client want to negotiate contract (another horror story?)

I didn’t want to hijack marzz03 thread, so I started my own because I have a somewhat similar situation in my hands, and that post got me thinking…

So here is my problem:
I am running a “one man design firm”. I was recently approached by a big bathroom fixture company, that has never used designers before, and wanted to try it out. They also talked (or so they said!) with some of the big local design firms.
When I met with them, they said they liked my portfolio and offered the following: Do a design test for us, designing “X” bath fixture. If we like what you do, we’ll go ahead and keep working together, if not, we will go with the safer option: One of the bigger firms that already has experience in designing this type of products.
So far so good, but here is the first catch: they said, we’ll take a risk doing this with you, so give us a good price, and that way we will be sharing the risk.
I didn’t have much work at the time and I agreed to their terms.
Maybe I shouldn’t have done so.
When I delivered the designs, they went “bananas”, and I could tell I had largely exceeded their expectations. I handed in my invoice for the price the project should have been, minus a special discount to make it come to the price we had agreed on…This way they already knew what the design really costs, for next time. For your reference, I charged them, only 1/3 of the project`s real price.

Then, they asked me to give them a quote for the complete product familly, and so I did. They said they would enter this in their 2009 strategic budget, and see how they would integrate design on their new collections.

When I followed up, they said (to my surprise) that I was way too expensive, that I was just one guy, compared to the other firms that had many designers, and then not competitive price wise.
Intrigued, I chequed my prices with some other designers I know, and they confirmed that no other design firm would quote as low as I did.

So I AM competitive price wise, but it’s just that these guys seem to be judging my quote, based on how many people would work on the project, as opposed to evaluating my results (that they already know are good)

So, this is the end of a long post…Now I need your advice: Should I consider lowering my price and make it what they want? (they didn’t say how much they want to pay for it, but I fear they might want me to do it for the 1/3 of the price again)

How should I proceed?

HELP!

Thanks a lot.

Gerry

I have had a similar situation, although I am a mech. design engineer who happens to do some industrial design. I am writing from Toronto Canada at this moment as I am visiting some friends, and will return to Ohio in a few days.

Send me an email (link provided on my website), and I will share some advice I had received from other independent consultants about my past situation as I am also a one person design firm.

Regards,

Chris
www.appianwaytech.com

you never know, their balking on the price, could be just an excuse. maybe they don’t have the budget, maybe they found another designer, who really knows?

i’d suggest to speak to them and offer to revise the proposal. don’t cut it by 1/3, but maybe 10-15% of see…

as for costs vs. the size of the firm, there is some truth that smaller firms normally charge a bit less. less overhead, less running costs, etc. the difference is that normally when you pay more, you get more (more service, experience, etc.). It’s just how it works and as a 1 man firm myself I price accordingly and competitively, but in my experience, have never found the size of my consultancy (or price) to be a determining factor.

in the end any potential client will judge you on a number of factors, and you can never really know which will be more important to them. price, service, experience, portfolio, skills, reputation, etc. the best thing to do is to first get to know the client, what their expectations are, and what they need, budget etc. and proceed accordingly. before I write any proposal or take on a new client, i always try to have a good 30min+ chat to better understand them as it saves lots of trouble in the end.

R

I just tell them that bigger doesn’t necessarily mean better and that they may get an intern in the big company doing the actual work.

Never sell yourself short! that’s what they want you to do. the fact taht they came back means you’re good in their eyes.

When people ask me how many people I have in my firm I throw the question back…How many people did Leonardo Da Vinci have?

I agree with MP.

