3 Smart Tips For Increasing Your Rates With Existing Clients
Picture this scenario: you’ve been working with a particular client for three years now — one of your favorite clients — but you’re stuck with the rates you first charged this client. New clients are paying more, your skills have improved, the economy is much worse and things are much more expensive, but you’re still stuck with the old rate you gave your existing client.
The above scenario is a very familiar one to most freelancers.
While charging old clients old rates doesn’t sound harmful, it can quickly cripple your business if care is not taken; if you’re charging $50 per hour for a service you should be charging $100 per hour for, and you have five clients that require four hours each of work weekly, you’re easily losing $1,000 every week (or $4,000 every month). That’s $48,000 every year. Yes, it quickly adds up!
Many freelancers have clients they negotiated rates with years ago, but the time has come to raise the rates to a more competitive level, and these freelancers are incurring a lot of short and long term loss as a result. If you’re in the same scenario and would like to change these conditions, here are some tips for you:
- Increase Your Rates Gradually and Subtly
A mistake many freelancers make is foisting a massive rate increase on their clients unnecessarily and in an untimely manner. Not only does this action have the potential to cost you your clients, it can also damage your relationship with the client permanently. For example, suddenly increasing your rates from $50 to $100 (or more) per hour can be too astronomical, shocking and difficult for your client to fathom. Just yesterday, this client was paying you $50 per hour, then you simply want to demand $100 per hour? Very few people will agree to this type of increase. Sometimes it helps to remember that making $0 per hour would hurt you a lot more.
The solution, however, is to gently and reasonably increase your rates: going from $50 to $55 or $60 per hour is easier for your clients to be able to understand. If you increase your rates this way once or twice a year, your client can handle this change. I recommend only applying the once a year raise in price, unless something else is dictating that you have no choice.
Interestingly, the effect of making slow, subtle changes has been proven by psychology through Weber’s Law of Just Noticeable Difference. Slow, subtle changes, though not actually welcomed can be adapted to, and are not as easily noticeable. Sudden, drastic changes are however, passionately resisted.
- Don’t Simply Increase Your Rates: Add Something Extra for Them
Sometimes, the rate increase you are required to put into effect is so steep that there’s no way around this action. For example, you might have to increase rates from $50 to $70 or $80 per hour almost immediately for things to work out for your company, and in that case you face a dilemma. You don’t have to fret, however. The solution to this is to add something extra when you increase your rates.
Many people will be resistant to even paying $5 extra for the same thing they got at a lower cost yesterday. When you add something extra, however, it becomes easier to see the increase as gaining a new thing — their intelligence doesn’t feel insulted, and they will more readily agree to your rate. Offering an outreach to relevant publications or influencers with the rate increase suddenly shows that you’re offering more, not taking them for granted, making a client more likely to adapt to your new rate.
- Set Expectations Earlier On
More importantly, you should make sure to set expectations that your rates can go up anytime — especially when you’re just beginning to gain new clients.
There are many ways to go about this, but you definitely don’t want to give a new client an impression such as this, “I’m only after your money and will be increasing my rates every other week.” Instead, set expectations by giving ranges of prices and not charging the same for all your services.
If a client asks you how much you charge, instead of saying “I charge $50 per hour,” you can say “I charge $50 to $100 per hour depending on many factors, including the type of work being done.” This way, expectations have been set and you can comfortably expand your per hour charge in the future when this becomes a necessity, since he already is aware that this will occur.
There may come a time when you need to increase your rates and you can be ready for this eventuality with the confidence that is bred through preparation.