By Alex Berman, Chairman and Founder of Experiment 27.
When you start pitching to potential clients, one of the most frustrating things that you're going to run into (if you haven't already) is how to make sure everyone is on the same page regarding the budget.
Clients don't know how much your services cost, so when they see your proposed price, it's often a shock. This can cause them to go elsewhere or abandon the conversation altogether. Below are four steps for organizing your budget and actually qualifying a potential client before you spend all that time writing and preparing a proposal.
Always Mention the Price on the First Call
Always mention the price on the first call. Mobile app developers don't like doing this. For example, they generally say that all their apps are custom so it's impossible to identify the price of each. That said, based on my experience selling mobile apps, I would estimate that you could sell an Uber clone for $450,000, an e-commerce site for about $250,000 to $350,000 or a fully custom Instagram-style mobile app for $80,000 to $90,000.
You know even better than I do what your agency charges for your services. You and your salespeople can throw out prices over the phone, which I recommend. If you propose an estimate of $150,000, you'll get an immediate reaction from your potential client. They'll either change their tone and ask if there's anything else you can do, they'll tell you it seems extremely high or they'll ask you to draft a budget. Once that price is on the table, they will either accept it or they won't.
Negotiate for the Best Price
After you estimate a cost, pause. Wait for them to respond. The first person to speak in a negotiation loses. This is a generic rule in the sales world. If they don't speak, ask them if what you proposed works.
The way that works in practice is: "Great. I've seen Uber clones. We actually just built a project just like this for a different industry. This is a big project and there are a lot of components involved. We would develop an API, build out the front end and make sure it's responsive on mobile apps for both iOS and Android. With UX and UI designs and the obvious research it would take to make sure that it works well, I've seen apps like this go for about a $150,000 to $200,000. Does that work for you?"
And they will either say: "Yes, that's about what I was thinking" or "No, that doesn't work." And then you can pitch other options or even pass it up to one of your partners if they are willing to create the app for less.
Never Send a Proposal Without Discussing the Price First
You never want your customer to see the price in an email before you've discussed it over the phone. Normally, I'll explain our pricing to all potential clients on the first call. Other agencies will often set a proposal meeting before they ever discuss the cost. And then right before the meeting, they'll send an email outlining the price once the potential client is already in the door.
This strategy often results in sticker shock. Basically, if a customer sees that you're charging $150,000 for an app and they can't immediately respond person-to-person or ask any questions about it, they'll become overwhelmed. And in my experience, you'll lose the meeting.
Set a Specific Time for a Follow-Up Meeting
If they're serious about buying from you, they'll meet with you again in the future. After they let you know that they want to talk it over with a co-founder or (ideally) want to close a deal, I like to transition into setting up a time by saying something like: "That sounds great. What time do you want to meet on Thursday or Friday to talk about this?" If they push back on this and tell you they will get back to you over email once they have the proposal, in the proposal email, you can send them a link to your calendar.
And you'll be surprised when you start doing this how many of your customers are willing to meet in the same week, usually sometimes even the next day.
Alex Berman is Chairman and Founder of a marketing and lead generation agency Experiment 27.