New Business Hawk

The New Business Budget Game: Up to Six Million

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To avoid discounting your work, we believe agencies should discuss money whenever a new job or project is brought up, right when the assignment is first mentioned by the client.  It’s a way to open up negotiations over both job specs and job budget.

Our approach is to start by asking, “In round numbers how much are you planning on spending to get this done?”  Now wait until the client responds.  The client has two options. 

Option #1 is to ask you back how much it will cost, and the agency person needs to move towards suggesting a budget range by discussion first the job specs and then by picking a high number to test the waters.  If the client responds, “That sounds about right,” then you know you have guessed too low. 

Option #2A.  If the client faints or grabs for his or her heart, then you have guessed too high, and you need to move down in a series of bracket jumps.  It’s fun to do.  The key point is to remember that you are not estimating the job at this stage, you are just trying to understand the importance of the job.    

Option #2B.  If the client gives you a number, your account staff should be trained to immediately say, “And as much as….?” You are assuming the client has given you the bottom number from a budget range, a normal assumption.  And now you are asking how high to probe for the upper range. If you get a new number at this middle stage, immediately ask, “And up too?”  Here you are assuming there is a very top number in the range, and you need to know what it is. 

This is simple negotiation in a process we call the Budget Game.  And your agency staff needs to be trained on how to play it well.  It takes less than a day to learn and it will make your firm a lot of money over the years.    

Running back to a client with a production estimate when you don’t have any idea what the client expects to pay, as so many agencies do, is very very foolish.  It’s not a smart way to do business because you lock yourself into your own expectations about how important the project is to the client.  And you lock your agency into living off production budgets.

Our files are filled with actual stories of how well this simple negotiation technique from the Budget Game has worked for agencies around the world. 

Here are some favorites.  A mid-sized agency asked their client, a medium-sized manufacturer in Ohio, a client for ten years, in round numbers how much money were they thinking of spending to launch a new home improvement kitchen product?  The client responded, “Up to $6 million.” 

The account handler was so shocked at the size of the budget that he forgot to ask the follow-on question of “And up to?” as he had been trained to do.  That afternoon the agency president told me by phone, “Guys, do you know what we would be doing this afternoon if we had not asked that simple question?  We would be working on a campaign launch of about $450,000.  That’s the usual budget range we suggest when work with them.  We have had the account for years, and we never knew they could pull the trigger on that big of a new product launch.  Thank you so much for showing us the way.” 

Another $300,000 Found

The president of a direct mail company called to report his junior account executive had just returned from a client office so excited that the Budget Game had worked for her the very first time she had tried it.  She had asked a client the “round numbers” question and the client had said $200,000.  She moved the client up to $300,000 for the next number and been told that the client couldn’t go over $600,000 on the project.  The junior account executive was excited that the Budget Game had worked so well her the very first time. 

The agency president wasn’t excited at that.  He was excited at the new monies that would have been left on the table without his most junior AE asking a simple question, “In round numbers”, and then knowing what to do with the answers. 

Before I knew about the Budget Game I got a big black eye on a large regional brokerage company.  I had been part of the team that had won the account and now I had been assigned to work on the client.  I was new to the agency, a junior AE.  The ad manager asked for a media recommendation on using the Wall Street Journal to launch their new brand look we had recommended.  I was young and so charged up.

I bounded back with a media budget recommendation that was six times larger than anything the ad manager wanted to see.  And he ripped me up and down and almost fired us.  We had flashed to him that we really didn’t know his business.  We kept the account for years, but after that I never again went back to a client with any recommendation without knowing what the client expected to pay first.  It was a life-lesson that I never forget.  And the best place to find that number is to ask for it when the client first mentions the job.  Your staff might need to learn all that now.