The freelancer and contractor industry is still growing in the UK – this is excellent news to contractors, especially with the uncertainty of Brexit and the future of free movement) still unclear.
There are around 2 million self-employed professionals in the country, and 1.77 million of them are full-time contractors. Whether you’re considering joining these contractor ranks or have been contracting for some years now, there’s something that remains true no matter what: as a contractor, one of the most important things you’ll ever do is negotiate deals. If you have a negotiation coming up, whether you’re going to start a new contract or want to renew an existing one, knowing how to get the best deal – and rate – is key.
Below, we discuss the importance of improving negotiation skills and we also offer tips to help you understand your value and how you can negotiate better. As contractor accountants, we are confident that these tips will help you to maximise your earning potential, while ensuring that your potential clients still want to work with you.
1. Always Do Your Research
Before jumping into a negotiation, you’ll want to take the time to research every single aspect of the job. It’s worth learning as much as you can about a prospective client, such as the unique features of the role and how much they pay on average. Review the client’s website, any press releases or articles they may have, or learn more about the person you’ll be talking to through a LinkedIn search. The more you learn, the better.
This research should also tell you whether the job is a good fit for your skills. You may find that your current skills are not up to par with the role, or simply that your skill set is not suitable for the job, because it’s not what you usually do. By going in prepared, you’ll be more equipped to discuss what can be achieved and what can’t, as well as how much you should accept in terms of rates.
2. Know Your Target Audience
It’s equally important to understand the point of view of your potential client. What do they want to achieve by hiring you? What are their expectations, and can you meet them? Conducting a negotiation with the right attitude of ‘us’, instead of ‘me versus them’, will help you to empathise with the client and understand where they’re coming from and what their needs actually are. The best negotiators truly listen to their clients and understand their pain points and key issues, so they can then formulate an appropriate solution. When talking to a client, therefore, it’s better to actively listen rather than trying to dominate the conversation.
3. Assess Your Worth
Many contractors feel uncomfortable broaching the subject of money, but it’s crucial that you know your value before you even start negotiating a rate with a potential client. Be aware, for example, of any rare skills you may have or how many years of experience you have in the industry. It’s a lot easier to promote yourself to a client if you know what you’re capable of. And when you know your worth, you also have more confidence to ask for more money. Not everyone believes they’re worth more than the asking rate, but it’s worth remembering that if a prospective client requires your help, they already believe you’re the right person for the job.
4. Don’t Concede to Everything
You don’t have to say ‘yes’ to everything. If you’re not aware of your worth as a contractor or lack confidence in your skills, you may fall into the trap of negotiating by constantly conceding to your potential client’s demands. They may continue to push boundaries by making unreasonable requests, if they know you’re likely to cave. If you have to concede or compromise on something important, make sure that you get something in return. A negotiation is just that – both sides have to be able to benefit from a contract.
5. Negotiating a Rate
Every project will have a salary range, so pin it down as much as you can before going in. For instance, you can look up industry guides and search for relevant news and mentions of wages. It’s also important to keep in mind that rates will vary depending on where you or your client are.
Most contract vacancies in the UK are concentrated in the South of the country and the regions with the highest rates tend to be Greater London, including the capital, the South East and the South West. In London, for example, it’s not unheard of for contractors to charge up to £300 an hour; however, such a figure is not likely to be found further north.
You’ll find that rates also vary from sector to sector, with industries like finance offering some of the country’s highest rates. And, of course, your circumstances will also play a role when it comes to negotiating a salary. If the economy is strong and you have several contract offers, you can say ‘no’ to jobs you’re not too keen to accept (or attempt to get a higher rate). The more options you have, the more your bargaining power grows.
A good strategy to start a salary negotiation is to be the first one to suggest a number, as that will become the one everyone will keep referring back to. So, know how much you want and lead with it. A great rule of thumb tends to be to aim as high as you possibly can and then expect to reach a compromise on the rate you really want.
However, some contractors do not like to be the first ones to mention a figure in a negotiation. They are wary of offering a number that is either too low (whereby they’re underselling themselves) or too high, which can cause a potential client to lose interest in their services.
