Why I will not negotiate with you about cost

First off:

1). any business will start to decline at some point, including you(rs). So cost cutting is a proven solution. You are not buying a business, you deliver a service

2). the whole point of hiring subcontractors is to reduce risk (in my opinion). You are an expert they want&get when they need, probably with some strict clauses.

3). agree that the request is pretty left-handed

Secondly, about negotiations:

Everybody likes to feel special or more exactly that they "won" something. Why not make them happy by giving them a 2-3% (negotiate) and ask for this a contact-commitment of minimum 20/30/50 hours/month. That way you also minimize your risk of looking for work.

If you do have too much work however, then you have the upper-hand in negotiations. Play it now!

Getting tired of simple-minded self-help advice in blog form. And this bitter post even doesn't give you any advice.

When doing business you will face negotiation tactics every single day (like the OP described in his post). If you are long enough in business you know how to handle to this and how to counter attack—without having to write a whiny blog post. And if you are a talented developer you have enough options anyway.

Depending what kind of project you are doing there are enough variables to play with (price, deadline etc), however if the client wants to receive the same service for less, there are not much options; either you (or others) cut prices or they find other people to do the job. In the end, if the client keeps coming back to this reduction request, they'll push it through eventually.

A tactic we used to use (i'm from the Netherlands as well) is a) make sure you are close to the decision makers (this is always smart and we always were/are); COO/CIO/CTO/CEO depending on company size and structure b) ask your 'friend' in the top to change your 'title'; so if you are a 'developer' making E90/hour and they want to cut 5%, tell them to make you 'head developer' making E100/hour and then, via your direct chief, accept the 5% cut. Somewhere in the company are bean counters who came up with this 5% across all freelancers; they don't know/care what roles they have, so you change your role, accept the 5%, you earn more and on paper everyone is happy until the next year 5% round which you can blindly take. And I wouldn't stick around for round 3 :) But that's just me.

Former management consultant here. I worked about 1 year on a cost-reduction mission for a large industrial company. While I agree that a cost-focused business is doomed in the long run, sometimes a large company does need to review its entire costbase. Over time, this kind of companies amass useless or underused contracts that need to be cut or heavily renegotiated. This kind of analysis takes a long time so when they can't afford it they just spam all their subcontractors to see who will "yield without a fight". All of this is a very common business practice.

The problem at the moment is the suspicion that the economy is being used as an excuse for greedy cost cutting (by both government and business). If my client were genuinely in some sort of trouble, I would be open to helping, but most clients don't disclose accounts.

As an example, one client had the cheek to have next upgraded executive cars delivered to their offices on the same day redundancy notices went out. A day later the contractors arrived to reconfigure the car part because the new cars were a bit too wide for the existing bays.

Clients occasionally have cost issues, sometimes for reasons within your control and sometimes because someone in purchasing had the bright idea "Hey, if we email 500 people and ask for 5% off, 100 of them are going to be unsavvy enough to say 'Yes' and we just saved ourselves a million bucks a year for the price of an email."

Venting on the Internet or at the bar has its time and place, but in terms of mutually agreeable resolution for clients, let's see what we can do here:

a) Tell the client that you hear and empathize with the goal to reduce the size of your invoices.

b) Offer the client ways of achieving that goal which are a mutual win.

For example, if a client sent me something like this, I might say:

Hiya Bob,

Thanks for the email. I understand that the telecom sector is a dynamic industry and, as a result, you're concerned about making sure our relationship continues on providing provable ROI which you can demonstrate to the other stakeholders at $COMPANY. I want to help you do that.

1) My most recent invoice covered projects A, B, and C. B was very successful and resulted in an increase in customer lifetime revenue of $REALLY_BIG_NUMBER as per the calculation outlined by Dave in our email thread of March 17th. This results in an ROI to $COMPANY of $DIVISION_IS_MAGIC just based on that one component of the engagement. I look forward to continuing to find $DIVISION_IS_MAGIC and above wins for you and $COMPANY.

2) If you would like a more formal report on ROI suitable for presenting to internal stakeholders, I estimate that we can prepare one given one week's time. Would you like me to reprioritize the schedule for our next engagement to include this?

