How To Lose Credibility When Negotiating Your Rate

Sep 22, 2015 9:00:00 AM · by David Kushan

HealthcareIS-Blog_Sept22Whenever we look to bring a contractor onto a project on which we’ve never worked before, we have to discuss compensation. Unfortunately, many new contractors are not prepared to have this conversation. Anyone can discuss what he or she wants to make. What I’m talking about is being able to have that discussion in a professional, credible manner.

At Healthcare IS, I believe we have a unique approach to how we compensate, but I will save that for another post. Here, I want to provide a few tips that will help you engage in this discussion with most firms.

The compensation conversation can be an easy one, based upon the particular assignment. The organizations with which you will generally be dealing have a standardized way of compensating their contractors.  Most firms know their bill rate to the client. From there, they have an amount that they will be willing to pay in order to maintain their targeted margin. If you give them an hourly rate that’s allows them to earn their standard margin, and the client thinks you’re a good fit, that’s the extent of the conversation.

However, there is frequently competition for a project. The competition will come not only from other companies with which a firm may be competing, but it may also come from other consultants that your firm can put on the project. When a firm is deciding which consultant would be best for a project, they’re taking into consideration not only the best-qualified fit for the project, but they’re also making sure they can hit the client’s targeted budget while maintaining a margin to run a profitable company. 

So, there will be many times when, based on the money you’re looking to earn, the firm is either going to have to take less than their standard margin or go back to the client for a higher bill rate. Make sense?

If not, email me personally and I can explain further:

In another post, I will explain how to build a professional case for what you should be earning. But in this post, I want to mention two things I hear far too often from consultants. When I hear them, I immediately know that said consultants have not done their homework, resulting in lost credibility.

Let me be specific: When I ask for the first time, “What hourly rate are you looking for?” the consultant loses credibility when he or she says:

1) “Well, a person I know is making XX, and I can do what they do, so this is what think I should (or want) to make.”

This statement carries very little credibility. If you follow it up by explaining that you have the same years of experience, have been in consulting for just as long (there is experience gained with tenure), and have done work for just as many clients (there is experience that is gained by doing the same work for multiple clients over a period of time), then you will keep my attention. But the statement, in itself, does not enable me, or any of our firms’ account mangers, to justify a raise in rate.

And . . .

2) “Well, in the past I was making XX, so I would like to see this rate now.” 

To my ears, when you say “in the past,” it means that you have not been earning that amount recently. This occurred either because you’re quoting a rate that you earned during peak market conditions or the supply for your skill set has increased, causing you to accept lower rates for recent assignments. In either case, what someone was earning in the past does not help build a case for why that person should be earning it today.

In both cases, the person I’m speaking with has simply not done his or her homework to build a case as to why they should be making that rate today. By doing some research and presenting your case professionally to the new firm with which you’re dealing, you’ll have a much greater likelihood of getting your rate negotiation off to a positive start.

General, Consulting, Career Planning


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