Freelancers - How To Negotiate in Germany
Last updated on Feb 21, 2020
Mar 25, 2019
Being independent - that's the dream. Anyone who has ever lived the freelancer or self employed dream either has not gone back, or did so, on quite unwilling terms. So very good are the freedoms that you have. You can choose who you work for. You can choose when you work. You can choose how you work. You can choose who has to not be worked with anymore, as an example or who you really want to nab as a client. Here’s one key decision you get to make: that is, deciding exactly how much you are worth. For most, and this is indeed generalising and of course, not everyone can be covered with this broader edged article, but starting off with an hourly rate you justify is the first point of defining your worth. This will be a topic covered on the Kontist blog because indeed, it does require an in-depth exercise and analysis.
Once you have set your hourly rate for your work as a freelancer or calculated what price you should charge for your product, that's already a big step. This is life though, and everyone wants a deal so not everyone is willing to pay your price right away. You will always come back to the situation in which you have to negotiate. It's about much more than just convincing a customer of your performance or value. In negotiation situations, the numbers on their own are not all that matters. There are so, so many variables in this, including the scope of your service, the length of the relationship and the previous professional transactions. Not to forget, it's not just the customers you're going to negotiate with as at some point in your freelance life, you too will go to the negotiating table in the customer role.
Why is it so important to be able to negotiate well?
A good negotiating strategy is essential for your own business success. If you can not get your price or sell below market value, you will fail with your independence. For you that means: Know your value - and stand by it! That's the basis for everything else. This is not so biz-inspo Instagram post style call to action - it is really the foundation of a sustainable operation. Especially at the beginning of a self-employed activity, one tends to make concessions that do not pay at the end of the day (or month) - and while of course it is important to book work, you can’t just take it and lower your true worth to that of a client - who, likely, will not be valuing the work the way you’d like if they low-ball you in negotiations.
So, while yes it is important to have a foundation of work, as in, bread and butter - and yes it takes time to build that kind of base and concessions are made - the end goal is to be earning what you need to survive, but also thrive. Many creatives and freelancers especially have to set their rates lower and lower to capture those jobs that balance out the end of the month. It is also quite a stretch to expect customers to pay more for services they are already receiving, without again, you having to convince them of your value. So, trying to obtain the rate you need from the get-go should always be the goal. Many creatives and freelancers also rely on themselves for validation on their work and value. In a society where we are taught not to see our talents but to see our flaws, in the broader sense, it can be hard to cultivate a true worth or value or in the very least, to feel it at all times. Negotiating is a skill that can even help with this, and knowing a negotiating strategy of practice well will only benefit you and your business in the end.
How do I negotiate best?
First of all, there is no winning formula for negotiation success because of all those variables we mentioned. But there are some tricks and methods that always prove themselves in negotiation talks.
1. Set your first offer wisely.
It will decisively influence the further course of negotiations - first impression last. Let's assume that you are a freelancer and call a monthly fee of 5,000 EUR. In the course of the conversation, the offers of the other side will move in the vicinity of this amount. You need to be sure and researched about this first offer: that it reflects your experience and abilities and based also on the ‘going rate’. This is easy to research with resources like Indeed or Glassdoor . So unless you have created some truly magical number, or your client is totally different to you, you can expect that your negotiations should head in this direction. That said…
2. Name a realistic price.
But what does that mean exactly? To find a realistic price, there are different ways. On the one hand, you can orient yourself on the market and check what your competitors demand for their work, as mentioned. You can also rely on examples of previous work - and it could even be worth sharing that portfolio so your client can understand the value of what they are paying for. There is also the option that you should set yourself a monthly sales target, from which you can live well after deducting your fixed expenses (rent, car, taxes, etc.) and really stick to that - and this is also a way in which you can assess your hourly rate.
3. Do not respond immediately with a counter offer.
If your customer does not agree with your price and makes a new offer - sit back, take it easy and let this offer remuniate for some time. Then react. Carefully communicate how the offer reflects based on your context. If the customer expectations are too far away from yours, you can communicate that clearly and calmly as well. Be open minded, kind and transparent but refrain from devaluing yourself or your work in any way. Be sure you know what your absolute lowest amount it - if you are in such a position where you must take the job - but do not go below that. Set that as your worst case scenario, and try a few other things first. If you’re new to freelancing this will be something that happens at some point - but you’ll be just fine.
Do your thing, not your taxesLearn more
4. Argue for you or your product.
You know what you can do. And you are sure that your work or your product is good. Otherwise, you would not have been self-employed. But what makes you so unique? What sets you apart from the crowd? Clearly, you must be able to answer these questions for yourself before a price negotiation. And these are the answers you tell your customer to show him why you're worth your money. You do not need to ‘’argue’’ for your product in the form of dot point emails explaining how great you are - but most certainly in the work or previous work you present, the proposal itself. You can argue for your product in the service you provide as well.
