How to Raise Your Rates Without Losing Clients (Even if They Say No)

Twenty Dollar NotesIt is inevitable that at some point in your freelance career, you will want to raise your rates. Many businesses and freelancers get started by offering a lower-than-average rate to entice new customers and then slowly raise rates as their experience and perceived value rises.

There have been whole books written about the best way to raise your rates and the discussion goes beyond the scope of this article. You might choose the option of gradually taking on new clients at your higher rate and phasing out the lower paying ones, but it is often preferable to keep clients that you have developed a working relationship with.

So what do you do if you tell a client that your rate is increasing and they refuse to accept it?

First, put yourself in your client’s shoes, ask yourself a few questions, and consider whether your rate change is really fair.

How Much Have You Increased Your Rates By?

An overnight 100% fee increase would be quite a shock and if you’ve taken this approach to raising your rates, you shouldn’t be surprised if your client turns you down. How much you choose to increase your rate is a very individual decision to make, but generally speaking, no more than about 20% at one time is a sensible figure.

How Quickly Did You Raise Your Rates?

Increase your fee every month and you will quite rightly lose clients – nobody wants to keep paying for a service that is constantly going up in price. If you take on a job at a relatively low rate and think you will want to increase it in the near future, agree a set time period for review with the client.

Otherwise, it is reasonable to expect that you may raise your rates every few months to one year, depending on how quickly your business is growing.

Has Your Value to the Client Increased?

You may feel like you deserve a raise just because you’ve been working for a particular length of time, but if your client is getting exactly the same service from you as when you started working for them, why should you demand more money?

If you started work at much lower than market rate, you may have an argument to increase your charges over time but don’t be surprised if the client asks for evidence of how you are providing them with more value. This is where a proposal comes in handy. Put together a great writing proposal like this sample, and they’re more likely to see your value.

This may be in the form of a higher quality service, increased sales or faster turnaround time. Consider how you have helped your client to better their business in the time you have worked for them and, if possible, present them with measurable results.

How Does Your New Rate Compare to Similar Service Providers?

There is only so far you can increase your rate before you start to price yourself out of the market. If you find you are charging more than most of your peers, you may find that clients realize they can get the same service from elsewhere, at a lower cost.

If you have reached this point, you may well need to consider other ways to grow your business such as outsourcing or developing products.

So if you’ve realized your rate change may be a little unfair to your client, go back to work, improve and enhance your services and try again in a few months, or offer a compromised rate that’s not quite as high as you initially asked for.

However if you feel like you are asking for a fair price for your services and your rate is competitive based on quality and value provided, the next step is to come up with a plan of action.

How to Convince Your Client to Accept Your Rate Increase

Successful people don’t give up the first time they hear “no” and if you slink away without a fight after your rate is turned down, it can send the message that you don’t really value your own work or have confidence in your skills and abilities.

Try some of the following strategies to win over your client and you may find you can convince them to accept your rate change after all:

  • Compromise. Offer a rate that’s lower than what you were asking, but higher than what you’re currently getting. Or you may agree to a staged increase over several months rather than one larger price-hike.
  • Flatter. Never underestimate the power of flattery. Make sure you tell your client how wonderful he is to work for and how you’d really like to discuss options for continuing your business relationship. It might just be enough to twist his arm.
  • Over-perform. This is best carried out in the weeks leading up to a rate increase but you can also do it during a crossover period when you’ve announced your new rates but not yet implemented them. The trick here is to basically make yourself so helpful and indispensable that your client will feel like he can’t cope without you.
  • Bluff. Still no luck? You can always try the old trick of cutting off your services (expressing regret that you can no longer work together) and hope that your client takes the bait and gives in to the increase. However there is always a good chance this might not work, so it’s maybe not the best strategy to try on your most valuable clients.

Identifying Valuable Clients

So what’s the next step if you’ve tried everything and your client still isn’t budging? Cry. Only joking! There is no need to panic or feel despondent – it can be a blow to your confidence when you’ve been building up to raising your rates and you’re knocked back but it’s all part of the experience of being self-employed.

Some clients will accept your rate increase without even blinking and others will flatly refuse. In this case, it’s up to you to decide if you want to continue working with them or not.

This is a decision you should consider carefully as you don’t want to develop a reputation for yourself as being a pushover and likewise, you don’t want to miss out on valuable clients who provide you with benefits beyond a regular paycheck.

So how do you decide which clients to keep and which clients to drop?