3) Given that the telecom sector is a dynamic industry, our current arrangement might not have the flexibility that $COMPANY needs to arrange your projects at the lowest possible costs. Currently, $COMPANY and I work on a time-and-materials basis for N weeks every $PERIOD. If $COMPANY would like to decrease invoiced amounts, we could:

a) Delay the delivery of D or E from $PERIOD(X) to $PERIOD(X+1), resulting in $INVOICE(X) coming in at $SUBSTANTIAL less, for a cost reduction that you can book in the current quarter.

b) $COMPANY currently purchases availability for work within $PERIOD at times mutually agreeable to $COMPANY and myself at the beginning of $PERIOD. If $COMPANY is willing to be flexible on the scheduling such that work will be delivered at any time during $PERIOD, I would be happy to grant $COMPANY a per-invoice line item discount of $DOLLAR_AMOUNT_CALCULATED_TO_BE_ROUGHLY_5%_OF_MOST_RECENT_INVOICE. (You may want to run this by Jill as her project will block if our next project does not get done as per the current schedule.)

You can continue humming bars in that direction.

If you routinely get emails like this, though, firm handshake and recommend a provider more appropriate to their needs. Anyone who does not wish to pay the price of butter has to cut down on butter consumption right now, because it is a seller's market.

There have been lots of single idea blog posts on the front page, which means they have obviously resonated with people that are on this site to the point where they upvote it.

I think that this is a good post for new entrepreneurs who may not have faced this type of thing before and get suckered in. For us more weathered business people it seems like fluff as we're used to people trying to pull dodgy moves, but hopefully this kind of post will stop the younger crew from getting burned.

The situation described is not really a negotiation at all. Of course, spamming all of your suppliers requesting a 5% price reduction is silly.

But I totally disagree with the headline. Service providers should be prepared to negotiate price and the best way to do that is to have some "asks" to balance it out.

Negotiation is a game, everybody is bluffing, just like playing poker. There are good and bad players but whatever you do (within a short term) luck matters. So you never know if avoiding a 5% cut you'll loose 100%. It's a risk that some can afford and others can't.

Really, leave the costs alone?

My inclination would be to assign an annoyance premium to that client. If they fail to come to agree to more next time, move on and find another one that you like more (even if they pay less).

"I'm always happy to work with our partners to save them money. I already offer a 10% discount for customers using our retainer plan. Would you like me to send you the paperwork for that?"

So cut your rate, but track your time more aggressively. Every email read, every call - all billable. Be a fuckin lawyer.

Every now and then someone decides to be a douche to get attention to their blog. There is a hearty debate on HN about it but most of the time they are completely wrong. An exception is DHH with his opinionated rails talks and blogs.

Is this guy any different?

Hmm so you just lost 100% of your business because of your unwillingness to negotiate over 5%. Really clever indeed. Have you ever considered the fact that they see you as replaceable (why else the 1 day deadline?).

Better to cut your hours than cut your rate?

> Sending out a mail to a bunch of your subcontractors asking them to agree to a cost reduction is not only silly, but it also shows you have no clue how to run a business.

It is a mildly smart and efficient way of demonstrating brute-force against your one-man-shows and small contractors of which too many will rather swallow the 5% cut than being afraid of not getting hired again... it is communicating "take it or leave it" and makes you worry about consequences. No, this is not nice but that is exactly how a lot of those big businesses are run and you wouldn't believe some of the stories I could tell you even about big names in IT. And it is not necessarily a sign of a huge decline, it could just be one of the higher-ups trying to earn brownie buttons or sweetening their own bonus by demonstrating some sort of cost reduction.

I don't think this blog post should go on to give suggestions how a business could cut costs elsewhere but it should demonstrate tactics of how you as the developer can respond to this, whether it comes from actual necessary cost reductions or just some management whim. There are a few good ones in the comments luckily! I liked the idea of the "counter-offer" where you offer them to work 5% or 10% less at the same rate.

When it comes down to it, it is just negotiation tactics and a lot of that comes down to not even going where they want you to go and having enough experience to direct things into the right direction much beforehand so you won't even get into these "yes or no" kind of moments.

Another idea is offering them an appropriate amount of "free" service if they order that-or-that many days with you - this might seem stupid at first but think about it, you could get a guarantee for days that you might not have had otherwise and MUCH MORE IMPORTANTLY: you did not lower your price!!! This is the one thing you should definitely avoid because re-negotiation prices up is very,very hard and probably impossible, so don't even go there. Place your high rates but offer "free" days where and when appropriate; that way your price is settled and you avoid further discussions on price and you can bill them at that rate later on.