Freelancers often need to develop a range of new skills in order to transition into self-employment, but in many ways, there is none more important than the ability to negotiate effectively.
Negotiation sets the tone for a client relationship, ensuring that all parties are getting what they want out of the agreement while formalizing expectations, deliverables, and rates. Unfortunately, few receive formal training on how to negotiate effectively, leaving most of the important lessons to be learned the hard way.
According to a widely cited 2013 study by Salary.com, failing to negotiate your salary as a full-time employee can cost you up to $1 million over the lifetime of your career. “For a freelancer it’s significantly more because there’s a lot more at stake,” says Andres Lares, the managing partner of the Shapiro Negotiations Institute.
Lares adds that successful negotiation can be as much of an art as it is a science, leaning on both preparation and research as well as gut feelings and prior experience.
“When you think about preparation and scripting, there’s definitely some pieces around process that I think are science-based,” he says. “The experience and the art come in [to play] in the moment, but even the art can be trained.”
Why freelancers struggle with negotiation
The Salary.com study found that nearly half of all full time workers don’t negotiate job offers, and the same is true of freelancers. According to a 2020 study conducted by Upwork, almost half of all skilled freelancers don’t set their own prices.
That is often because freelancers typically pursue a craft or career that they feel passionate about, and when you love something so much that you’d be willing to do it for free, it’s hard to ask for better compensation.
“Athletes feel the same way, where they feel like, ‘I love playing basketball, I can’t believe I’m getting paid a lot of money, so what leverage do I have?'” says Lares. “It’s the same thing as a freelancer, and to some extent it’s a similar negotiation. It’s a reminder that how much you enjoy doing it should not have an impact at all on what the rate should be; it should come down to supply and demand.”
The other reason freelancers often fail to negotiate, especially when they first start out, is because they’re maintaining what freelance coach and author of The Six-Figure Freelancer, Laura Briggs, refers to as an “employee mindset.”
“Most employees don’t even negotiate their own salaries or raises, and that mindset comes into freelancing; and that’s problematic, because as a freelancer you can’t just say ‘My last employer paid me $25 an hour, so therefore I’m worth $25 an hour.’ You have to think about it strategically,” she says. “I see too many freelancers that start off with that employee mentality of accepting whatever they were last paid, and then realizing later they haven’t valued themselves properly.”
Here are a few ways freelancers can improve their negotiation skills:
Don’t negotiate over email, don’t set prices on sales calls
When freelancers engage with a new potential client, it is not uncommon for them to receive a request for their rates upfront via email, but Briggs strongly recommends against committing to anything over email.
“Even if you think you have an idea of what you might charge a client, it’s very important to do a phone call or a video conference,” she says. “You’re just a stranger on the internet to them, but when you have a human-to-human conversation, that’s when you showcase your expertise, and they get excited about buying into you as a service provider.”
Taking that opportunity to both demonstrate your expertise and to learn more about the client, their goals, and the scope of the project itself will put you in a much better position to negotiate, says Briggs. Even at the end of that interaction, however, she still recommends against committing to an agreement over the phone.
“I tell them truth, which is: ‘I need to take the notes from this call. I’m going to put together a proposal for you based on that, and I’ll have it over to you in a couple of hours,” she says. “That’s what I like to do to give myself that space to think about it a little bit and say, ‘Do I feel like this client is easy to work with?’ ‘Do I feel like they appreciate the service that I provide?'”
The first step for freelancers to become a better negotiator, says Lares, is equipping yourself with some information that can help back up your perspective. In order to determine their value, Lares recommends that freelancers use the acronym “P.A.I.D.”
The “P” stands for precedent, and refers to what you (or others) have been paid for similar work in the past. “A” is for alternatives, as in, what other options does the client have, and what other opportunities might you as a freelancer decline in order to accept this offer? “I” stands for interest, and refers to what you really want to get out of the project, which could refer to compensation and enthusiasm for the project itself, but also includes whether or not the assignment could open other doors. Finally, “D” stands for deadlines, and serves as a reminder to work backwards from the deliverable date to determine whether or not you can accomplish what’s expected within the proposed timeframe.
“If you think through P.A.I.D., you are both more prepared in the way you manage the conversation, and you’ll also be more confident,” says Lares.
Focus on outcomes
Freelancers are often hired for a specific task, but they also need to take the necessary time to understand the client’s broader business goals, and how the assignment fits within in. Doing so, according to Stefan Palios, a freelance coach and author of The 50 Laws of Freelancing, allows freelancers to develop more mutually beneficial agreements with their clients.
“My best tip is know what outcomes folks want ahead of time, so when you start any negotiation you can do it from a place of outcomes,” he says.
Palios explains that if, for example, the client has a more limited budget, freelancers can help them develop an agreement that allows them to achieve their stated goals within that budget. That may require changing the scope of the work, extending deadlines, or finding ways to reduce the workload in order to come to an agreement.
“The key purpose of freelancing is to help your clients accomplish an outcome; if you know their problems and how to solve them, every negotiation ask becomes a lot easier,” he says. “The more of the scope you can understand, the better you’ll be with negotiations because then, any request can be put into the context of accomplishing an outcome for your client.”
Key elements of a freelance contract to consider
Negotiations tend to focus on a single number, but there’s a lot more to a freelancer agreement than just compensation. When negotiating a contract, Palios says there are a few key clauses that freelancers need to pay attention to.
He explains that freelance contracts tend to be adaptations of employee agreements, but there are a lot of clauses in such agreements that would be problematic for freelancers. For example, many employment contracts include a non-compete clause that prohibits freelancers from taking on work for other clients without the client’s prior consent.
“That’s super standard for employees, but business-crushing for a freelancer,” he says. “It’s little details like that that can trip you up.”
Other little details that freelancers need to pay attention to are intellectual property (IP) clauses, which dictate who owns the final work. While most freelancers are happy to hand over ownership of their projects to the clients who commissioned them, they also need to define whether or not they can use that assignment as part of their portfolio. Freelancers can even include a clause that allows them to retain ownership until they receive payment, which can help protect against late payments.
“Another really common one is set working hours,” says Palios. “Employment contracts have set working hours, freelance contracts usually explicitly indicate that there are no set working hours; that you, as a freelancer, have full control over your day, provided you meet mutually agreed upon deadlines.”
Another important clause to consider is the termination for convenience (or T for C) clause, which allows the client to terminate the agreement at any time, for any reason.
“There are some freelancers that have no problem with a termination for convenience clause,” says Palios. “Those freelancers might also charge really high rates, or charge upfront fees, or add a cancellation fee, so you can have termination for convenience, but they should have to pay for that convenience.”
Palios adds that most clients will be amenable to reasonable changes, as long as it’s approached within the context of outcomes. He believes it’s important for freelancers to explain how those changes will enable them to better serve the clients’ needs.
Those with the necessary resources can also work with a lawyer to draft their own contract. “If you come forward and say, ‘Hey look, I’ll send you a contract so that we can work together really easily,’ and you include all of those baseline things—the non disclosure agreement; a non-solicit agreement, which promises you’re not going to steal their clients or their employees; an IP rights assignment, which says as soon as they pay for the work they own it 100%. When you can show up with that level of contract and that professionalism, you’re sending a signal that you care, too,” he says.