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Renegotiating a Deal
Hi guys,
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I’ve been negotiating a deal with a client. They asked me to send a proposal for a $1M budget. I sent them a quote for x% rate. Then they said, hey our budget is actually $500k and we reached a verbal agreement at x% rate.
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I then realized that I forgot to increase my rate since the budget dropped by 50%. So now we have a verbal agreement in place, they’re sending over the contract soon — and I’m realizing that I should have quoted a more expensive rate here.
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What would you guys do in this situation?
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6 Replies
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You can reneg and say you made a mistake but it could cost you credibility and the deal. Only you know the nuances of how everything went down so you should let that be your guide.
The fact that they dropped the budget by 50% would indicate to me the deal isn’t “done” and therefore can be adjusted further.
But if you said, “no problem” let’s stick with the same rate you’ll look like a jerk changing that now.
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If you reached an agreement already, I would personally just go with what you discussed and arrived at.
It’s a mistake, and everyone makes them, but it’s really hard to follow up with an email saying “oh that price I said? I meant more” since it comes across as cheap and unprofessional.
On a secondary note, charging by % leads to problems like this. We have clients that spend $1MM+ a year, and the workload is not any different than a client spending $500k. A flat fee or retainer model with pre-defined budget tiers will usually serve both you and the client better.
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That’s what is wrong with the percentage pricing. You should price based on the manhours and potentially add the percentage as extra/bonus. The client wants to spend 1million and you assumed the x% you’re asking for is great. Now at half a million, you’ll get half the fee. If the client sees average performance in the first couple of months, they may halve the spend again for Q2. What would you do then? Renegotiate the contract again? It doesn’t make sense.
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Just tell them you were under the impression the % agreed was based on the 1M budget. Apologise for the miscommunication but say obviously you will need another chat about pricing. You never know they might have also forgot about it and it won’t even be a big deal.
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Start by naming the feelings that will be caused by your wishing to renegotiate the agreement.
E.g. “What I am about to say will upset you. I will look careless and unprofessional. I may even make you wonder about what else could be wrong with me and my proposal, perhaps even whether I’ll be able to deliver as agreed.”
Then proceed to simply state what happened.
Ask them what you should do.
That’s the beginning of a conversation.
While you may think you are at a disadvantage, you are actually in a very good position to discover the kind of relationship you’ll have with this client over the long term.
Because this is probably not the last mistake that either you or they are going to make.
Here’s where the rubber meets the road.
Naming the feeling before provoking it actually deflates it.
Good luck.
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Take the deal, let then know about increase in rate in next retainer cycle
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