Your client says, “We don’t have a budget. Just send us a proposal” Now what?
Don’t fall for it. Ever.
Over two decades running my creative studio, this always struck me as curious: clients would call us with a new project – providing me all sorts of details such as the scope, timeline and deliverables – then ask me to send them a proposal.
Um, what’s missing? How about a budget?
When you are in this situation, what do you do? You muster up some courage and ask:
You: “Do you have a budget in mind?”
Client: “No. We don’t have a budget yet.”
You don’t much like the idea of creating a proposal in a vacuum, so you push back gently:
You: “Hmm… how about a budget range?”
Client: “No. We don’t want to limit your creativity! Can you put your best minds on it, see what you come up with and send us a proposal?”
The client sounds so confident. You can’t help but think: Wow, I guess they really don’t have a budget.
Has this happened to you? What do you do next? If you are polite (read: avoiding confrontation), you probably throw up your hands, write up a budget (lacking any budget guidance), and send it off with fingers crossed.
Every Project Has A Budget
Shame on you. Stop being so polite. You aren’t doing your firm – or your client – any favors.
Here is the dirty little secret: every project has a budget. I’ve discussed this with more than a few clients who, in a moment of candor, have confessed:
“Of course, we always have a budget. But we can’t resist calling my favorite vendors to see if someone surprises us with a really low price.”
Tip: if you’re the vendor that comes back with a price lower than the client thought possible, you don’t want to be that vendor.
If you’re the vendor with a price lower than was thought possible, you don’t want to be that vendor.
What You Want to Happen
Assuming you have qualified the prospect and the project, how should you proceed? Your goal is to position your firm as the expert vendor that proposes a premium price… and yet is still awarded the project.
Here are the steps to make that happen:
- Get the client’s mind open to all the exciting possibilities.
- Uncover the client’s secret budget.
- Present your winning proposal.
Follow these steps so there will soon be a meeting on the client side where the decision maker argues for awarding the project to your firm:
“This firm came back with amazing solutions that we hadn’t considered. And their proposal is right on-budget! Plus, it’s clear they really want our business… so they are my #1 recommend.”
Offer Verbal Options
So now you’re dying to know, OK so how do I find out what my client’s budget is?
First, sit down with your team and come up with 3 solutions – let’s call them Gold, Silver and Bronze – defined as follows:
GOLD: the ideal budget that would empower you to produce a truly epic solution. What “the big boys” spend for this type of project.
SILVER: guess the client’s budget and imagine the best possible solution you can produce for that price. Think: Goldilocks.
BRONZE: the least expensive solution you can envision… but would still be proud to execute.
Next comes the fun part. Resume the conversation above to smoke out your client and uncover the budget. KEEP THE CONVERSATION VERBAL. Call the client (never use email for difficult conversations!) and say:
You: “Our team got together and we have some great ideas… but the costs vary widely. So we don’t waste anyone’s time, can I run them past you before we go any further?”
Here is how you turn the tables by opening up your client’s mind to all the exciting possibilities:
Client: “OK, go for it.”
You: “Ok check this out. Hold on to your hat! We have an absolutely incredible idea. [Describe it.] I’m calling that the Gold Option. That approach would cost somewhere in the neighborhood of $$$$$.
We also have another solution that is really great. [Describe it.] Let’s call that one the Silver Option. The cost for that is in the range of $$$.
Finally, we have this really clever approach that is leaner, more efficient, etc. [Describe it.] That one is my Bronze Option. It would cost somewhere around $.
So what do you think? Which of these options sounds like the right approach?”
Gasp! A Budget Magically Appears
What happens next… is fascinating. Even though a budget presumably does not exist, your client is about to reveal – gasp! – a budget. It will usually surface in one of the following ways:
Client Response A: “Uh oh. I don’t have nearly that much. Even for your Bronze option. We were hoping to spend $X.”
Client Response B: “I love that Gold option. But I don’t have $XXXXX. Could I possibly get the Gold option… for the Silver price?”
Client Response C: “The Silver option sounds great, but I didn’t realize it would cost that much. Is there any way you could do the Silver option… at the Bronze price?”
Congratulations, by offering helpful guidance, you just uncovered your client’s secret budget. Voila!
By offering helpful guidance, you just uncovered your client’s secret budget. Voila!
Now instead of blindly guessing what the budget is, you are empowered to create a solid proposal that is spot on-budget. Or back out gracefully and avoid wasting everyone’s time. Use The Three R’s™ to help you decide what to do next.
The Power of Anchoring
Congratulations, you’ve also just employed your first price negotiation using anchoring: you sparked your client’s imagination with your Gold Option. And the more excited the client becomes about the Gold possibilities, the more his mind will open to find the money to pay for it.
Yes, you knew your Gold Option would likely be out of reach for your client, but it serves an important purpose: to make your Silver Option appear quite reasonable, while also making your Bronze Option appear undesirable.
After all, what client would dare admit they called you looking for the most basic (read: cheapest) solution?
Blair Enns makes his case for anchoring this way:
The highest priced of (your proposal) options should almost always be an anchor – something you’re not expecting the client to buy and (which you) will celebrate if they do.
If you are like me, you were always taught in negotiations, “He who offers a price first, loses.” You fear if you put a price out there first, you will put yourself at a disadvantage. Anchoring as well as Prospect Theory help explain why this isn’t always the case.
Anchoring explains why ‘He who offers a price first, loses’ isn’t always the case.
Always Be Helpful
Note: I’ve found this methodology to be far more effective than the old-school, “Fast, cheap or good. Pick two.” approach. Because instead of insulting your client with irreconcilable tradeoffs, you are offering options. Don’t be snarky. Be helpful.
Countering Commoditization
When your firm starts winning projects with anchoring, your competition – who reluctantly agreed to blindly submit a proposal, guessed wrong and left the client confused – will be left scratching their heads. They will wonder, “How did we lose this bid?” Hint: your Bronze Option made their cheap solution appear undesirable.
Over time, you will find anchoring is an excellent way to combat commoditization, that deadly place where the only differentiator between you and your competition is price.
Commoditization = the only differentiator between you and your competition is price.