How to negotiate a consulting contract or a freelance rate starts with understanding your value to justify your fees. A clever way to break down a contract to make it more appetizing for the client also helps.
To negotiate a consulting contract with a client stay firm on your billing fee. Your fee is justified if it is fair and you can deliver on your proposal. Understand their objections to design a contract that puts their fears to rest. Talk with them to build trust in your skills and the contract will be yours.
Also, don’t let your internal dialogue undervalue yourself.
Interview on how to negotiate a consulting contract
In this anonymous interview, we hear tips and a shot of courage on how to negotiate a consulting contract. This interview is also a good example for negotiating a freelance rate.
Clients are always going to question your billing rate. They will look for a bargain basement rate to meet or beat their own budget. Even though it was her first perspective client, she justified her billing fees to get the contract value she deserved.
Read on to hear how she negotiated her first consulting contract.
Location: San Francisco, CA
Original Fee: $10,000
Negotiated Fee: $18,000
“No one is going to pay you what you deserve if you don’t believe in your value.”
Why did you decide to negotiate your consulting fee?
I had just left my full time role as an engineer in the energy industry. My goal was to gain more flexibility and freedom with my schedule and after doing a few side projects, I decided to venture out on my own and create my own one woman consulting company.
For my first large project I was connected with the owner of a small energy startup. The pervious consultant they hired did a sub-par job and they were really looking for someone with deep industry knowledge. Having spent over 10 years in the industry, I knew I was the right person for the project.
I had a great introductory meeting with them and spent hours putting together a very thoughtful proposal that I knew could deliver results. They seemed to be very excited about finding someone with actual industry experience, because everyone they had interviewed previously had very little.
At the end of the meeting the project manager told me that they’d love to work with me and wanted to get started ASAP.
Questioning the billing rate
Later that day I received an email from them confirming that yes, they’d love to start quickly but they need me to revise my price. I had quoted $18,000 and they were only approved to spend $10k. They said they felt $10K was a fair consulting price because I had only just started my consulting business and I didn’t have a long history of success.
I was stunned that they sent me an email that treated the price like it was an afterthought. It may be an afterthought to them, but to me it is my livelihood. I emailed back saying that I’d prefer to discuss my fee with a call and we set up a meeting for 2 days later.
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Can I negotiate a contract?
The next day I was thinking about the email and started feeling really inadequate. Maybe they were right. I didn’t have a lot of consulting experience. They were taking a chance on me. Maybe I couldn’t even do the job they were asking for. It might be best for me to adjust my price to $10k, build a relationship with them, and then hopefully get better, higher paying work in the future.
Don’t you dare undervalue yourself. Just because one person is trying to get a bargain basement rate, doesn’t mean that’s what you’re really worth.
I was feeling frustrated and unconfident that night when my husband came home from work. I told him about the situation and that I was planning to cut my consulting fee down to $10k. What right did I have to charge more, anyway?
He looked stunned and said “Don’t you dare undervalue yourself. Just because one person is trying to get a bargain basement rate, doesn’t mean that’s what you’re really worth.”
Justifying consulting fees
I sat back down and went through a list of questions to justify my consulting fee:
- Was my professional fee fair?
- Did I think I’d be able to deliver on the project?
- What was their main objection and why did they have this objection?
I did think my price was fair and that I’d be able to deliver exactly what they were asking for. Their main objection (aside from the cost) was that I didn’t have a lot of experience as an independent consultant. While I knew my work ethic, they didn’t.
I re-wrote my proposal and, without changing the fee, broke the large project down into four smaller projects. With each small project I attached a timeline and a fee. I proposed treating each project individually and being paid as such. The first project would be $3k and each project after that would be slightly larger with a higher fee. The final project was worth $7k.
If I could earn their trust in the first projects they would be able to feel comfortable paying me more and more.
Contract rate negotiation script
I sent the proposal ahead of time and initially they were really resistant. They didn’t want to budge off their price of $10k. I explained to them that I really felt like I could do the best job for them based on my deep industry knowledge.
To abate their fears, I told them that I understood it would take trust, but I was determined to exceed their expectation with each project and if they were ever unhappy with my work, we wouldn’t continue with the remainder of the projects.
They ended up signing the negotiated contract and I got to work delivering the first project the next week.
What advice do you have for others negotiating a consulting contract?
Don’t let a negative internal talk track bring you down.
As soon as someone questioned what I wanted to be paid, I second-guessed my worth. If I had lowered my rates, I would have been setting myself up for low rates in the future.
I’m glad that I had someone who told me to stop undervaluing myself and to not let others dictate what I’m worth. No one is going to pay you what you deserve if you don’t believe in your value.
Need to a little help with your negotiating prowess?
Did you know that negotiating your salary one time can add over a million dollars to your earnings over the course of your career?
That’s kind of a big deal. And so is the confidence you get from knowing that you can ask for and get what you want and need in your career.
My negotiation guide gives you the negotation framework you need to persuasively make that ask. We’re not talking negotiation theory that works in a classroom but not in an office. This is a simple framework that gives you the confidence to use your own voice and get what you need: research. prep. ask.
Fill out the form below and I will send you the kind of email that makes your day. It will have the link to download my negotiation guide so you can start earning more money. Get the salary you deserve, fill out the form below.
This article was originally published on December 21st, 2016 and updated on October 8th, 2019.
research. prep. ask.
Did you know that negotiating your salary one time can add over a million dollars to your earnings over your career?
- I'll show you how with my 3 part system: Research. Prep. Ask.
- 3 videos included with practice scrips
- Free access to Not Your Father's Negotiation Course, a $97 value
Erica Gellerman is a CPA, MBA, personal finance writer, and founder of The Worth Project: personal finance and family travel. website. Her work has been featured on Forbes, Money, Business Insider, The Everygirl, The Everymom, and Lifehacker. When she's not writing about personal finance you can find Erica exploring Europe from her temporary home base in London.
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