How does an Entrepreneur justify their value in a negotiation?

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Sitting across from a person to negotiate compensation is the hardest part of any discussion. I watched multiple people work deals in my career. The compelling thing about everything I saw was payment apprehension. It never ceased to amaze me how timid a person would be to ask to be paid. Most people require money. You must ask for money if you want to be paid. Many people do not ask and wait to be offered money.

Upfront money is the hardest negotiation for an entrepreneur. The upfront cost poses a barrier for the majority of deals you encounter. Most of the time a person creates a wall around the upfront payment. The person then frets at the fact they must climb the wall. The wall the person makes is a self built wall.

Apprehension is due to inability to justify “value”.

I built successful models that “required” upfront payments. At the height of the financial collapse (around 2010) I mastered the art of upfront service fees. I found the tolerable range for “payment before product” was $3,500 — $14,500. The factors that influenced this price were determined by each client circumstance.

Each client sat in a different industry. Each client selected a different venture. Circumstances varied greatly between each one. Do you know the common thread intertwining each deal? The more steps away someone is from obtaining a credible sponsor the higher the cost. If you can enter a disorganized market there is opportunity. Opportunity exists when there is no “authoritative source” for your service. You can become the go to person for service in a disorganized market.

Value at a table is directly correlated by market conditions. If market conditions create one hundred different competitors your price will depend on your “credibility”. If market conditions create one hundred different options in a regulated climate your price will be low. If market conditions create no searchable options your price can be extremely “high” — if you create “credibility”.

Credibility is simple. Credibility is created by doing the following: 1) have references, 2) have a professional license, or 3) tie all of your compensation to performance.

When you have references clients know you can get things done. If you make a good impression you can obtain business. You can then justify your pay by showing how much a person benefited from the cost. The term I use frequently with this is called a “Cost Benefit Analysis”. References allow decent pay depending on accountability measures (i.e. Are you licensed? Are you financially solvent? Do you have a large office to create a good stage presence?). This is option is impossible if you are first starting out.

When you have a professional license a regulatory body calls you a “fiduciary”. Fiduciaries are trusted by the public. No one asks a doctor for their references when they show up to a checkup. Most people believe the Medical Board and Department of Health qualify people who are there. There is a legal requirement to be covered under Malpractice Insurance. The same applies for attorneys who carry Error’s and Omission Insurance. If you have a license, people “pay” for the “license”. This is standard and is easy to justify in a negotiation. Professional license pay is average. This is a good option to start out at if you have no references.

When you tie all your compensation to performance you do not “cost” a person anything. You work before receiving money. If you cannot successfully complete your task you do not get paid. There is no risk of loss for the client. It is easy to garnish support for this type of arrangement from a prospective client. Performance always pays the best. This is the best option when you lack “credibility” through licensing or historical performance.

I have a saying, “I can always justify my value at a table. Ask me why I am being paid. I will tell you in three to four sentences.”

Focus on value. Focus on being concise. Do not answer a question with too many words. Do not get offended if someone asks “Why should I pay you?” If it takes you longer to answer a simple question — you might not have any value to justify your pay check. Adjust your approach and revalue yourself.

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About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com

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Christopher is a Professional Entrepreneur with over 14 years of experience, a Master Project Manager, Financial Analyst, & Master Financial Planner

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