How you negotiate on salary and secondary benefits has a big influence on your work and your ability to work. Especially if you are a freelancer, solo entrepreneur or part of a small team. If the price is too low, it might influence relations-building, your enthusiasm and even the quality of the outcome. On the other hand, setting the price to high might cause other problems. How to solve that dilemma?
This is where Paretify comes in. Their tools combine technology, mathematics and data in order to simplify complex negotiations. Providing the best possible win-win solution for all parties in the process. We have Morten Raahauge, one of the founders of Paretify, tell us more about the idea behind the tool, and why your experience is important for bringing aspirations to life.
The 80/20 Rule
Paretify is a Danish startup, but the name comes from Vilfredo Pareto (1848-1923). He was an Italian economist, sociologist and engineer. He is best known for two principles:
- The first of these is a “Pareto distribution” – also known as the 80/20 rule. The widespread phenomenon that 80% of the consequences in an area are due to 20% of the causes.
- The second concept is a Pareto equilibrium, which is a mathematical equilibrium in a negotiation between two agents based on a number of weighted parameters.
What does this mean to freelancers and entrepreneurs?
If you’re self-employed, you may have observed the tendency that 20% of your clients are responsible for 80% of your earnings. This may (certainly should) give you cause to consider how much resources you spend on your various clients and suppliers.
However, it is the second principle – the Pareto Equlibrium – which is at the heart here. How can use this principle to help freelancers, solo-entrepreneurs and small teams as they negotiate price and conditions relating to projects and deliveries?
“Most people can handle the complexity of more than 3 parameters at the same time. You can’t calculate all the different outcomes and solutions in your head. But technology can help you keep track, reduce complexity and do the math.
These days, clients and freelancers often end up discussing just price. Whether is a fixed price, the hourly fee and subsequent discounts and retainer options. It produces an uneven playing field and actually also horrible solutions for all. The process is not efficient and both the client and the freelancers leave options and money on the table. We can turn this around using tech. So that everybody wins.
Also, technology can help negotiate if you don’t like the process, don’t think you are good at it or just appreciate precise guidance as you go. Negotiation technology is definitely going to be a thing in the future.”
What is the tool going to look like? How do people access it?
“We are planning for a mobile app. Makes sense as freelancers are often on the road and quite tech savvy. We see it as a stand-alone solution but it should also work as a plug-in on platforms connecting clients and freelancers. Pricing will be a monthly fee – 5 Euros or so. Super cheap – something you don’t consider and is instantly covered by the positive results.
We are working with Seats2meet to understand the needs and wants of freelancers, how to set up the business model and also work with all the amazing talent as we develop the solution. We hope to build a sort of beta-tester community around this. Really interact to understand and provide the best possible solutions.
Why should people use a tool like this?
“First of all, negotiating and setting prices is hard for all freelancers. It is something you need to learn, but learning is often individual and super slow. And if you make mistakes, they are often costly. The reason why we wish to make a tool is so that all freelancers can benefit from the accumulated experience in the network, have benchmarks made available to them and the whole process clearly mapped out. Empowerment and help to make better negotiations and therefore better business. Help to sustain themselves and live a better freelance life.
Moreover, most negotiations focused on one parameter only – price. The negotiation becomes simple arguing about this one parameter. A zero-sum game you can only win or lose. The result is rarely attractive to any of the parties. An unpleasant experience that does nothing to build relationship. Our method ensures a more transparent process, a more collaborative approach and neither the freelancer or clients leaves opportunities or money at the table. Everybody wins. Surely, that should be more attractive to all parties?”
Where are you now in the process of developing?
“We don’t have a prototype just yet. We want to make sure we have product market fit. Which is why we are still doing workshops. We do have another solution that helps people to negotiate salaries and benefits, so we should be able to build on some of this work.
Besides working with seats2meet we also work with CWI in Amsterdam. CWI is the Dutch national research institute for mathematics and computer science. One of the researchers, Tim Baarslag, is an expert in the combination of Pareto outcomes and how to use machine learning and AI to achieve it.”
What do you need from the Seats2meet community to help with the development of Paretify?
“We need input from experienced freelancers, to determine what the relevant parameters are. How they are connected.
The tool should also help you identify and mitigate risks. Let’s say you go for a fixed price. Usually, you end up spending too much time. It that is true, what then also needs to be true for the project to make sense. Is it a great opportunity for network and more work down the line? How do you get paid? Up front? In 3 months? Do you have immediate access to decision-makers? Do you need to work onsite or it is just remote? Who pays for transport? Etc. We need the input of the seats2meet experts on this!
What can you offer to Seats2meet people who will help Paretify with their experience and skills?
“For everyone who participates in our workshops we provide free and eternal access to the tool from prototype onwards. The same will be true for everyone who wants to be part of our beta-community. Seats2meet is based on reciprocity. We want to honor that principle. Collaboration always yields the best solutions and results.
Where can people sign up?
“If you want to be part of the project and participate in the workshops, please get in touch with us directly via email to firstname.lastname@example.org marked “RETRIEVER” (name of the project). Just state your contact information, and we will get right back to you.
Other than being a free agent or part of a small team, you can have any background, any age, any color, work in any business, have any expertise or skills set. The more diverse, the better!
Looking forward to meeting you!”