How to Discuss Project Budgets with Prospective Clients

chatting over a table

Talking about money can make people uncomfortable. But in any business context, money talk is a must. And for agencies, few monetary conversations are as important as agreeing on a project budget when working with a new client.

Budgets determine the job’s scope and opportunities for profitability, yet some clients need to be eased into these conversations. Here’s how to discuss budgets confidently with prospective clients.

What comes first: budget or costs?

In an ideal world, all clients would share their budgets upfront. Knowing a client’s budget from the get-go allows managers and planners to prepare accurate proposals. Transparency is integral to a healthy client-agency relationship; therefore, client budgets should come before agency costs.

However, some clients prefer to receive a cost proposal before revealing what they’re willing to pay. In their minds, this reduces the risk of agencies inflating their costs. When you consider that US-based companies can expect to spend between 7 and 10% of revenue on marketing activities, this is understandable if misguided.

So, how can you handle this difficult situation?

Important factors to consider when discussing budgets with clients

Encouraging clients to share financial information upfront can be challenging. Here are some important factors to keep in mind:

    • Are you talking to the person who holds the purse strings? Too often, the person with the power to approve the project budget is left out of the proposal process, which can lead to issues later down the road. Whether that person is the CEO, head of marketing, or financial director, make sure they review your proposed costs and scope before they are signed off.
  • Don’t undervalue your offering: No one wants to tell a client their budget is too low, but avoid reducing your rates to secure the project. While tempting, doing so undermines the value of your work and that of similar businesses. An alternative option is to create a bespoke project cost based on what they can afford.
  • Not all leads will be right for you: Mismatched financial expectations are a common reason why agencies turn clients away. The budget chat is the first of many conversations you can expect to have with your client about money. If they are hesitant to share their budget or the information you need to prepare a proposal, they may not be a good fit for your agency.

How to have budget conversations with clients

Focus on education

When discussing budgets with clients, you don’t want to come off as money hungry. To avoid this, focus on educating the client on the value of your services. Position your agency as trustworthy experts who deliver the best value for their clients by making their budget stretch as far as possible.

Likewise, clients with limited experience working with third parties may need a helping hand when figuring out what they’re paying. These situations present an opportunity to educate the client on your processes, including how you approach costing projects and preparing proposals.

Ask for their budget

One of the first questions you’ll ask a client when looking to write a proposal is, ‘what is your budget?’ Many will share it willingly. In fact, many experienced clients will share a brief which includes their budget. However, as we’ve covered, this isn’t a given. If a client is hesitant to share their budget, follow these steps:

  • Politely explain why you need their budget. Lay out the process of preparing a quote as part of a proposal, and explain how their budget determines what resources they get access to, the project’s timeline, and what results you can commit to delivering.
  • If a client can’t provide a budget because they can’t gauge a fair price, suggest they look at how much their team has spent on similar projects in the past.
  • Finally, if they can’t answer your questions but are open to further discussions, focus on their goals instead. If they can share their goals for the project,  you can provide a rough cost by reviewing the previous budgets of similar projects on your project management software. This should be enough for the client to determine whether or not they can afford your services.

When work goes over budget

The money conversations don’t end once a client has signed on the dotted line. From chasing invoices to managing scope creep, you’ll likely be discussing money with your client every week.

Scope creep is a challenge all agencies face, with 34% of projects across industries affected by this issue. Rather than waiting for scope creep to become a problem, we recommend educating clients on what happens when projects begin to burn due to scope creep as early as the proposal stage. 

Asking for more money because the project is overspending can be incredibly nerve-wracking. After all, no one wants to dig into why the project has exceeded its budget, and clients can easily assume it’s due to poor project management. 

Here are a few tips for avoiding these tricky conversations:

  • In your proposal, always clearly state what is and isn’t included in your costs, such as what the exact scope is, what services aren’t covered, and whether VAT and other taxes are included or calculated later
  • Add a disclaimer to your proposals and contracts stating that changes to the scope incur an additional fee
  • In the event of scope creep, raise the issue with your client as early as possible by using your project management software to closely monitor project spend
  • Client expectations and client budgets don’t always match up, so expectation management is critical. Educate your client by discussing scope creep and the costing process at the proposal stage, so they understand additional requests will require extra budget.

Understand the value of your work

From uncovering which services drive the most revenue for your agency to which tasks cause the highest burn, financial tracking tools help reveal the value of your work. This understanding is key to effectively negotiating budgets with prospective clients and navigating challenging (but necessary) conversations about scope creep. There’s a reason why two-thirds of top marketers believe the best decisions are data-led.

With Forecast’s project accounting software, you can see how your clients’ money is being used in a single glance with an easy-to-understand overview of all financial data. That means more accurate project proposals, optimized cost management, and informed budget discussions with your clients.

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