Thursday, November 17, 2011

Everything's Negotiable

Throughout my career, I have used a simple speaking agreement or consulting agreement to record all the details of each engagement. I'll talk more about these agreements in a future post. Most of the time this simple form works fine. Occasionally, though, I will get some pushback from the client on specific terms in the agreement. And once in a while, the client's legal department gets in on the action and sends me a massive document to sign.

People naturally write contracts biased in their own favor, so you need to read anything you get from a client very carefully. And it's good to remember that almost all of the terms can be negotiated if you aren't happy with them. In fact, I'm in the midst of such a negotiation this very day. So far, this client is proving quite accommodating of the changes I'm requesting. For instance, the client’s standard services contract demanded that I take a drug test, something I’ve encountered only once before. I replied that I don’t take drugs and I don’t take drug tests. The client dropped the requirement. Sometimes you just have to ask.

In this post I describe some typical categories where you might need to do some negotiation with a client.

Fees: The most obvious negotiable term is the fee you're charging for your services. Frankly, I’ve found that clients don't challenge this as frequently as you might expect. I have standard rates that I quote for certain services, but there's some flexibility in them. For instance, I'll offer a nice discount if a client wants to acquire a site license for some of my eLearning training courses in addition to having me present a live seminar. I'll also drop the price if the client wants a combination of consulting and training services, or to have me present multiple classes during the same trip. Similarly, I offer a bundle discount if someone buys multiple products at the same time.

Once, a prospective client asked for a discount of several thousand dollars off a two-day training course simply because my quote exceeded her budget. She just wanted me to knock the price down because I'm such a nice guy. Sorry, I'm not that nice. I wasn't willing to do the job for the price she suggested, and we never were able to come to an agreement. Sometimes that's the way negotiations turn out.

Cancellation Fee: My speaking agreement always include a cancellation or rescheduling fee. Some clients balk at this. My premise is that, when I sign the agreement, I am committing a certain number of days for the client event, plus preparation and travel time. Should the client decide to change the agreed-upon date or to cancel the event entirely, it's unlikely that I can rebook that time slot with another client on short notice. If I purchase a nonrefundable airline ticket, changing the dates or canceling will cost me some money.

Therefore, I ask the client to make a similar commitment to me in the form of agreeing to pay me twenty or twenty-five percent of the price as a cancellation or rescheduling fee. Sometimes we negotiate a lower such fee. Or, we might put some time bounds around it. Maybe no payment is due if I can reschedule at no cost to me or if they cancel at least X weeks prior to the event. But I always insist on a cancellation fee. If the client isn't willing to sign up for that, we don't make a deal.

I had one client who tried waiting until immediately prior to the scheduled event to sign the speaking agreement, to minimize the likelihood of having to cancel or reschedule and thereby incur a fee. However, my policy is to not commit specific dates to an event until I receive the signed speaking agreement. I felt no qualms about giving that client’s desired date to another who was willing to make the commitment. I didn't appreciate the game of schedule chicken this client was playing with me. That gig fell through, also.

Usage Rights: The consulting service contracts that some corporations use attempt to claim unreasonable rights for the presentation materials used in a training course. They might stipulate that the client has the right to use the course materials in any way they wish, simply because I presented the course once at their company. This right could extend to unlimited distribution of the material throughout the company, teaching the class themselves within or outside their company using those materials, or even licensing my courseware to other companies. This is the first clause that I remove from every such service contract. My clients do not have the right to use my training materials for any purpose other than the courses I am presenting, unless we execute a separate licensing agreement. I’ve never had any problem getting this clause removed.

Video Recording: Occasionally, a client wishes to record my presentation and show it to other people throughout their company. Obviously, this represents a lost opportunity for me, because they might use the video rather than hiring me to come in and teach another class.

I am not totally averse to video recording. If the session I’m presenting was open to anyone in the company who wanted to come, it's fine with me for them to record it for anyone who could not physically attend the live session. Usually, though, my training courses are capped at a certain number of attendees for the agreed-upon fee. If they want to make the material available to other people, such as through videoconferencing or videotape, I will generally permit this but charge them extra for the privilege.

