How to Raise Your Rates Without Spooking Your Clients
Nothing stays the same price forever. Your grandparents paid five cents for a gallon of gas; you pay about $4 per gallon. Those “good ol’ days” of 25-cent steaks and 10-cent loaves of bread are not coming back for the simple microeconomics reason that a healthy supply and an increasing demand result in inflation.
If you’ve been providing freelance services of any sort and seeing your client base and work increase, it’s only fair that you increase your client rates. After all, if you were employed by an outside employer, you would expect a yearly raise or at the very least, a cost-of-living adjustment (i.e., COLA).
The issue, of course, is how you can raise your rates without scaring away your current clients. Here is a step-by-step guide on how you can go about raising and justifying your higher rates:
1. Create some professional goals and achieve them.
If you are employed with an outside company, do you think your boss will give you a raise just because you want one? Or because you feel you “deserve” one? Nope. Companies are typically built around the idea of issuing raises based on merit, meaning that the employee has not just fulfilled his/her required job duties but has actually gone “beyond the call” and performed additional tasks not related to the job.
In like fashion, you must go beyond your agreed-upon tasks with your freelance clients. This going beyond may entail obtaining extra training/education, finding additional business opportunities for your clients, etc. Whenever you do go “beyond the call”, make sure your clients know about these extra efforts. In this way, you start keeping a record of your accomplishments and extra efforts, a record that will come in handy later on.
2. Create a “warm” letter campaign.
Perhaps you’ve played the game “Hot/Cold” with your friends, where the object of the game is to go somewhere or find something after being prompted several times by your friends who tell you that you’re either getting warmer or colder. Naturally, you want to get “warmer” and eventually find that hidden object or secret location.
A warm letter campaign works along those lines, telling your clients about the services you currently offer as well as those services you’ve improved or added at no extra charge. The letters also hint that something is at play here, just not exactly what. Thus, your clients are getting “warmer”, but they have yet to fully understand the “hot” item you’re soon going to introduce. Ideally, you want to send several such warm letters over the course of 3-4 months.
3. Announce your (eventual) rate increase.
At this point, you are ready to announce your rate increase to your freelance clients. However, you should “cushion” your rate increase by at least two months. This way, your clients are informed about the rate increase but, since it’s not effective immediately, they’re also less likely to worry about it.
If possible, it’s a good idea to increase your freelance rates at the start of the new year and notify your clients about this event as early as September or even August. Another possibility is to increase your rates with every client work anniversary you observe. For example, if you started working with a client in April 2012, you may wish to announce your rate increase in February 2013, to become effective April 2013.
What if your current clients balk at your request?
Some freelance clients are just not going to agree to your rate hike, arguing that they can get the same services for less money from other freelancer workers. But you can still win them over to your side with what I call a Value Proposition.
What is a value proposition?
Consumer psychology works this way: Consumers are willing to pay more money for something they judge to be a good value for their money. This is often the reasoning behind “Buy X Get Y Free” deals; even if you had no intention of buying Y, you know that this free item makes the purchase of X a good value for the money.
You can create a similar “deal” for your client by offering to throw in extra services at (ahem) no extra charge if s/he agrees to your value proposition. Maybe those extra services include social media marketing, keyword optimization, an extra logo, etc. More than likely, your client will never need these extra items- but who knows, right? The fact that the client now has this option makes your offer much more attractive.
About keeping a record…
Remember how I mentioned keeping a record earlier? The reason you should keep a “beyond the call” track record is because, at some later point in time, you may wish to show your clients just how many services you have provided to them during your tenure, including those extra no-charge ones that they’ve probably forgotten about by now. This is where keeping a record of your work comes in handy. Make a list, check it twice- and then send this list to those clients that are objecting to your price increase.
Consider trimming the fat.
In the end, you may have one or several clients who simply won’t agree to your new rates. At this point, you face some important questions: Do you continue to work with these freelance clients and hope for something better next year? Do you cut back on the amount of time spent working on their projects? Alternately, do you end your contract with them altogether?
There are no easy answers; however, one thing you can do is analyze how much of your time each your clients consumes and if the payoff is worth your effort. As is often the case, you might figure out that 20% of your clients eat up 80% of your time. If these clients are also balking at your new rates, it might be time to “trim the fat”.
Of course, not all compensation can be measured in dollars and cents. Some clients can’t or won’t pay you very much; however, what they offer you in terms of training, a byline, recommendations, exposure, etc. is invaluable.
Still, keep in mind that this is a business and your mortgage, bills, etc. can’t get paid on recommendations and exposure alone. And, as I like to say, people die of exposure!
Photo credit by Key Foster