Don't Compromise. Trade.

April 6, 2024

In my work I help my clients negotiate services agreements. This is the agreement between them, the agency, and their client, usually a brand of some sort. The agreement speaks to the services and deliverables my client will provide in exchange for the fees that the brand will pay. In addition, the agreement sets out all the other rules of the engagement. Things like intellectual property, termination, indemnification, and the like.

The way most agencies handle negotiations is through a series of compromises. Maybe the agency wants invoices paid in 15 days, the client wants to pay in 60 days, so they compromise around 45 days. Meeting in the middle. Splitting the difference.This gets the job done of course, but it's a rather middling approach. I think it prevails because it saves the agency from having to say the hard thing:

"No. We require payment in 15 days."

Why are they afraid of saying the hard thing? Because they are afraid of the reaction. They worry the client will get mad. Or that they will yell. Or even insinuate that the agency isn't being fair. Its fear of these reactions that causes people to silently compromise instead of asking for what they need and truly negotiating.

So instead of compromising, I encourage my clients to think of negotiation as a series of trades. If you want to get paid in 15 days and the client asks for 60 days, the response should be:

"Our fees were calculated assuming payment in 15 days. However, we can extend 60 day terms to you but it will result in a 15% increase in fee to compensate for the extra risk and delay imposed on us by the terms you are asking for."

Or maybe you are negotiating portfolio rights and the client is refusing to grant them:

"When setting our fee, we assumed that we would be receiving portfolio rights as part of the transaction. If that won't be possible, then we'll need to increase our fee by 15% to compensate for the lost portfolio rights."

Trades also don't have to be just money. Almost anything can be the basis of a trade. Get creative! They want jurisdiction and venue in their local courts? Let 'em have it, but get a larger deposit in trade. But whatever you do, don't compromise. Say the hard thing and ask for what you need.