The Art of Renegotiation
Nothing inspires dread in the heart of an independent worker more than this scenario: This year, you've been charging all new clients $75 an hour for a number of small and medium-sized projects. But today, you're meeting with your biggest and oldest client, the one who helped you bootstrap yourself into the contractor life that you've grown accustomed to.
How on earth do you tell them that you've got to raise your fee by 50 percent, from where it stands at a sub-market $50 per hour? Here are some tips on how to work your way out of this and other traps frequently encountered by consultants at contract-renewal time. Consult a lawyer if you think you need legal advice, which this article does not provide.
Money, Money, Money
No doubt about it, money is the top concern of most contractors when they consider renewing with a tried-and-true client. And it's never easy to ask for more money, even if negotiation is one of your key skills. "I always get hell from clients when I raise my fees," says Daniel Cobrinik, whose solo law practice in New York City has many contractors as clients.
Cobrinik believes that you've got to have a rationale when you want to increase your fee with existing clients. "You're in a position of weakness if you just go to the client and say, 'Hey I want more money,'" he says.
One approach is to cite increases in expenses that are built into your overhead. "Recently, I've been raising my rates," says Dennis Salguero, president of Beridney Computer Services, an IT consulting firm in Washington, DC. "One thing I talk about is increases in gas prices for driving to client sites. "
Another tack is to restructure your charges rather than simply increasing your hourly or daily rate. In Salguero's case, this could mean asking for reimbursement for mileage if a client requires you to travel to his office. For more help in rationalizing fee increases, read "How Much Should Contractors Charge?"
When you first signed on with that client who's now offering you a renewal, did you give away all rights to the intellectual capital you create, whether it's software code, a slick design or a sonnet? Well, you've got plenty of company among fellow contractors. But rather than cursing your lack of foresight, consider renegotiating the intellectual property terms of your agreement.
Suppose that in performing work for a client, a programmer writes code that she recognizes could have commercial value beyond the client's specific needs. The client, satisfied with the results of the project at hand, may not want to go to the trouble of realizing the additional value the programmer has created.
"The company can always deed intellectual property back to the contractor, especially if it's something the contractor wants and the client isn't using," says Cobrinik. "The contractor may be able to get value from his inventions somewhere else," he adds. And looking ahead, you might consider asking for royalties on uses of future works created while you're under contract. For further information on harvesting more of the rewards of your creative labor, read "Leveraging Your Intellectual Property.
The hardest part of the renegotiation dance is overcoming your fear of offending or alienating your client. Though a personal relationship is often a part of a consulting arrangement, the health and prosperity of your business has got to be your bottom line. Cobrinik says that if that venerable client isn't willing to budge, you should "search for opportunities and consider going elsewhere. Be prepared to walk if they refuse to give in."