Entrepreneur
Article
By John Tabita

Asking for the Budget: A Flawed Approach?

By John Tabita
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It was our first official sales call after forming our partnership and we were excited. My new partner and I met the prospect at his home to discuss building him a website.

I had no idea being a professional square dance caller could be such a lucrative profession—that is, until our prospect began telling us how he’s booked months in advance and how he makes money organizing square dance cruises. “I’m the best,” he said, “so my website needs to be the best.”

We envisioned a project to match … custom design, online appointment scheduling, photo gallery and videos—all to which he agreed. Information in hand, we returned home to prepare our killer proposal. A few days later, we quoted him a project cost of $5,000.

Imagine our surprise when he told us he had $500 in mind.

Frustrated, I scoured the message boards, curious to see how others handled this.

  • Ask for the budget early in the sales call
  • Show them how much time is involved so they’ll realize the price they want it for is about $9 an hour
  • Send an angry email “thanking” them for wasting your time and refer him to Guru.com

Thus I learned the all-too-familiar mantra of the service provider: “Always ask for the budget.”

The Budget Question: A Flawed Approach

While asking for the budget is not the worst thing you can do in a sales call, I think the concept is fundamentally flawed. Here’s why:

No Trust

From the client’s perspective, why should he give you any idea of a budget until he’s sure he can trust you? Al Davidson of Strategic Sales & Marketing says many prospects take the budget question to mean “How much can I possibly charge you for this before you’ll run?”

No Due Diligence

Even if the other person has a figure in mind, it’s rarely based on any due diligence on their part. I find that most prospects are embarrassed to even say what they’re thinking, because they know they’re just pulling a number out of a hat, rather than one based on reality or thoughtful business analysis.

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No Value

It focuses the prospect’s attention on what he has to spend, rather than what he’s going to get. The subject of cost must be addressed and agreed upon beforehand, but never outside of the context of the prospect’s overall objectives, the value of the project, and his potential return on investment. If you discuss price and budget first—and your price is “too high”—you’ll be forced to talk about value to justify your price. That almost never works.

Asking for the Budget May Actually Hurt the Sale

By asking for the budget, you’re trying to reconcile what you need to make to do the job with what the client is prepared to pay. That always puts you and the prospect in an adversarial relationship. But when you discuss objectives, value and ROI, you become a collaborator, helping your prospect reconcile his vision of what he wants to achieve with what he can actually afford.

The True Decision-Maker Can Simply Add a “Zero” to the Budget

Keep in mind that “budget” is always relative to value. Prospects with a budget of just a few hundred dollars have ended up spending four times that amount because they saw the value in my solution. Money is like time—we spend it on what we value most. If your solution’s value exceeds its cost, your prospect will find the money. So don’t lock yourself into a set price by asking for the budget.

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It’s not too late to get my free guide, 27.5 Must-Ask Questions for Consultative Selling. Just follow me on Twitter and I’ll send you a link.
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