Yes, that sounds strange. But did you know that silence is an established and successful negotiating strategy? If a customer makes an offer or a counter offer and you are silent, this silence is interpreted as a rejection of the given offer. In the best case, the customer then on his own - and in your favor - to screw his offer
6. Work with body language.
If you are negotiating with your client face to face, be present and step back, and allow yourself to perceive their physical responses to the discussions. Sometimes the reasons for the negotiation may be too private - maybe the budget really is tiny, maybe there are other costs coming up and they are concerned, maybe you are new to them and they do not know your service. Look for cues and adjust your communication to better suit a positive outcome.
7. Offer your customer additional services.
It's not always about the price, but about the performance the customer receives. If you do not want to continue financially, you can offer an additional service. For example, a free correction loop. Or - in the case of a product sale - an addition to the goods, or an edit or adjustment. Be sure to have options in your mind of what you can offer that may be of more value to your client while you negotiate.
8. Make only small concessions.
Imagine sitting on the other side of the negotiating table. Say: you are the customer. That too will happen in your life as a freelancer or self-employed person. For example, if you make an offer for a software tool or work with another freelancer. In such situations, it may be worthwhile to meet only in small price increments. This signals your counterpart: "Hey, I've reached my price limit." Sometimes it can be very easy to knock a lot off just to speed up the negotiation - but just remember the game is for everyone to feel like that are getting a fair deal.
9. Do not fall for a bluff.
It may happen that the negotiator has gotten a better deal than what you have given - at least he claims that. Of course, in this situation, you can not be sure if your client really has a better deal or just bluffs. In fact, this is surprisingly common and you may even employ such techniques when buying something as simple as a T.V. - well, humans do that in business too. Argue then with comparison prices in the market. If the offer that the customer tells you is far from these prices, he bluffs or he has received an offer from an unprofessional service provider or defective goods, and it really has nothing to do with you. You know your price and limitations.
10. Slice by slice, step by step, piece by piece
Slice - or better: piece by piece to the goal. That's the salami tactic. Towards the end of a negotiation, both parties use the opportunity to get small additions. A good starting position. Again, know what you have to offer and end the negotiations on a good note - where everyone feels like they are getting what they want.
11. Make concessions for longer term bookings.
A situation that will happen to you more often as a freelancer: A customer would like to book you for an on-site job over several weeks. Great thing. After all, that means a regular income for that period. In such cases, however, you should adjust your fee. Your hourly rate is most likely too high if the customer books you firmly for three months and full time. For such cases, you should calculate weekly and monthly rates, with which you can live well and through which your customer - compared to the hourly rate - saves something. Make sure you have this tiered pricing in mind for your business. Something which starts with the first hourly rate, and calculated for all situations downwidth.
Properly negotiate as a service provider and customer
For real success as an independent or freelancer, you have to be able to negotiate. It does not work differently. It is your job to enforce your prize. If you can do that, it will have several advantages: First, you can have the standard of living that you want. On the other hand, you demonstrate to your customers that you are really worth your money and that your prices are calculated (and not from the air). With too many concessions, the customer might otherwise think that you are totally overpriced and the final price actually corresponds to your fee expectations. And that should happen under no circumstances.
At some point you will accept the customer's side: Then you should know what you are willing to pay for a service or product. To find out, take a look at the competition. Most prices for a particular software or service are in a specific price range. However, the scope of service may vary from provider to provider. In addition, some are happy to give you an extra when making a reservation or purchase. For example, with an SEO tool. If you accept the provider with a longer, binding booking period, he should in turn allow you to manage more projects in the software.Such deals are a win-win situation for both sides.
Conclusion: being a good negotiation takes time, but is worth the time
Negotiations are the most important conversations you have to have as a self-employed person. At the end of the day, they ensure your existence. Melodramatic but an err of truth most assuredly. So if you want to be successful as a self-employed, you have to understand the art of price negotiation. So, take the previous tips to heart and show your customers what they are worth. This ultimately happens through your work. But with the right price you already make a statement that suggests the quality of your work and you can sustain the freelance dream, day and day again.
VAT for Freelancers - Basics You Need To Know
Like most developed nations, Germany has a ‘tax’ added onto goods and services. In Australia, it is the GST and in the U.S they have the ‘sales tax’. VAT is essentially the same concept within Europe - a consumption tax, with varying rates depending on what country you’re in. Germany was, in fact, the first country, alongside France, to introduce VAT in World War I as a consumption tax. The VAT system is intricate, complex and paperwork heavy at times. However, for most freelancers, it can become an easy-to-manage part of business and administration life. It all depends how the laws applying to you, and what obligations they create. Overall, VAT in Germany is a fair system - no one expects you to pay what you shouldn’t have to, but you are expected to pay what you owe. So, let us now delve in and get to know the VAT system.