It’s all about finding the strategy that works for you and that you feel more comfortable with.
6. What’s Your Lowest Rate?
You may consider a lower rate to be off the table, as you’re not willing to accept a low wage in return for your services; however, it’s still important to be aware of the lowest number you’re prepared to accept. After all, you don’t want to end up accepting a figure you’re not happy with, so setting a base limit you’re comfortable with will help you to keep the negotiation on track, ensuring you never take on a job for less money than you intend.
When coming up with your cut-off point, always take your living and commuting expenses, as well as other day-to-day costs into consideration.
7. Timekeeping is Important Too
This may not be the first thing that comes to mind when you’re looking to negotiate a contract or your rates, but time can sometimes make or break a deal. You’re probably tired of hearing that time is money, but there’s a lot of truth to that. When you’re a contractor, every minute counts, as you could be making money elsewhere on another contract. Time is therefore of the essence for contractors, when coming up with a deal that both parties are happy with.
In addition, the longer a deal drags, the more likely it is that something will come along and derail it. Promptly make your research and learn how much you’re prepared to accept from a contract; this doesn’t mean you have to rush a negotiation and concede on points you’re not comfortable with. You should always take your time in order to ensure that you get the best deal out of the negotiation process; however, do keep in mind that there may be moments where time is not your friend.
8. Stay Ahead of the Game
Industries change all the time, and the same is true for systems, rates, processes and technologies. You want to keep ahead of any potential changes that can affect the way you do your job, so it’s essential to be aware of current and future trends. You’ll want to continually develop your skills in order to not only become better at your job but also gain more leverage when it comes to negotiating higher pay rates. There are many ways you can achieve this, such as by attending important industry conferences and seminars and by signing up for training programmes.
9. You Can Negotiate More than Just Money
It’s easy to forget sometimes that you can negotiate other aspects of the job when talking to a potential client, not just your rates. For example, you may be able to negotiate deadlines, payment for shipping or supplies, more flexible working hours and the option of working from home. When it comes to negotiating, don’t focus on one thing – every detail is important. Depending on your field or task, you probably have a long list of items that could be discussed and compromised on, so always go into a negotiation with those things in mind.
10. Always Have a Professional Attitude
It goes without saying that you should always maintain a professional attitude throughout the whole negotiating process. The last thing you want is to burn bridges, even if your proposal didn’t have the outcome you wished. While you may not be considering it at the moment, you can never rule out the possibility of working with a potential client in the future; by staying friendly and respectful, you will help to nurture future relationships.
11. Working Through an Agency or Directly with Client?
There are several different ways to approach a negotiation, depending on the type of business you have. Are you working through an agency or do you contract directly for your client?
When contracting through an agency, you have to discuss the matter with them first. First of all, they will probably have more experience and more knowledge of other contractors’ rates, meaning they are likely better prepared to argue on your behalf.
Additionally, if you work through a recruitment agency, they will probably be remunerated by taking a percentage of your hourly or daily rate, while trying to get the best deal. Some contractors prefer to utilise an agency, as it can help them to avoid any gaps between contracts; others prefer not to work through an agency, seeing as they will take a cut that can be as high as 60% in some cases.
Should you opt to work with a recruitment agency, it’s important that you’re clear with the instructions you give them. Typically, they will be well informed but, should that not be the case, they may also be unaware of how important your skills and experience are; by not arming the recruiter with these crucial pieces of knowledge, you risk losing out on the best deal.
If you work directly with a client and will be negotiating with them, then you’ll be fighting your corner by yourself without the support of a recruitment agency. It’s therefore key that you outline your proposal and offer any necessary evidence to defend your position. The aim is to make a strong business case as to why you deserve a higher rate; a good way of proving this is by showing them examples of past work and how it benefited the organisations you previously worked for.
At Gorilla Accounting, we know just how important it is for you to get the best deal possible when negotiating with a client. So, in addition to our negotiation tips, we can also help you calculate your take-home pay with our contractor tax calculator. We have years of experience and knowledge in the industry; if you wish to learn more about our accountancy services, don’t hesitate to ask us any questions.