This may be a “negotiating tactic” I think it’s called bluffing. I’d remind them that they loved your work, that your original project was done at the same hourly rate, that while they may get a bunch of people working on their project at a firm, none of those people will be dedicated to it, as they will be spread across 10-15 projects, instead of focused. Then I’d say if that is not enough, give the firm a try and call me when they screw up… (if you have room to bluff)

Tell them to show you the actual proposal they are getting from the larger firm. Then pick through it to show where they are not coparing apples to apples. If you go lower, negotiate a partial royalty to cover the difference.
Ask them how many units they are planning on manufacturing. Then divide it by the design fee and show them that design is literally pennies per unit if made in volume. Stand by your work and talent. Rememer you can be designing for someone else, a comptitor. or even yourself. =)

If you do not work for them and can reinvent their product, do it and get a provisional patent and then license to the highest bidder or give them first right of refusal. I guarantee you a percentage of sales would be higher than any one time deign fee. Sell value and not time.

Remind them not all designers are created the same. THer eis a reason why Tiger Woods makes more than anyone else to put a ball in a hole.

My original reaction was to lower the fees about 10% as Richard suggested and see what happened then.
But you guys are mentioning interesting points, to bring up on the negotiating table, so I’ll probably use a few of these strategies first, and if nothing work, tell them to go spend 4 times as much a the larger design firm.

I also thought of asking them to show me the proposals the got from other companies as mpdesigner suggested, but I thought that would be a little unprofessional…wouldn’t it?

No, no no! Don’t do any of this. It’s highly unprofessional and just would make you come across as a cry baby.

You can never make someone hire you. The client can choose to put his business wherever he sees fit and doesn’t have to make any suggestions or prove why. It could be they like firm A over B because firm A has the same name as his college girlfriend.

Your job as the consultant is to sell yourself. Tell the client why he should hire you, why it should cost what it does, and what you have to offer that others may not. After you’ve done this, the ball is in the client’s court. Of course you need to follow-up and address any concerns, but asking the client to see other proposals or getting into their business is not the way to do things.

R

Richard is correct.

This company is attempting to manipulate you because you have allowed them to do so.

You should have submitted a proposal for the original design work including your price and some method of substantiation for that price, such as a costed work breakdown structure. Then, when your prospective client attempts manipulation, you can refer to your cost substantiation and negotiate down your price by taking out work.

This is how all successful fees for services companies conduct business, including industrial design consultancies.

Never lower your price unless there is assurance of reward for doing so. This is simple negotiation. In most people’s experience a promise of future work is just empty rhetoric, sometimes it materializes but often does not. Also, standard procedure in consulting is once you have established a price point with a client it is maintained almost in perpetuity. Large consultancies escalate fees according to schedule every year, and always irritate their clients; it’s humourous to watch and often a reason why 1Big ID Co. gets dropped and 2Big ID Co. gets hired, later to be dropped for 3Big ID Co., etc.

To be realistic about your situation, if the bathroom fixture company did talk with local big ID companies, then probably they hired you based on lower cost. Perhaps, to be cynical, also maybe they foresaw you as less cumbersome than a big ID company with proposals and terms and conditions and set hourly fees, etc. My opinion only is that there is probably no future for you at this company given such unsure beginnings over value and payment for work. You will probably be best to only negotiate terms of work and cost as discussed and understood between you, be firm, and that you are in the right to insist on payment as agreed for work performed.

Well, I don’t see it as being unprofessional. It’s worked for me many times.

If you want to talk about being professional, remember, their low balling you is unprofessional too. We’re playing hardball and they’re trying to get you to work for dirt and not treat you fairly with unprofessional rates. They’re deteriorating this from a professional transaction to a flea market. You’re running a business, not a charity.

If you go lower on price you must ask for something in return. Tit for tat! Never cave in without getting something else back like a royalty or something like your name written on the product, etc. Get something in return for going lower.

I’d challenge them to find a better deal. They’re tryng to scare you into thinking they’d go to a big firm. Cheapskates don’t do that and the reason you are being considered is because you are cheaper and faster and just as good or good enough in their eyes. The very reason they are still talking to you is because you are the best game in town so far. Trust me. They don’t waste time on you if they thought you were far from their actual budget. You must be affordable at this point to even have continued communications.

