Fees and Negotiation

Fees and Negotiation

As you would expect, a lot of my time is spent talking about Money. It’s only 1 of the Big 3 resources needed for a project (timing and people are the other 2 . . . another topic) but Money is the one that gets everyone in the room to stand at attention and gets the palms to dampen. We can go around and around on whether or not it’s the most important of the Big 3, but right now my focus is on how to talk about fees and the right time to negotiate. I’ll be brief.

Going back to my little graphic of How Decisions are Made:

Let’s start with this: Money comes up a few times in the process. It’s not always at the end. With that in mind, discussions about money don’t always signify a classic “negotiation” which I associate with the final step in the decision making process. Here’s my quick example: early in the decision making process, a broad decision has to be made on budget. Like, my kid needs a laptop for school. Before I get into the “negotiate the best price” phase of my decision, I need to decide how much I’m willing to spend, right?

That “budget” number is rarely set in stone. It can’t be unless I’m pretty experienced in purchasing laptops that my kids use for homework. So I think back to my last purchases, check in with friends, get spousal approval and move to the next step. That number in my head ,”$1000″ for instance,  may be 25-50% different from what I actually spend.

Contrast that with my “negotiation” number. Once I’ve decided on the 11.6″ Apple MacBook Air, published price $949, I go looking for the best price or best financing deal. That price may be 2-3% different from what I spend.

My point is, a lot happens in between regarding the Value of the purchase. A lot of work goes into figuring out what the desired value is, if the initial investment number will bring the desired value, and whether or not the investment or desired value has to change.

Knowing that, and knowing that Money is one of the Big 3 so it will always come up, we need to get good at determining where we’re at in the decision making process and learn to talk about money in the correct context.

When we’re in the “ballpark” phase of resource allocation, the numbers can be off by anywhere from 25-50%. Think about that. If we’re talking about a $10 Million dollar problem, the solution may run $1.5MM to fix. At this point, who knows, right? That means a discussion of money using that figure can be off by as much as $750,000. The CFO may hate that, but she’ll appreciate knowing this fact if she’s budgeted $100,000 to fix the problem.

Armed with that information, she knows that something needs to change. Either the Value ($10MM problem) or the Investment ($100K) needs to change.

As my good friend Drew says, “C’mon people. Let’s Think and Process.” He’s right. We all know what “too good to be true” is, but that doesn’t stop us from wanting it. That said, let’s work together and come up with a way for both parties to succeed.

Know where you’re at in the “process” and talk about money as freely as you discuss Timing and Resources.

Easy to talk about, hard to do.

Good stuff.