IF YOU HAVE THE RIGHT CONVERSATIONS NOW, YOU CAN RAISE YOUR RATES AND KEEP YOUR BEST CLIENTS, TOO.
If you're one of the 53 million freelance workers in the U.S., no one’s going to decide to give you a raise. If you want to earn more, you’ll need to negotiate with your clients for a rate increase.
In theory, that’s no big deal. It’s just business! The problem is that many free agents create long-term relationships with clients, which makes asking for more money feel awkward and scary. Sometimes that fear leads to bad situations. I’ve seen hundreds of people’s time logs over the years, but the only 100-hour workweek I’ve ever seen was from a self-employed accountant. The problem? She hadn’t raised her rates since the 1990s.
The good news, though, is that many organizations are creating their 2016 budgets now (in Q4 of 2015). Laying the groundwork now for a higher price point in the future vastly increases the chances that you’ll get it. Here’s what to do to raise your rates in January, while keeping the clients you want to keep.
1. KNOW WHAT YOU’RE WORTH
An employee approaching her boss for a raise would be advised to research what other companies were paying. Likewise, as a free agent it’s good to know what other people are charging for similar services. Reach out to people you trust for advice. Also, consider what you’ve done to boost your value to clients. Elisabeth Sharp McKetta is an editor and writing coach based in Boise, Idaho. "I had been charging the same hourly rate for all writing services for years, and throughout those years I had gained experience, publications, and a PhD," she says. "It was time I revalued my time."
2. ANALYZE YOUR TIME
If you’re charging by the project, or a monthly retainer, then some clients are already more profitable per hour than others. That's a good thing to know. Track your work hours to figure out which clients are a dream, and which you’d be okay with shedding. In the accountant’s case, one difficult client was taking 40 hours a week alone. That’s an easy target for hiking rates, or offloading. On the other hand, some clients may already be paying your new desired hourly rate, so nothing needs to change.
3. FLOAT NEW RATES WITH NEW CLIENTS
This is an easy win. "One morning without any fanfare I changed my hourly rate on my website from $60 to $80," says McKetta. "When new clients emailed about manuscripts, I explained my services and told them my rate. I didn’t mention the old rate; it wasn't relevant." If you tend to negotiate prices rather than posting them, use inquiries from potential clients to test what the market will bear. If it’s business you never had in the first place, why not ask for a lot? If the potential client says no, you’re no worse off than when you started. If he says yes, you’ve got a new high-paying client, and a point of evidence on your desirability to share with existing clients. If your business is constantly adding clients, you may not even need to raise rates on the old ones. "As a matter of loyalty, I kept existing clients grandmothered in at the old rate," says McKetta.
THE FACT THAT YOU NEED MORE MONEY IS NOT A COMPELLING REASON TO PAY YOU MORE. THE ONLY REASON TO PAY YOU MORE IS THAT YOU’VE ADDED VALUE AND WILL ADD EVEN MORE IN THE FUTURE.
4. SHARE WHAT YOU’VE ACCOMPLISHED
Schedule Q4 conversations with existing clients to remind them of what you’ve done for them. "Don’t think of it as a money conversation. Thing of it as a big-picture conversation," says Terri Trespicio, a branding strategistwho advises clients on rates. Focus on the value you’ve added, particularly anything that’s grown the bottom line. To a client, the fact that you need more money is not a compelling reason to pay you more. The only reason to pay you more is that you’ve added value and will add even more in the future. "Dream big with them for the next year so they see you as a critical part of their growth," says Trespicio.
5. ASK WHAT OTHER SERVICES YOU COULD PROVIDE
The easiest way to raise your rates on existing clients is to offer new services that you weren’t providing in the past. There’s a simple way to figure out which services clients would value: ask. Trespicio suggests this script for your Q4 meeting: "How do you feel this is going? Are you getting everything you need? Could we be doing more? Here are some ideas I had." You and the client could agree that you try providing those services gratis for a short time, with the agreement that the client will start paying for them soon.
6. EMPATHIZE ON THE BUDGET
If the client tells you that he’s actually not looking to add new business, and that the budget will be smaller next year, that’s important to know. You can still raise your rates by offering to pare down your services. Strategize with your client on what he will need in the new year and what he won’t. If you do 50% of the work for 60% more money, you still come out ahead.
7. LET YOUR CLIENTS CHOOSE TO PAY YOU MORE
Another relatively painless way to increase rates is to tell clients that, come the new year, you’ll be introducing tiered pricing. Clients who want to continue paying what they have can do so for a basic level of service. You might outsource some of your tasks to an associate you’d supervise. "A big way to raise your rates is to stop doing all the work," says Trespicio. Clients who want more access to you personally can pay a new rate for "premier" service. Say how much you enjoy working with the client and, given all the new higher-paying clients you’ve brought on, this is how you can continue to provide the personal service he’s enjoyed in the past.
8. TRAIN YOUR CLIENTS TO EXPECT RATE INCREASES
If you’ve had your clients less than a year, you can tell them that small annual increases are just part of your operating model. "A 3% increase each year is easy for most clients to tolerate, while a 10% hike every five years brings a backlash (even if it would have worked out to be less for them in the long run)," says Kelli Brown, CEO of Pixel/Point Press, a digital marketing firm that uses the annual approach. If you’ve had your clients longer than a year, you can announce that your model is changing from previous years, but consider offering another 6 to 12 months at the old rate as a goodwill gesture.
9. PROMISE NOT TO LEAVE ANYONE HANGING
While you no doubt love your clients, this is your livelihood, which means you may need to move on from clients who can’t grow with you. During your end-of-year conversation, mention that you’ll be raising rates in the new year. You might leave a little wiggle room for your favorite clients, but if they won’t be joining you for the journey, use the rest of the year to find someone else who can provide the services you do for less, and bring that person up to speed. This is the ultimate win-win. You’ve helped another free agent who’s starting out, you’ve left your client in good hands, and you’ve freed up space for higher-paying work. That’s a great way to start the new year.
original post here on FASTCOMPANY.COM