What can go wrong while negotiating with an agency?
Most of us have the habit of negotiating the initial price of the product or service and getting it at a cheaper price, which puts us on the winning side.
While negotiating, if you are getting everything at a dirt-cheap price, then there are high chances of your project getting compromised. An agency’s quotation is based on two components (Resource Cost + Profit Margins).
Process of Creating Quotations — Based on the initial discussions with the client, we choose the resources from our pool suiting best to the requirements. Combinations may comprise a Project Manager, Product Designer, Tech Lead, Senior Developers, Mid-level Developers and, in some cases, Junior Developers as well. Based on their engagement time Resource Cost is calculated. After this calculation, we add Profit Margins to this cost (which varies from agency to agency).
When we lower the cost (taking my company’s example), it’s from the Profit Margin’s part, not the Resource Cost because it may directly impact your project quality. And when an agency offers you an unbelievably discounted price, it compromises on the Resource part and that is where bad time starts for the future of your project.
Below are a few complaints that we hear after choosing the wrong agency:-
- “My application is crashing again and again”.
- “It doesn’t look like the designs we agreed upon”.
- “The agency is avoiding communication and making the same mistakes again and again”.
- “The code quality is poor”.
And the list goes on…
Common mistakes during a negotiation
- Negotiating without domain knowledge.
- Taking a competitive approach rather than collaborating. Don’t negotiate only to win, but rather to develop a relationship of trust.
- Even after getting a quotation, constantly pushing the agency for a lower number based on other quotations without any logical reasoning.
- Money isn’t everything, and the price isn’t the only thing that you can negotiate. You can leverage the deal with add-on benefits like maintenance services or branding etc.
- Letting your emotions impact your judgement which keeps you away from making a rational decision.
Here I would like to emphasise on choosing a tech partner rather than choosing an agency. The right partner will understand your business goals and your client’s needs, which will significantly impact your business.
Remember, smart negotiators, are those who always look for win-win solutions.