I guarantee you they can not produce a quote from a large firm that beats yours. Large firm employees do not have the same incentives you have. They’re not the bosses and they won’t answer calls after 5 Pm or work weekends without overtime pay to get it done. Every little thing would be charged like a law firm.

As a freelance independant, you are the Navy Seal of ID. You can jump into the blazing fire and put it out. You can be more dedicated than some slouch working in some firm for dirt. Your level of attention and expereince is worth something and the large firms are simply too bogged down with overhead and bureacracy to be as flexible. their best resources are going to big clients not these low ballers.

The day you can walk away from an underpaying gig is the day they start respecting you and you yourself. You know what you’re worth and what they would get charged elsewhere for possibly inferior work.

Remember, you have no health benefits, or any of that, you have to eat a lot of costs so you have to spend your time wisely on worthwhile gigs and not be wasting time being stressed out about people who aren’t going to be at least a bit reciprocal. afterall, they’re the ones making most of the money off it.

You have to give before you get.

Sounds like your client is just a douche bag. Seriously, why do we waste time on people like this? Its because you don’t have the experience and confidence to say ‘no thanks’ and, you’re not busy enough to say ‘no thanks’ so, you’re not busy cause you don’t have the skills yet. So, that alone tells me that even though you may have nice drawings and ideas, there is something missing with the marketability or manufacturing of the ideas or maybe its just your business knowledge, dealing with people and contracts.

For you to be a one man design firm with little business experience (obviously, otherwise you would not be in this predicament) then there is no way you can justify charging what a ‘big’ design firm would charge, not even close my friend. Why? Cause they know what they’re doing, and you’re just learning. They know what to do when the doo doo hits the fan and you don’t. They know exactly how to mfg something and have probably done it before and you don’t. I’m not saying that ‘big design firms’ always know what they’re doing but let me put it this way, if they’re big, they probably know more then you. This is proven true in your case because if you knew what you were doing then you would not have ever offered to work for 1/3 the price. Common, be realistic.

So how do you combat this situation? You get experience and you get skills. Sounds like you have a lot of ambition. I hate working with people who have a lot of ambition, they usually don’t have the patience to learn something the proper way, or learn anything for that matter, they just do it themselves their own way and then I cannot use it or I have to re do their work. Why are you a one man design firm? Don’t you have anyone you can partner with? Employ? Sounds like you need a bit more experience.

On the other hand, this is one of the ways that you ‘earn’ a client. I don’t give a rats ass who you are, when you start out, you get raped, so deal with it, learn from it, become the best from your knowledge and in time, that experience will earn you the right to be in demand and charge whatever you want, and things will balance out financially.

Number one rule when starting out, don’t do it for the money, do it for the experience. Money comes to those who learn and earn, not yearn.

Once you prove to them that you are ‘the man’ then you can either, convince them to pay you more, or go work for their competitors. Its business, not art. If you want to pretend you’re Leonardo like someone above mentioned, then go back to sleep, cause you’re not, and you’re never going to be, Leonardo, also started out working for peanuts, Leonardo EARNED his name and his rate over decades and was more historian and business man then anything else. Learn your history before you open your big mouth and waste every ones time with your ignorance.

You’re lucky they didn’t ask you to do it for free.

On the other hand, people like you make my day realllly easy, so thanks! Not to be sarcastic but think about it, people like you waste clients time, then there is a time crunch and they need someone who actually knows how to get the job done, then they ask me to do it for 10x what it actually should cost because they need it right away and they need it proper.

I feel your pain, I’ve been there, but its about knowing where you’re at, before you try to move forward, as a designer and a business person.

Good luck!

Make sure they aren’t giving your sketches and ideas to the other firm to finish.

I hope this wasn’t a Work-for-Hire situation!!

I’ve really appreciated this thread. I’ve only worked corporate since graduating. I know I’d have the same problem if I started my own firm tomorrow.

I think Budda might have had the best advice, he just put it a derogatory way: learn from this bad experience and don’t make the same mistake again.