When you start your own business, especially at first, and then during the process, potential clients may resort to tricks, as…consider themselvesbusinessmen.
Imagine that you are a builder and you have been asked to construct a house. You say that the construction will take a month and you ask for 1000 currency units for it. The client plans to rent the house out in the future and earn 100 currency units per month. However, he currently has no money, or he doesn’t want to pay, or he thinks it’s better to “get the chairs in the morning and the money in the evening,” and starts a conversation like this:
— So, you’re a pretty cool builder, right?
— Well, no one has complained!
— And you, as I understand it, are confident in yourself?
— Well, yes!
— Do you agree that payment for any work should be made based on the results?
— Of course?
— And what does the result mean for me?
— The house that was built?
— No! For me, the result is the tenants who move into this house. And if you build the house poorly, then the tenants won’t move in, and that means I don’t need such a house and there’s no point in paying for it. After all, it makes no sense for me to pay for a substandard house, right?
— Of course not.
— So, to ensure I’m confident in the quality of the house and you get paid based on the results, I’ll pay you 50% of the rent amount until I’ve paid you 1000. It’s in your best interest to get as many tenants into the house as possible so you can receive your payment sooner.
It seems that the client is right. But something is clearly off here. Typically, builders are paid for the house, not for the tenants, and if the house is of poor quality, they are asked to fix the deficiencies or return the money. The builder seems confident and, having no reason to distrust the client, might agree to such a payment arrangement. However, no one has ever accepted this, and here’s why:
- From a builder’s perspective, he earns 1000 a month by building house after house. If he is a good builder, he has a line of clients and knows no downtime. The question is, does the builder need to sacrifice 1000 a month in exchange for 50 a month?
- It is also clear that the builder has completed their part of the work and will not be doing anything more. One-time jobs require one-time compensation. It is no longer up to the builder how the client will search for tenants, maintain the property, fairly or unfairly set rental prices, prevent emergencies and quickly address any that occur, carry out timely repairs, manage accounts receivable, and so on. What does the builder have to do with it?
- A builder is unlikely to be able to divert their working capital to purchase construction materials, only to hope to get it all back someday.
- The most important thing is that if the builder were willing to earn not from selling houses, but from renting out square meters (which is clearly more profitable in the long run), he would do just that without any client. In the scenario proposed by the client, the client simply becomes a parasite, bearing no business risks.
A modern perspective on the economy views a businessman’s earnings as the exploitation of the uneven distribution of information. Some people know more, while others know less. A businessman is willing to take certain risks, and this is the essence of his business, simply because he knows more about these risks than others and knows how to avoid them.
The risks and knowledge of a builder lie in constructing a house. They risk working for free if the house is poorly built and the client demands a refund during the warranty period.
The risks and knowledge of the Client lie in finding and managing tenants.
What am I getting at?
For some reason, there are particularly many of these “clients” in consulting who want to pay later and in installments. The main idea is: Build my sales, and you’ll get a share. And if you don’t agree, then you’re a loser! We’ve seen enough of these talkers and don’t want to throw money away! Although the formula also applies in consulting: Service-money-guarantee period.
Let’s assume the company clearly needs to improve skills, say, in closing deals. What should be done? First, a training session, then field training with some individuals, followed by a coaching session. After all this, we can assess whether the skills have been acquired, either through questionnaires developed together with the company’s management or through demo sales or test purchases. However, this does not mean that a) the application of the acquired skills will be monitored, and b) sales will increase, and c) sales will rise above the trend. Why? The trainer cannot ensure continuous management attention to the salespeople during the skill reinforcement phase. If nothing is done after the training, then nothing will happen. A local doctor cannot heal your child if you, as a parent, do nothing yourself. They can provide recommendations and prescribe medication, but they won’t make you warm tea with raspberries. Additionally, it’s clear that sales depend not only on the salespeople and their skills; there are also product attributes, marketing, logistics, customer support, and so on.
Of course, the consultant’s services will be focused on organizing the aforementioned measures aimed at improving the skills of the salespeople. It is also understood that these services should be paid for after their acceptance, rather than as a percentage of sales that exceed expectations according to the trend. Furthermore, if it is found during the acceptance of the services that the skills have not been instilled, the consultant should spend their time and resources to correct the shortcomings.
How can we avoid dealing with cunning and witty clients during the negotiation stage, and if avoidance isn’t possible, how can we effectively handle such “objections”?
First of all, it’s important to find out if the client has the budget, as this is currently a major obstacle to the company’s development, and whether your services can actually improve the situation. Once you understand this, you should simply engage in classic sales techniques, focusing on identifying the client’s needs, if any, and guiding them towards a solution. It’s quite possible that we might encounter a self-employed chatterbox trying to sell Forex to unsuspecting individuals, who has no real needs for growth beyond their own greed.
Should you completely refuse to participate in future profits? Of course not. You just need to assess the specific situation. If you are offered 50 instead of 1000 per month for two years, then the answer is no. But if you can negotiate 800 plus 10 per month indefinitely, then why not? One condition—guarantees for receiving those 20 must be rock-solid, not just on paper, but also in terms of trust in your partner.