Even though people often quip that “Money talks,” many people have a very difficult time talking ABOUT money in personal and professional settings. In the next two 99WOWs Blog posts, we’ll explore some of the factors that may be behind even the savviest entrepreneur’s resistance to facing money conversations head-on. These two articles are an expansion of a WOW from 99 Creative WOWs—Words of Wisdom for Business, a recently released quick-read book for thriving and striving entrepreneurs, biz whiz professionals, recent grads and creative wizards of all sorts. Because money conversations are as stressful as they are critical to ongoing success, in this first article post, we’ll demystify a few complexities about this key business tool.
Converse well about money to negotiate fairly for all.
You may not believe how many otherwise gutsy and fiercely competitive entrepreneurs are actually afraid to talk about money. To an even greater degree, other business professionals are often more reticent to discuss this fundamental aspect of conducting business effectively. And yet, money matters so much to all parties, why is this so? Why are even gregarious, confident entrepreneurs often willing to ask for more information about a host of other project aspects, but suddenly fall silent when it comes to asking direct questions about money? Is this behavior a conscious choice or does it possibly spring from a more emotional place?
It’s likely that past outcomes are driving current unwillingness to risk raising awkward money discussions. When entrepreneurs have risked asking money questions in the past only to get shut down, silenced, or even looked at askance, it makes sense that going forward, even the boldest entrepreneurs often shy away from asking direct questions about money. Those past risks didn’t serve them well. Why go there again? The answer is simple: because, to do business well and negotiate fairly for all, entrepreneurs must be able to converse about money wisely.
Entrepreneurs tend to be quick learners, sometimes too quick for our own good. When an entrepreneur gets stonewalled, or worse yet, criticized for taking a particular risk with no positive outcome or response, entrepreneurs often rapidly regroup and correct their courses on the spot. Because money discussions can be difficult for everyone, it makes sense that this would be a topic where entrepreneurs have met a lot of resistance and hence, opt “not to go there anymore.”
Entrepreneurs don’t want to risk irritating clients or prospective clients. The ROR (Return on Risk), that of getting back valuable information, can be low when it comes to money so many entrepreneurs simply avoid the issue, deciding not to go back into that particular lion’s den again. This strategy, however, may reduce tension for both clients and entrepreneurs, but the decision not to explore money early on in any business relationship usually comes with a high price tag for all parties.
Why are money discussions so difficult?
Money is shrouded in secrecy. To be privy to budgets and other financial matters, one often needs a certain level of status or clearance in an organization. Money is also interesting to many, though often relevant to only a few. For example, while team members might be highly curious about the salaries of those around them, unless they are directly responsible for payroll and benefits, they don’t require this financial information to do their jobs, but many spend a lot of energy seeking out this financial information nonetheless.
Money is often perceived as the ultimate measure of worth. To discover one’s earning less or more than a colleague can impact performance, commitment and ego. It’s tough for many people to ask for a raise, stand firm when pressed to lower a price or to even broach the topic of “how much”?” in many different personal and professional situations.
In addition to the impact of past experiences and the low ROR described above, another possible reason that business professionals hesitate to jump into money talks relates to tipping one’s hand. Many business leaders fear that the party who names first number loses. This belief may well explain why in a negotiation or a project assignment, clients are so willing to share every other absolute.
“We need x units for y markets and we need them delivered onsite live no later than midnight on z date.”
These demands are clear and concise—though one key variable is notably absent. Requests for Proposals in competitive bidding situations often spell out myriad specifications and project requirements in infinite detail. Clients are typically extremely specific about every want and need associated with a potential assignment, save one: HOW MUCH MONEY they have to spend. WHY is this so often the case in so many industries?
By the time clients have gotten internal approval to solicit RFPs, they typically have a very clear understanding of—
WHAT they need to create,
WHEN they need it delivered,
WHERE the deliverables must be sent,
WHO the users will be,
WHY they need this particular assignment at this time,
HOW it must be produced and in what final form it must ultimately be submitted.
In order to receive competitive bids that are apples-to-apples, clients know they must share all of this information consistently across all bidders. In addition to these critical bid parameters, clients rarely secure internal approval to proceed with RFPs without also knowing HOW MUCH they are approved to spend on the assignment. While it is true that sometimes clients float out an early pre-approval RFP to get a sense of the probable cost in order to create a budget, when it comes time for an actual competitive RFP process to begin, most clients already know HOW MUCH money is in their budget. Why then do clients typically withhold information about money so often?
Conversely, even if clients withhold this information, why do suppliers, entrepreneurs and others preparing proposal also avoid this topic? Because it is often so uncomfortable to discuss money, many entrepreneurs hide behind the unspoken “I’m not telling you anyway” caveat: THEY DON’T EVEN ASK. Why?
I’ve asked this question of clients, peers, colleagues and mentors—the answers are similar:
- Some companies have corporate policies that prohibit executives and managers from disclosing financial information.
- Even when executives are not restricted, they often choose not to share the budget because on some level many business professionals believe that by communicating their budget, that’s exactly where the bids will come in. This is often dubbed “setting the table” of expectations.
- Other professionals have been coached that by sharing their numbers, they could be over-spending. This is a manifestation of the “party who names the first number loses” approach.
In the next article, we’ll dig deeper into this “money-conundrum” and look at a case study and focus on six money-centric questions entrepreneurs can ask clients about this highly sensitive subject.
Do you have insights to share about why money talks are so challenging for so many? Post your comments below.