Negotiating is a part of life. You negotiate with your children for a longer/shorter bedtime. You negotiate with your neighbor about the property line. One thing you shouldn't ever negotiate is the cost of a cake, however. Especially if it's from a small business, especially if they work from home.
Why? Two reasons:
1) They are a small business. They're not paying a CEO. They're not paying for million dollar commercials on TV. They're paying for their mortgage, soccer gear for their kids, food for their table, and their way of living.
2) Your cake is their paycheck. Would you want someone negotiating with you for your paycheck because it's not in their budget to pay you? I didn't think so. It's rude and disrespectful. You're asking them to provide you with a service. Be courteous.
So let's say you want a cake for 40 people, and your budget is $100. You ask Julia McCaker for a quote and it's (gasp!) $200. You REALLY love her cakes, and you couldn't possibly go without one for your event. WHAT DO YOU DO?!
Don't respond to Ms. McCaker by saying, "That's WAAAY too expensive! You expect me to pay for THAT? It's just cake! Why can't you do it for $100?" Say that, and Ms. McCaker will automatically respond with, "I apologize, but I am fully booked for that day," or "Then I cannot accommodate your request." Most decorators have carefully calculated out how much they need to charge based on materials, experience, labor, and ingredients. Being told that they're too expensive not only undermines their business, but also makes them look at you in a different way. As in, they'll look at you as a potential "black list" customer and will not want your business in the future.
Instead say, "That is a little out of my budget. Is there an alternative that could fit my budget?" Be reasonable and don't go ballistic. They may suggest things like only getting a portion of your guests cake, and getting other desserts as a substitute. After all, not everyone likes cake, or some may share a slice. They may suggest a simpler design, or a cake that takes less labor. They may even suggest another decorator that is more comfortable working with a tighter budget.
Julia McCaker and most other decorators want to help you obtain a beautiful cake. Keeping a level head (on both ends) and being respectful is the best way to go about business, with both parties coming out on top.