Why you should communicate your budget upfront with your agency
Not everyone’s comfortable talking about money, even (in some cases, especially) with their agencies. But leaving budget discussions off the table is a bad idea. It can lead to misunderstandings, misalignment, and worse.
Let’s look at a few scenarios.
Say you really don’t have a set budget. I’ve been in the room with an agency owner who, when the client said he didn’t have a set budget, responded “Great! We can do a lot with $1million.” While everyone laughed, it was followed by an uncomfortable silence…. Oftentimes there’s some sort of budget, or at the very least a reasonable range of what you expect to spend to achieve the stated goal. In this particular case $1m was a ridiculously high number for the project being discussed. So there was a “not to exceed” or max budget in mind. And that’s how it should be! Without communicating it, though, there’s no chance for you or the agency to align expectations and suggest solutions.
That doesn’t mean you have to know exactly what that number is. There are a few ways to work through this. If you have a solid RFP with a range, that works great. If you have a very detailed scope and no budget, that can work if the detail is really there. But it can be difficult to evaluate proposals if they come in at drastically different rates.
Why is one group estimating $50,000 and another $100,000? You’re not necessarily looking for the lowest price, but you’re probably looking for the best value. If both are capable agencies, what is one offering that the other isn’t? Or is one simply more expensive? Is one company having junior staff working on it and another senior staff? Is the proposed hourly higher, or the number of hours higher? Is one fixed scope? Having an amount or range can help the agency tailor the services they would normally offer to fit in that range, and help make your job in choosing easier.
Budget helps identify fit as well. If you’re looking for new vendors, and the agency you’re speaking with usually does projects starting at $50,000 and you’re looking to spend $1,500, you’ll both know right away that it’s not a good fit. They might be able to refer you to someone or help provide resources. And neither of you will feel like you could have used that time exploring something else. Without that information you might walk through a detailed proposal process and both end up frustrated.
If you’re working with a current vendor, communicating your budget helps you align on the project. Knowing what types of resources we’re dedicating allows us to provide quick recommendations and be ready to act.
With that said, there might be a number of reasons you’re not ready to communicate your budget upfront:
- You really don’t know it. This can happen for a number of reasons. In corporate environments, you might not have your budget allocation yet. Or maybe you’re costing it out to present internally. For non-profits, you might be getting proposals in support of a grant or to approach a funder. In these cases I have two recommendations: Give a range when possible (what do you consider reasonable?) and be as specific as possible with the scope. It will make everyone’s experience easier!
- The scope isn’t clear. It’s hard for both sides if it’s not clear what needs to happen. But that’s not unusual, either. We conduct a discovery process in this case, where we work together to identify the goals, document a scope, and then provide recommendations and pricing. In this case the only immediate budget conversation would be for this initial discovery phase.
- You’re worried about paying too much. I’ve heard this from clients who feel their vendors are charging too much or take advantage of the budget available. This is tricky, of course. My first reaction is that trust is very important to me in any client/vendor relationship, and having that doubt always hanging over my head would make me uncomfortable in other ways. If you’re not comfortable, I’d take a moment to evaluate other potential agencies. But for the right agencies, communicating your budget should give them the chance to give you the best value for your spend. It allows you to evaluate what they’re offering to do for the amount you’ve set.
- You just want to “see what it costs.” This could tie into a number of the items above. In my experience this works in very limited circumstances. It can work when you have a very detailed scope, as mentioned above. It can also mean more work for you in evaluating the differences between various proposals and the true value each provides. Without a detailed scope it can result in numerous responses. We’ve received inquiries from potential clients who report receiving proposals for a campaign that vary from $5,000 to $50,000, and they’re struggling to work through why that is and what they actually need.
In all of these cases, having a clear budget, even if it’s a broad range, and communicating it as part of a request for proposal or an initial consultation can put everyone on the right track for a successful project. That helps us all create or maintain a mutually beneficial ongoing relationship. Cheers to that!