This is a guest post by Nicolas Acuna and Mikka Olsson, co-founders of Ebbex.com, an iPhone and iPad apps development company. In the last year, they’ve had great success (and committed a fair share of mistakes!) creating apps for clients all over the world and decided to share their findings with the fine readers of Inspired Mag.
If you’ve established rapport with a lead and there is a mutual understanding on the scope of the project, it’s time to talk money. Every potential client needs to know what the bottom line is before awarding you their project. Talking about money with a lead always changes the dynamic of the conversation. When discussing scope and brainstorming ideas there is a natural sense of excitement and opportunity but once the focus shifts to money, the conversation can become awkward, and sometimes defensive. Money conversations are emotional and if not handled correctly, they can cost you the project.
So how do you handle the money question? How can we talk about it openly without it being awkward? Here are four tips that have worked for us.
Bring it up Early, Bring it up First
Don’t wait until the very end to talk about costs and budgets. In our early days, we wanted to win projects based on exceptional service (only!); this leads us to write pre-proposals, proposals, SOWs, technical feasibility studies, follow-up
emails, etc. without ever finding out the potential client’s budget. This of course leads to a lot of wasted time for both the potential client and for us. All this energy and work could have been saved if the money conversation happened earlier.
Use the Architect Metaphor
So how do we ask leads what their budget is? Being iPhone app developers, we constantly get the “How much does it cost to build an app?” question. Our answer usually goes like this: “Well it depends on what type of app you are building, the
feature set, the required technologies, etc. It’s like asking an architect how much a house costs. There is no set price for houses; it depends on the number of floors, rooms, type of materials that you want”. “The architect will usually ask what
your budget is and s/he can tell you how much house you can get for that amount and it works the same way for apps. What number are you wanting to stay under to build this app?”
The architect metaphor brings a lot of freedom to the conversation. Whatever number they say can now be the right number since it’s placed in the correct context; the number defines the feature set instead of trying to squeeze a bigger feature set into a limited budget. The architect metaphor turns the “not enough money” problem into an opportunity where you can build a quality minimal feature set product at a fair price point. Of course this approach only works if you are honest and open with your potential clients.
Don’t Haggle, Sell on Value not on Price
If you keep decreasing your price in order to be “competitive” you enable a race to the bottom mentality that will most likely cost you the project since someone will always bid less than you. (This happened to us a couple of times in the early days.)
Selling on value instead of price transmits confidence and integrity. If you easily decrease your price, why was it higher in the first place? Was it not a fair price to begin with? When a price is quoted, the potential client should feel confident in the validity and fairness of the price.
Selling on value also sets the tone for the relationship. You are hired because you are an expert in your field and an expert should always know how much something costs. If you establish your expertise in the sales process, the production process will be much easier as the client will continue to trust you.
Sometimes the right price is a little above the client’s budget. In these occasions you can chose to be flexible and reduce your price in exchange for tangible value. Here are some examples:
- A conspicuous credit on the website/app/etc. For apps, we usually ask for placement in about screens or splash screen;
- Permission to use the project as a case study that can be shared with other potential clients;
- Press release mentions; and/or
- Extra production time for the project
If there is a good fit with you and the potential client, there are always ways to find a valuable and creative compromise.
Hopefully these ideas (and some provided in the comments section!) will help you navigate the money questions and eventually lead to a bigger and better business for you. In the next post we will share some thoughts on how to talk to your clients once a project has started.