Question

Topic: Strategy

Appropriate Way To Determine Client Budgets?

Posted by Anonymous on 11/18/2009 at 4:51 PM ET 125 Points
I recently started my own marketing company after 8+ years in the industry. My background is in account management and marketing strategy, so I operate similar to a general contractor - doing what I can myself and compiling teams of specialists as needed from my network. We do strategy and execution based on the client's needs. I'd guess that makes me a consultant.

I'm comfortable with my rates for my own time, but in pitching a new client, when is it appropriate, if at all, to discuss project budgets? My agency background has taught me never to ask, just instead to "guess and check" but is this how consultants typically work too?

A new potential client wants me to deliver a comprehensive marketing plan for a new product launch, but I don't have any idea what ballpark they're in cost-wise. I do know that their budget is proportionate to their sales, and as their sales increase so will their budget.

This adds another challenge to my pricing dilemma - is it better to deliver a plan in phases or as a "menu" with my recommendations? Or is there still a better way I haven't thought of?
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RESPONSES

  • Posted on 11/18/2009 at 5:32 PM Author
    Thanks for the response Phil - very helpful. It does bring up another question though (and forgive me if I should know this - again, I'm new to the "new business development" area).

    I've been considering the plan I'm supposed to deliver as my "pitch," and based on my thoughts/ideas they will choose to hire me or not. I intend to keep the plan top-line and not include specifics (i.e. not give away the milk for free). If they then agree to hire me to execute the plan, I'll get a signed agreement which outlines specific deliverables based on the plan.

    But now I wonder if I'm going about this backwards? Should I be asking for a signed agreement just for developing the plan? (in which case I would make it specific)
  • Posted on 11/23/2009 at 10:47 AM Accepted
    Casey, Phil has offered some great points here. Can I offer some advice coming from 15 years on the client side and hiring a lot of agencies/consultants/vendors?

    Ask. Don't guess.

    Ask them what their budget is for a project, campaign, etc. I know it seems intuitive that most companies won't tell you their budget because they want the "lowest price." But that's not always the case.

    I have had agencies, consultants, vendors ask me straight out "what's your budget for this project?" And I told them what it was.

    This helps in a few ways...

    A) If the agency/consultant/vendor knows they can't deliver a quality project within my budget they will gracefully bow out; tell me where they can help with; or offer another agency/consultant/vendor they know who might be able to help at the lower cost point.

    B) It doesn't waste my time or theirs.

    C) It helps me ask for more budget if management has, perhaps, unrealistically set expectations as to how far our budget should go in regards to what we are trying to accomplish.

    And yes, I would get a signed agreement before doing an ounce of work above and beyond the original pitch. I hate to say it, but ideas can and have/will be been taken ('taken' is not as harsh as 'stolen.') and either given to an agency/client/vendor that has a relationship or implemented internally.

    I hope this helps.

    Beth Harte
    Community Manager, MarketingProfs
  • Posted on 11/23/2009 at 11:05 AM Accepted
    After 26 years as a consultant, I've learned to not make it about what the client can afford, but to set a rate for yourself -- hourly, daily or per project -- that relates to what you believe to be your worth in your marketplace. Then charge that rate consistently. We charge two ways -- fixed price and hourly -- depending on the project and the comfort of the client. On a fixed price, if you can get the work done faster, while maintaining high quality -- the profit goes your way. If it takes you longer than you budgeted, as long as the terms of reference haven't changed, it's to the client's advantage. Hourly rates are most appropriate when the scope of work is somewhat undetermined. You both benefit, as the client is covering the actual time it takes you to do the work.

    In terms of talking budgets with clients -- I don't leave a meeting for an engagement without discussing budgets. OFten times, the client will ask you to put together a budget without declaring what they have in mind. Which takes me back to my first point.
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