Insurance: Contracts coming out of the legal department generally contain clauses about the various types of insurance the consultant is expected to provide. If you have multiple employees, you might be expected to provide worker's compensation insurance coverage, but to my knowledge (and remember, this is not legal advice), sole proprietors are exempt from workers comp. I do carry business liability insurance, which offers some protection if, say, I injure a student with my laser pointer or damage some property with my car. However, the coverage amounts stipulated in the contract often are higher than I carry, so I negotiate to lower those coverage expectations. This has never been a problem for me when I point it out to the client's legal department.

I do not carry professional malpractice (errors and omissions) insurance, although some companies request that. Clients have always been willing to remove that requirement when I point out that I don't carry it and that I don't need E&O coverage for the sorts of engagement I typically perform.

Other Expenses: Today, for the first time in my career, a client required that I undergo a criminal background investigation. I have no objection to that, so long as they don't find all my secret offshore bank accounts or the yachts, but they wanted to charge me $49.79 for the privilege. I was able to persuade the client to cover this cost. They also might want to pull a credit report on me. Also fine (if peculiar), except that I have freezes on my credit reports with TransUnion, Experian, and Equifax—the three major credit reporting agencies—as protection against identity theft. If this client wants a credit report, I have to pay $10 per agency to unfreeze my account and $10 more to refreeze it. I asked the client to pay for that, also, but they decided they didn’t need to do a credit check after all.

Each party involved in a negotiation is striving to adjust the outcome in their favor, but they should also respect their counterpart's legitimate needs. We all have limits to our flexibility. If the people with whom we're negotiating insist on finalizing the terms beyond our tolerance limits, we won't reach a mutually acceptable outcome. You don't win every negotiation, but you might be able to do better than you expect just by asking.

For more on effective negotiation, I highly recommend Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher, William Ury, and Bruce Patton. This book provides excellent advice on how to successfully negotiate from an understanding of each party's interests, rather than by debating immovable positions.

(If you found this article helpful, please consider making a donation to the Norm Kerth Benefit Fund to help a consultant who has been disabled since 1999 with a traumatic brain injury from a car accident. You can read Norm's story or donate here. Thanks!)

3 comments:

  1. I found this advice helpful, thank you!

    If a (typically, large) client prefers to send me its legal document, then if something seems iffy then I email the senior stakeholder(s): "Okay, but this is how I would interpret this clause ..." and then I give some examples. Typically, this resolves the issue. The last client to whom I sent such an email replied with "completely reasonable" and I'm reading between the lines that he also appreciated that I worked through the issue so diligently.

    Then again, I've found some very large companies to have completely unreasonable agreements. About a year ago, I was about to start a senior contracting gig at a large Silicon Valley Internet company (no, not Google) at approximately $1,500 a day, which would have been very welcome cash flow for me. Everything was "green light" and the company sent along a document that was described as the security badge information. Even so, I read this carefully and was aghast. Essentially the company assigned to itself the rights to whatever I, or anyone in my company was making during the time-frame of my contract, plus indefinitely into the future. Whoa! I contacted my recruiter, who has 4 years' experience as a paralegal. I pointed out my concerns and asked if I was interpreting the clauses reasonably. Indeed I was, he said. He resolved to go back to the company and come back with a more reasonable version of the contract, and also do some investigation as to how any of his consultants had managed to sign that contract. A few days later he reported back with the sad news that the client refused to make any changes, and that his other placements had signed "while holding their noses" in the hope that the client would choose not to enforce these clauses. As for me, I refused to sign, and the gig fell through.

    Word of this decision (integrity, what a concept) found its way through the sub-culture unbeknownst to me until several months later, when another senior recruiter contacted me, and mentioned being aware of the incident. His tone was one of respect.

    ReplyDelete
  2. Andre, thanks for sharing these insightful experiences. Okay, I was wrong: maybe not everything is negotiable. More accurately, as I pointed out, you don't win every negotiation, but you can certainly push back against contract clauses that you find ambiguous, unreasonable, or unacceptable. Good for you for sticking to your integrity guns!

    ReplyDelete
  3. Thanks for writing this wonderful post, Karl. Sometimes we ignore the power of just "asking". I will keep these ideas in mind when I start my freelance consulting practice.

    ReplyDelete