How often do we experience the lull in conversation when asked by a vendor: “So, how much do you want to spend?” or “What’s your budget for this project?” The ironic part of the budget equation is that both sides in a training transaction tend to close up around this question.
For the vendor, when a potential client asks about pricing, a tap dance may be incurred: “Well, it’s hard today,” or “Hmm…That all depends,” or better yet, “Well, we will have to go through a process to figure that out.” On the other side, when asked for their budget, a potential client will usually push back and ask the vendor, “You tell me,” or “I just want the best solution,” or better yet, “We don’t know.”
The truth of the matter is that in at least some of the cases both sides can give each other basic guidelines on budget and costs. Moreover, based on years of research at Allen, the chance of a successful engagement between the client and the vendor will go down by over 20% because of mis-scoping by the vendor and the need to continually revise the proposal as the client finally lets loose some budget numbers.
A strong case can be made that as both sides define budget and expectations up front, the quality and the cost of a project will best fit the needs of both sides of the equation.
The logic is simple: Most corporate training departments work hard to set budget expectations with the sponsors of a project. No one feels good about having to go back and ask for more money or having to surprise a sponsor with numbers they don’t expect. By the same logic, while most vendors would love to maximize the size of any deal by being given a budget, they must work harder to pour into that numbers as much value to the customer as possible. A focus on an agreed upon budget framework enables both parties to communicate clearly, understand tradeoffs and look for the most optimal solution under the constraints of such a budget.
An important point that should be made pertaining to budget is that by no means does a budget discussion stop the vendor or the prospect from being able to negotiate a better deal. A savvy prospect will usually either downplay some of his budget numbers or ask for more with a given figure hoping to see where the vendor can provide the most value and save herself from having to ask for additional features or change orders. The vendor will entice the prospect with additional features above and beyond the budget in the hope of uncovering additional needs not articulated with the original budget.
The bottom line will be that both sides will work harder up front to reach the best optimal solution as apposed to waiting for the post proposal phase to fix proposals, deal with disgruntled sponsors or worse yet, dump a cheap vendor that bid unrealistically and tries to squeeze more funds out of the client down the road.