(This article was originally published on 2/06/2018 and updated on 6/15/2021)
People can be funny when it comes to money, and that’s even true in business. It may be that they think it’s rude to talk about money, or that they’re wary to share their budget with you as they deem it “sensitive information”. But when it comes to business, the money conversation is a necessary conversation to have.
Understanding a potential client’s budget is essential, as it’s the foundation you’ll build your solution upon. It also helps you establish a clear expectation for your prospect and determine if the project will be able to generate profit, so it's important to establish a realistic budget Not to mention that it’s pretty much impossible to write a winning proposal without oneTo avoid wasting time and energy on prospects who can’t afford to work with you, here are some tips on how to handle the budget question.
Should you ask your prospect what their budget is?
Knowing your prospect’s budget early on is crucial to moving any project forward. Budget will determine whether or not your lead is a good fit financially, shape the scope of the project, and help prevent scope creep. Asking for it up front will save you both the headache of unnecessary meetings, position you as a professional, and help you gain the trust of your potential client.
Some prospects will be hesitant to discuss the numbers with you, so you need to explain that a planned budget will help you help them.
For example, if you’re planning to buy a new car, chances are you have a budget range in mind. Explaining your budget to the salesperson will help them find you the right car faster than if you let them show you every car on the lot – 2001 Hondas to 2021 BMWs. Getting to the budget conversation early saves you time, and determines which of the options you can afford..
How to ask for your prospect’s budget
The way you ask the budget question is important. You don’t want to come off as money-hungry or let them smell your commission breath, but you also don’t want to come off as timid and too scared to ask. Your prospect should understand that you need to know the numbers in order to develop a proposal that solves their business challenges.
To start the conversation, ask your potential client some open-ended sales questions. This will get them to open up about what they have in mind for the project, explain their pain points, and encourage them to share more information that will help you customize the proposal.
- Explain why you need to know the budget – “What kind of project budget could we expect to work with? This will give us a better idea of what we can do to meet your needs, and help us determine the timeline we can complete it in.”
- Inquire about previous projects -- “What sort of budget do you usually allocate to projects like this?” This will give you at least a rough idea of your prospect’s budget range.
- Ask about their goals -- “What is the target (or outcome) you are hoping to achieve with this project?” This can provide insight about their expectations and give you an opportunity to start the conversation about pricing.
If questions aren’t your style, try an analogy -- you can build them either a sailboat or an ocean liner. You can build both to be seaworthy, but their budget will dictate which solution is possible.
Educate your client
Keep in mind that this could be the first project of its kind for your client, so they may not know what kind of initial budget they need. They may be looking for an estimate of what you would charge for the project to help define their budget.
Take the opportunity to educate prospective clients about your business and how you price your proposals. Explain similar projects you have done in the past and what the price range was for each. This allows people to see the kind of work you’re able to provide and opens the door for them to say whether or not your services and prices are a match for their expectations.
Talking about previous project budgets also gives you the chance to gauge the prospect’s reactions. If you throw out a large number, and you can suddenly slice the tension in the room (or air over Zoom) with a butter knife, chances are they were expecting a smaller figure.
Whether you end up getting a defined budget or a ballpark range, by the end of the conversation, it should be clear whether you will be able to work together, and if it’s time to move to the proposal stage.
Focus on the value
Rather than focusing on how much the client has to spend, change the conversation to be about the results of the project. In other words, position the value your company can deliver rather than focus on the price you charge. Highlighting the ROI allows your client to see into their future, and forecast the success they can expect.If you explain that including a certain feature is going to cost $5,000, but that it will generate $8,000 in revenue because of X, Y, and Z, the client is more likely to focus on the ROI than on the initial $5,000 they have to shell out.
Here at Proposify, we started using value-based pricing to change the conversation from price to value, and it has drastically improved our sales process and helped grow our business.
Know who you’re speaking with
When discussing available budget for a project, product, or service, make sure you’re speaking with the right person; someone who is part of the decision making process when it comes to signing the dotted line of the proposal.
We heard a story about an agency who was in the process of pitching to a potential lead, only to be quickly shut down by the CEO of the lead's company. While the lead was eager about the agency's pitch, the CEO disagreed with the direction his employee had given the agency. The moral of the story is that it's important to ensure that the prospect you are in contact with has the power to make decisions before spending time on a proposal.
That said, while the first person you speak with might not be the final decision maker, it doesn’t mean this person isn’t valuable to you. They may be an influencer who convinces the decision maker that your product/service will solve their business challenges.
Whoever you speak with, acknowledge their role and build a relationship with them – make them feel as valued as the decision maker you’re trying to reach. A great way to do this is to include them in your dialogue. “Along with yourself, who else would be involved in making the decision?” and ask about the opportunity to meet with them as well.
Don’t be afraid to turn the lead away
What do you do when a prospect resists revealing their budget? If you’ve asked a few times, and your lead still hasn’t given you a clear budget to work with, they might not be worth pursuing. Don’t be afraid to cut the cord, you can spend that time pursuing more qualified leads.
It may seem like a risky move the first time you do it, and like you’re turning away ‘good’ business, but it’s the mark of being a professional and knowing what your ideal customer looks like. After all, time is money. To remain profitable, you can’t waste time chasing dead leads who won’t finalize a budget, or seem like they’re inherently flaky.
It’s understandable for your client to not know their full budget up-front, but after a thorough discussion with them, they should have a better sense of what you can provide, and what money they have set aside for those services.
Knowing which leads to pursue and which to leave behind is key to scaling your business and gaining customers that want to work with you.
Conclusion
Budget can be a tough subject to broach when you’re looking to close a deal. Some clients will be more open than others when it comes to talking about money, but at the end of the day, it’s a conversation that needs to be had.
Asking for a budget is a critical part of the sales process. It will help you vet leads, focus on quality clients, and write winning proposals that are destined to be signed. Be tactful and professional in how you ask, but don’t be afraid to walk away if it feels like they’re just playing games.
