How to Raise Your Rates with Existing Clients

Every Freelancer I Know(Myself Included) Made The Same Mistake Starting Out: Charging Too Little

Maybe it’s because they didn’t have experience. Maybe it’s because they thought the formula was rate = salary rate / 2000. They didn’t consider all the overhead and liability of being an independent business owner.

The Good Ones Wise up.

They start to charge their new clients more. $50/hour becomes $60 becomes $75, maybe even $100. But then, you have a conundrum. You still have old clients. Loyal, long-term ones that pay your old rates. These old dogs are paying $50/hour while the shiny new ones are paying $100 for the same work.

On the one hand, the long-term clients have changed from stable income to liability. You could replace them with someone that pays double. Keeping them around is bad business.

On the other hand, they bet on you when few would. They hung around through some tough times while you were learning the ropes. Raising prices on them or worse, kicking them to curb feels unfair. Not keeping them around is bad business.

So what are you supposed to do?

You should raise your rates, but do it the right way. There’s a way to respect both your relationship with the client and your own business. Here’s how to approach it:

Pick a Date At Least 30 days Away.

I always did my rate increases on January 1st. The benefit was two-fold. First, clients are more likely to make buying decisions for the next year at the end of the previous one; it lets them get a big tax write-off at years end and pursue new initiatives in the coming year. It also made it clear that this was a planned business move, nothing personal. Lots of companies make changes in the new year. Your clients, as business people, should understand, and respect that.

If you can’t wait until then, the starts of fiscal quarters work well: April, July, or October 1st. Any date so long as it doesn’t look arbitrary.

Don’t spring a rate increase on your clients.Your invoice should never surprise. Give them 30 days notice minimum. 60 is better.

Pick a Reasonable Increase: No More Than 50%

Rate increases are more likely to be accepted if they sound reasonable. If you try to jump from $20/hour to $10,000/week, you are going to raise a few eyebrows and get more than one boot on your ass. Don’t raise your rates more than 50%. Even if you are charging the old client $50/hour and charging new clients $100, consider increasing their rate to $75. You could tell them you charge others $100, but since they have been a long-time customer, you are cutting them a break.

Draw a Line in the Sand Between New and Old Work

Tell them that the deadline is the deadline for new work booked, and does not affect the rate of previous agreements. If you agreed to a 50-hour project at your lower rate, you need to do that work at your lower rate, no matter what. Letting people know that there is a rate increase coming gives you a sense of urgency. Use it.

Don’t Say The “I” Word

Don’t call this a rate increase; it’s just a price change. Be direct and professional. Don’t apologize and don’t sugar coat. You are a business person making a business decision and communicating that decision in a professional manner. Act like it. Own it.

Explain Your Value

Higher prices typically mean a higher quality of service. In what ways has the value of your service increased, or will increase, for your clients moving forward? Here are some examples:

● You’ve become better and faster at what you do. Your work is worth more now than when you started.

● Raising your rates means that you have to take on fewer clients so that each client will get more of your focus and attention.

● You’ve added or will add new parts to your service, increasing the value.

Bring these to your client’s attention when you bring up the rate increase. Don’t assume the justification is obvious, politely bring it to their attention.

Putting it All Together: An Example Email:

Hi Client, I want to let you know I am changing my billing for the for next year. I'm changing my business, so I can take on fewer clients, and give more specialized attention to clients like you. All work booked after January 1st will be billed at the rate of $100/hour. All worked booked before then will remain at the old price. Please let me know if you have any questions or concerns. Regards, Glenn

What If They Object?

Your clients won’t always greet your rate increases with welcoming arms and open checkbooks. Here are some common objections, and how to respond to them.

“I should get to keep my old rate.”

reiterate your earlier message: They can keep the old rate for work they book now, but new work will have to be at the new rate.

“Why Should I pay more for the same service?”

Point out your value add from before, and also that you know their business more intimately than literally anyone else on the market. Your client knows you, and you know them better than anyone. That makes you worth more. You have the ultimate unique selling proposition. Now is the time to use it.

“ The new price puts you out of my budget.”

Then tell them you are sorry your services are no longer a good fit, and if you can, point them in the direction of someone who can help them.

So Pick Your Date

Do you have some older clients paying less than your new ones? Time to fix that. Choose a date, and put your plan in motion. Draft the email you are going to send.

Are all of your clients paying you the same, i.e. your top rate? Capital! Think about whether it’s time to put a rate raise on the schedule.

And Remember All Client Relationships End.

Either you outgrow your clients, or they outgrow you. Or one of you gets pissed and fires the other. Not every client relationship will survive this process, and that’s perfectly ok. You gave people every opportunity and reason in the world:

● You gave them notice of the increase.

● You gave them one last chance to get work at the old price.

● You gave them reasons justifying the rate jump.

● You gave them options if it didn’t work out.

If you follow the steps above, no reason for hard feelings on either side. And once you’re done, consider the outcomes:

● Your old clients are paying your new (or close to your new) rate. You are making more money for the same amount of work.

● Your old clients leave, and you replace them. You are now making more money for the same amount of work.

● Your old clients leave, and you don’t replace them. You are now making the same amount of money for less work.

There is no bad outcome here. So what’s stopping you? Time to fix this inefficiency in your service business.

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