for most of us, negotiation is a skill that has to be learned with practice. The Harvard negotiation Institute provides a popular structured program on critical aspects of negotiation and mediation. These skills can be applied to any kind of deal: from a multi-billion dollar Merger and Acquisition to a proposal for the development of a new website. The end objective is to maximize the value of your negotiation.The most common approach to negotiation is the BATNA approach (Best Alternative To a Negotiated Agreement). There are many considerations in defining and even improving your BATNA. But we will concentrate on the importance of being the first in anchoring the negotiation. This step of the negotiation is fundamental for freelancers that have to constantly price their work under uncertain circumstances.
Negotiate like a pro by anchoring first:
1- Understand all your options and opportunity costs
When entering a negotiation for your services know in advance what your other choices are if this client does not hire you for this specific project.
2- Understand the ZOPA (Zone of Possible Agreement)
Ultimately your goal is to make the most money you can on each deal. For this to happen you will need to have a clear understanding of the company’s alternatives. Do your research, know your market and ask the right questions to the client. What are their choices if they don’t hire you? How much would it cost them to get the work done? Now you know how far the company is willing to go.
3- Be the first to set a price for your services
Once you have enough information, throw YOUR number first. Don’t go too low as you will not have room for concessions and don’t go too high as that will signal the end of the conversation.
4- Give small concessions
If you are asked to give a discount or forced to negotiate your price then reduce by only small percentages indicating that you are not ready to go down too far and that your initial offer is firm.
Although it may seem counter-intuitive, you are better off being the first in giving a number for your services, either by hour or by contract. Once the number is on the table, the company will have great difficulty in moving your price too far from your initial offer. There is a potent cognitive bias in which people give too much weight to the initial number.
Negotiation is the intellectual dance of arriving to the midpoint between your initial offer and the company’s counter proposal…. the key to negotiate like a pro.