In short, the new business prospect provides your small agency with a full debriefing of the pitch. Except the client leaves out one tiny detail: a budget.
It's obvious what's going on. Ask the budget question, and you'll get a plethora of responses, from "You tell me" to "We are not disclosing budget" to my personal favorite, "There is no budget."
I kid you not with the latter reply. Our shop's heard it twice in the last few months. And we're not talking about small client companies, either. One is a Fortune 100 company, the other a major regional healthcare organization. Both asked us to pitch ideas for a project with significant potential. Both confirmed no established budget, but requested a proposal to approach senior management with for funding. Suckers that we are (or optimists, depending on your perspective), we proceeded with investing meaningful resources.
While the effort has already paid off with one client -- the other seems to have lost interest following a glimpse at the price tag in our proposal -- it remains true that being coy with marketing budgets is a drain on agencies' time. If an agency makes the wrong investment, it's a costly mistake in hard and soft dollars, not to mention the hit house morale takes.
Why do clients play budget poker? They suspect agencies will spend whatever budgets are ultimately set aside. (True.) They believe a better deal is procurable by pitting agencies against each other in a blind bidding war. (Also true, but detrimental to the agency's ability to make a fair profit.) Lastly, marketing managers with big dreams but little funding sell senior management on new ideas by shoving the dirty work onto agencies. (In this case, I recommend insisting on some sort of investment by the client, which you rebate if the project receives funding and you are awarded the business.)
Budget poker is a slippery slope, a game that is increasing in frequency and gall. When a new business prospect deals you in, do your best to call bluff by asking smart, vetting questions to get a handle on the real size of the account. If that fails, put on your darkest sunglasses, and choose wisely before laying down your cards.