We sell a SaaS solution to enterprise clients that has a long sales cycle. I often see companies use the "your solution is out of our budget" tactic to keep on negotiating lower rates. This is especially true when they are dealing with startups (and thus have more leverage due to their size). Any suggestions on how to deal with this to close the sale without hacking away at your margin?
If you are hearing this response, you obviously haven't established what the client budget is in advance, which in turn suggests that you're probably trying to push your product onto the client - a sales technique which does not work in the sellers favour in a long cycle process.
In order to successfully counter this argument, you must be able to prove that the argument isn't true. That the value of your product far exceeds the cost of it, and, that the value created is in fact value for this specific client. This is usually referred to as a business case.
This all starts with understanding the problem, and the client specific situation - to a point where you understand it better than they do. When you know the details of the problem, you can convert that problem to a monetary value. That value is the anchor point for the conversation.
If the customer has a 1 million dollar problem, they're unlikely to pay 5 million to solve it. But they might pay half a million, and they'll almost certainly pay 250k.
If you have a 250k solution to a 1m problem and your client knows that you know this and are experts, you're never going to hear "your solution is out of our budget", and if you do, you were never going to get the deal in the first place.