Let’s Talk About Budgets
Having worked with hundreds of clients, one thing is always true. Every project has a budget.
While many factors influence budget considerations, one of the most common conundrums we hear from clients is whether or not to share a budget with potential service providers, in our case digital and creative agencies. Naturally, there are numerous and valid reasons you might elect to keep your budget private — your organization may lack clarity around the allocation of financial resources, your team may lack experience determining appropriate ranges for a given scope of work, or you may simply be uncomfortable talking openly about money. Perhaps most often, clients candidly tell us they fear disclosure of their ability to pay might result in prospective partners taking advantage of that information to inflate their prices.
There are certainly instances where we counsel clients to play it close to the vest. For instance, you might gain strategic advantage in negotiations around emerging technologies for which little or no benchmark pricing has been established. That said, for the areas we’re discussing here — core agency services like brand strategy and design, campaign development and production, or website design and development — pricing is well-defined and intensely competitive. With these benchmarks in place, your priority shifts from open exploration to maximizing value. As a result, we often recommend clients talk openly about budgets. Whether you feel your financial resources are a constraint or an asset, having a frank conversation offers a host of benefits.
Gauging Fit
Whether you disclose your budget in an RFP or during initial conversations, your prospective agency partners can immediately evaluate if the project fits their price projections for the requested scope. In some cases, an agency will decline to pursue a project that doesn’t appear to fit. That’s a win for both of you. The agency saves the time vetting and pursuing an opportunity that doesn’t match their criteria, and you save the effort, and in some cases heartbreak, of pursuing an agency that can’t deliver on your specific needs.
For some agencies, the math may not be conclusive, and knowing your budget encourages them to suggest alternate scope or to discount their prices. Again, you both win in this scenario as well. The agency can quickly put their best thinking forward and foster a candid conversation with you. You’ll hear new perspectives and distinctive approaches to your challenges, which can improve how you evaluate all the agencies you’re looking at.
Apples to Apples
Architects often say great buildings respond to the limitations and opportunities of their site. In other words, true creativity is often a reaction to a set of criteria or parameters. Being transparent about your budget allows you to set an important parameter for agencies. Even a budget range can elicit more nuanced proposals than you’d receive otherwise. Knowing agencies are responding to the same prompt allows you to see where each shines.
Some of your candidates may describe distinct possibilities at either end of your range, empowering you to choose the path that suits your internal strategy. Others may see opportunities you haven’t considered, showing their experience and insights by offering tactical reconfigurations of your scope within your stated budget. But in every case, the teams will be working within the territory your budget prescribes.
Negotiate from Strength
We understand the reasons you might want to hold back your budget. There’s an instinctual concern we might be taken advantage of, and in our daily lives we often find controlling information can lead to bargains. Yet the opposite appears to be true in this instance. Clients seeking bargains are playing a low-probability game. Consciously or not, they’re hoping to find an agency with enough experience to do the work, but that hasn’t figured out how to value and price their services. As you might suspect, that’s a dangerous game. Agencies working without appropriate pricing bring risks ranging from systemic inability to deliver to apathy born of feeling under-compensated.
By talking openly about the financial component of a project, you assume a posture of confidence and candor. That will attract stronger and more capable partners, ready and willing to work for the resources you have available.
Starting on the Right Foot
In addition to the more tactical benefits, being open about your budget is a step toward building a relationship based on trust. As you complete internal conversations around financial resources and organizational priorities, check within your peer network to obtain pricing benchmarks as you compile a shortlist of potential agencies. With a clear sense of what you need to accomplish, the funds available to support the work, and the relationship between your ‘ask’ and other parallel activities, you’re perfectly positioned to spark a great conversation with your pool of candidates.
These conversations can help you find an agency partner as aligned financially as they are strategically, aesthetically, or technically. We know fees are an essential consideration for our clients. And our clients know fees are a key component in our ability to deliver extraordinary results. When your agency partner is accurately and adequately compensated, it’s a great assurance you’ll get the most value from the work you do together. We hope these notes will help you build trust, negotiate more effectively, compare candidates, and find a better match.
This article is part of our Client Handbook series, where we share what we’ve learned from 20 years of working with clients. The articles collected in this Client Handbook will help you at every step of your agency relationships, and ensure you deliver value for your organization.
