Negotiating higher rates can be challenging for many contractors, but it is an essential part of being an independent professional. Our upcoming contractor survey found that 59% of respondents earnings have remained unchanged in the past 12 months. This is in spite of the UK being in recession for the first time in 11 years.
How contractors retain and command a higher fee, is an important aspect of freelancing. But, how do you effectively negotiate a contract? Take a look at our top six ways of mastering the art of negotiation as a contractor.
Do your homework
Preparation is key, knowledge is power and having a solid understanding can make the difference in standing out to your prospective clients. Research the company, research the role, research the skills you need, and above all, research yourself. Understanding what you uniquely bring to the table for your potential clients can make a real difference when negotiating a better fee.
You’re worth it
You don’t want to pluck a figure out of thin air when negotiating your rate. There is no point in demanding £2000 per hour if your competitors only charge £30. Vice versa, you don’t want to undersell yourself.
Try to find out how much the going rate is for someone with your skillset, with your experience, in your client’s industry. There are a number of ways you can do this. Glassdoor is a great tool for scoping out potential clients, their salaries and contractor rates. Also, ask other contractors what they earn. This can help you gauge whether you are in the right ballpark when negotiating your fee.
Be flexible with your day rate
A trap which you might fall into is agreeing a rate then sticking to it. Often contractors decide on a day rate that they believe their skills or experience are worth, regardless of the job remit. Individually quote for each project based on the time and effort involved. This is particularly relevant if it is another contract within the same company. Many will expect a similar rate, regardless of the work involved. If it involves different skills or is more labour extensive, explain why and quote more.
Save some room for negotiation
Now you have an understanding of what your worth/going rate is – leave some room for negotiation. Try and use the 15-20% rule. Offer your prospective client 15-20% higher than what you actually want. This will mean that if your client tries to play hardball and haggle, you don’t have to to go below what you believe you are worth. This helps you both feel like you’ve ‘won’ the negotiation as well.
If you’re working on a long term contract with your client, it is worthwhile to leave the communication channels open to re-negotiate, especially if the assignment is extended. If you have been working with your client for a year, that is a year’s more experience, a year’s more understanding of the business, and a year where you have been a useful resource for the business. However, please be mindful that you don’t want to push away consistent work. Only try and re-negotiate if you feel you deserve more and are confident they will agree to it.
Learn, learn, learn… and learn again
Our last and most important bit of advice. Treat negotiation like any skill and work on getting better at it. Forbes has a great article on the top self-help books to help you become a master negotiator. Another way of improving yourself is using Kolb’s Learning Cycle. Continuously self-reflecting on how you did and how you could do better, can have a significant impact on your skills as a negotiator (or any skill for that matter!).
Find out more
For more tips and tricks, take a look at our guide to running a limited company.