Yesterday I got a mail from one of my clients that started with:
“The telecom sector is a dynamic industry, which requires us to constantly focus on costs. We have therefor introduced 3 measures to help us manage costs.”
And it continues to require me to agree to a 5% reduction in my hourly rate. If I don’t agree I might lose my contract.
Oh.. and they need an answer today.
Now here is why I will not negotiate about cost. There is nothing to negotiate about.
Cost is only half of our transaction. I do work for you that is valuable to you and you give me money, which is valuable to me. Now the trick is to get more value out of my work then you pay me. It is called running a business.
So if you are unhappy with my benefit/cost ratio I would love to (re)negotiate. But only if we negotiate the whole thing.
That leaves open the option of figuring out how I deliver even more value to your business for the same pay.
Sending out a mail to a bunch of your subcontractors asking them to agree to a cost reduction is not only silly, but it also shows you have no clue how to run a business.
Should you not care about cost at all? Of course you should keep an eye on your costs. And you should strive to root out all cases where you do not get more value out of a transaction, but costs should always come second to creating value.
Which is why a focus on only costs is a sure sign of a company in serious decline. With no way to grow revenue, cutting costs seems the only way to improve profits. But if you focus just on cost, you might not see the impact it has on your revenue.
Here is a quick tip to all companies looking to cut costs.
- Sell all your assets
- Cancel all contracts with your suppliers
- Fire all your staff
- Optionally: Tell your customers you won’t be around for long
Voila, no more costs.
tferris posted a slightly inflammatory comment on Hackernews, which also has a good point buried deep within.
Getting tired of simple-minded self-help advice in blog form. And this bitter post even doesn’t give you any advice.
When doing business you will face negotiation tactics every single day (like the OP described in his post). If you are long enough in business you know how to handle to this and how to counter attack—without having to write a whiny blog post. And if you are a talented developer you have enough options anyway.
I was certainly not trying to be whiny. This is just business after all. I was just trying to point out how a single minded focus on costs without relation to benefits helps neither the company or you as a contractor. But just to be clear, my advice is to open up the conversation from just costs to a negotiation which includes other things, including the benefits.