An entrepreneur’s guide to negotiating your rates

two people reading a contract

Whether you are a freelancer or small business, entrepreneurs must master the art of negotiation in order to scale. Negotiating rates, prices, and deliverables is at the heart of profitability, especially for new businesses, yet many entrepreneurs struggle to get it right.

The practice of negotiation

At Azlo, we are committed to providing our customers with the tools and resources they need to succeed, so we recently brought in Tanya Tarr, Forbes columnist and expert negotiator.

Ask Tanya how to negotiate and she will tell you that you cannot learn negotiation from reading a book. You actually have to “experience the practice of negotiation; just like muscle memory and sports, being a master negotiator requires mental memory.”

Tanya notes that for many entrepreneurs, especially those that have hearts of service, or in the non-profit space, it is difficult to ask for what seems like large amounts of money. That’s why it’s important to practice asking.

There is an adrenaline rush that takes place when people negotiate and you are going to revert to whatever your habit is, so you have to actually train your mind and body by practicing it over and over.

Five negotiation hacks

  1. Record yourself practicing your ask and negotiation points. You are your best critic, so practice your pitch on video to help relieve the anxiety associated with negotiation.
  2. Know the difference between selling and negotiating. Sales involves matching a need to a solution; negotiation happens after it becomes clear that there is a match and you need to negotiate terms.
  3. Anchor high with the first offer. Anchoring is a negotiation term that means the first offer given in a deal, and it is often the first price thrown out. Include a margin in the price that you can use to create a perceived discount.
  4. Be prepared. Know the market price for your service or product, know your competitors’ pricing, and have your counteroffers ready.
  5. Know when to walk away. Not every negotiation is going to lead to a signed deal or the terms you want. Entrepreneurs would be smart to understand classic negotiation theory, Best Alternative to a Negotiated Agreement (BATNA) or the best outcome you can expect if you fail to reach an agreement at the bargaining table. Your BATNA may include creating alternative wins, like a referral or alternative payment structure.

Changing the way you get paid

At Azlo, we understand that getting paid is an acute pain point for many small business owners which is why our customers enjoy easy in-app invoicing and integrations with Stripe and Square.

But getting paid is not just about sending an invoice—Tanya suggests it is about a mindset. Tanya has developed a unique term called “paymentum.”

If you’re helping someone through a transformation in their business, you need to get them to focus on making that change in their life—and them paying you is a step towards that transformation.

Bonus negotiation hacks

  1. Understand your lowest acceptable hourly rate, or your Minimum Acceptable Rate (MAR). The MAR equation includes overhead, hours worked, and taxes.
  2. Charge by project, not by hour. Just because you can complete a project more efficiently (it takes you an hour and your competitor three) doesn’t mean your client should get a discount on the deliverable. Your goal as an entrepreneur is to make sure there is perceived value in your service or product. If your client thinks that the job is easy because you can do it quickly, the perception of value declines.
  3. Don’t take the negotiations personally. Early stage entrepreneurs tend to have more personal relationships with their buyers. Remember that you can be respectful and friendly and still stay focused on the business transaction at hand.

Hi there! This post exists to offer you (hopefully) useful information but it cannot take the place of personalized professional advice. Please consult a qualified expert if you have questions about your business. Also, Azlo doesn’t endorse any third-party sites that are linked here.


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