Think About the Value of Each Client in Terms of Your Ongoing Career

If working for a big business or influential name in your industry will look good in your portfolio, help to market your services, or further your career in any other way, you may well want to continue working for them. On the other hand, doing one job for a prestigious client will often provide the same value for you as doing 100 – it depends on your particular service and circumstances.

You need to decide if continuing to work for this client will grow your business in the way you want it to grow, or if they are simply preventing you to moving onto bigger and better opportunities.

Consider Regularity of Work and Reliability of Client

Does this particular client offer regular work and always pay invoices promptly? Or do they go months without speaking to you, demand service at short notice and take their time about paying for it? There’s a lot to be said for the value of a reliable, trustworthy client.

Don’t Forget Your Interests and Passions

We all take on jobs that we’re not particularly passionate about, just to pay the bills. But perhaps you have a client you love working for, who assigns you interesting and inspiring work, but they simply can’t afford to pay higher rates. In this case, you may well decide to keep working for them anyway.

Remember than work is not all about the money and one of the advantages of working for yourself is that you have the option of choosing work that you enjoy.

Don’t Dismiss Worthy Causes

In some cases we may work for a lower rate or even for free for a charity or other worthy cause that may not be able to afford higher rates. This kind of pro bono and discounted work is not something that should make up the bulk of your project list, but it may well be worth it in terms of exposure for your services and pure good karma.

Take care to tell the difference between a real worthy cause and someone who is just trying to take advantage of you. For example it’s perfectly acceptable to lower your rate for charity but think twice about accepting a low-paid job for a friend who is just after saving a few dollars.

The Last Resort

The clients who refuse to accept fair rate increases are most likely not the kind of clients you would want to continue working with anyway. If this is the case, let them go, move onwards and upwards and forget about them.

However if you’ve identified a valuable client that you would like to continue working with, you still have a couple of ways to increase your rate that are well within your power.

I would always advise service providers to work on a per-project or per-job basis rather than on an hourly rate. The reason being that if you charge hourly, you are completely reliant on your client to accept a rate increase.

If you’ve been foresighted enough to set your work rates on a project basis, there are two main ways you can effectively increase your hourly rate, thereby giving yourself a pay rise without your client even knowing!

1. Work Faster and More Efficiently

Whatever kind of work you do, if you can increase the rate at which your job is completed, you will automatically increase your hourly rate. Sometimes this just comes with practice but you can also streamline your working method by using software and tools than can help to make you more efficient and productive.

If you are a writer this might mean installing a speech recognition program to remove the limitations of your typing speed (see here for some of my tips on writing faster), or programmers may find a better environment for building applications with code hints and other time-saving features. Ask around, see what others are using and experiment with how these tools can affect your productivity.

2. Scale Up and Outsource

Another way that you can produce more work in the same time is by outsourcing tasks to others at a lower rate than what you are being paid. You do need to tread carefully here, for example, if you are a graphic designer it can be very risky to outsource jobs, particularly if you do not inform your client first!

However if you think outside the box a little, there are probably many tasks that you can outsource that will not affect the quality of your work. Perhaps you can hire a virtual assistant to manage your email account or employ someone to help proofread and format your articles.

Conclusion

It always takes a leap of faith to raise your rates and it can be even more difficult to stick to your guns if your client refuses, but 95% of the time it is well worth sticking your ground. The most important thing to do is believe in yourself. If you don’t believe your own hype, how can you expect your client to?

What are your experiences with raising rates for existing clients? If you have any tips you’d like to share, or want to add to the discussion, we’d love to hear your comments.

Photo Credit: Unhindered by Talent

About Tom Ewer


Tom Ewer and the WordCandy team have clocked some serious mileage as freelancers, agency employees and even agency owners over the years, and they love sharing their combined expertise here on the Bidsketch blog.

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Ewald

Great advice! I find that charging per project just works out so much better for everyone involved. The reality is, you need to include a yearly rate review clause in any agreement or contract, as there are cost factors that are beyond your control, like inflation, transportation costs etc.

This article is full of great advice for entrepreneurs and is doubly useful for those that have not navigated the tricky waters of rate renegotiation yet.

Ernest OYUGI

very well.I do charge on our basis for all support calls we receive from my clients but on projects we cost them on per-project basis depending on the scale of the work to be done.However, I do increase my rates yearly,I send out notices for the intention of rate increases mostly three months before the new year and I have found my clients responding very well because I give them enough time to adjust.On the contract agreements too I have a clear clause on when the rates will change.That works for me and my clients are very happy.

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