How To Raise Your Rates Without Losing Clients
Do you break into a sweat at the thought of raising your rates and having to tell loyal clients that you’re going to have to start charging them more?
Is your biggest fear that all your clients will walk away if you add even a tiny increase to your current fees?
As the new year is approaching, it’s a key time to get your business in order, focus on your strategy and ensure your business will not only be here this time next year, it will be thriving. Of course, earning the money you deserve for the value you add to your clients is a big part of that and many freelancers often don’t charge nearly enough.
One of the most common questions I get asked when coaching clients is “How can I raise my rates without losing any clients?”
So far, none of my clients have lost any of theirs once they’ve broached the subject of their increased fees and many, much to their pleasant surprise, have been met with the same response – “I’m surprised you haven’t done this sooner”.
If the fear of losing clients is holding you back from raising your rates, here are some pointers to help you broach the thorny subject of asking for more…
Create a pricing strategy
This is the first and most important point and very often one of the key things missing from a freelancing business. Before you even consider raising your rates, make sure you have thought out your overall pricing strategy.
A pricing strategy is basically a well-thought out plan for how you decide on the fees you charge for the range of products and services you offer. It’s not simply a ‘finger in the air’ guesstimate of how much you fancy charging from one month to the next but a coherent calculation based on a logical structure for your pricing.
- Do you calculate your services on an hourly rate?
- Do you charge for your work on a set project basis?
- Do you use performance- or results-related pay?
- Are the incremental price increases between each level of your service/product well thought out?
An Example Pricing Strategy
Your pricing strategy can be a simple excel table of the different services you offer and how you’ve calculated that fee. For example, if you offer consulting or coaching services, your pricing strategy may be as simple as:
- Minimum hourly rate = $100 per hour
- Average hourly rate = $125 per hour
- Premium hourly rate = $150 per hour
And the options you offer prospects and clients are:
- 1-5 hours at $150 per hour
- 5-10 hours at $125 per hour
- 10+ hours at $100 per hour
Or if you package up (aka productise) your service, you may end up with something that looks like this:
- Get Started Program at $300 (costed at 2 hours x $150)
- Boost Your Progress Program at $625 (costed at 5 hours x $125)
- Premium Results Program at $1,000 (costed at 10 hours x $100)
Once you’ve got your basic pricing structure sorted out, you can then start to plan out how your rates will increase over the course of the next 1, 2 or even 5 years.
When you are planning your rate increases, you might want to ensure you’ve covered aspects like rates of inflation, planned investments or any increasing costs faced by your business over the next few years.
Share the key client-impacting elements of your pricing strategy
I’m not recommending that you share the ins and outs of how you calculate your rates but I would definitely consider explaining your pricing policy up front or in your contract to new clients (and existing ones if this is the first time you’re implementing this).
If you are working with a client for the first time, try this:
- Present your fees in a logical, structured manner that makes it easy for them to understand and select the option that is best for them.
- Introduce them to the concept that your rates are not static and will be raised according to a strategic plan.
- Explain what that plan is – for example, annual rate increases on the 1st of January and/or a 5% increase to all your fees every time you add to your qualifications and skills.
Sharing this kind of information with new clients at the beginning of your relationship sets this expectation upfront, enabling you to initiate the conversation more easily in the future. An added benefit of doing this is that you’re demonstrating to clients that you do indeed have a strategic pricing strategy and won’t just be raising your rates and asking them to stump up more cash whenever you feel like it.
If you would like to raise your rates for existing clients, then just be honest. Explain that you have been working on a new pricing structure recently and if necessary, share some of the details of this with them. Initiating this conversation with existing clients may feel uncomfortable at first, but it is an effective and inclusive way of communicating something to clients that is ultimately going to impact them.
Do it with confidence
If you are 100% confident in the service and value you offer your clients, then you have absolutely nothing to fear from raising your rates.
As long as you are following your planned pricing structure and not just implementing an increase in an ad hoc manner, you are fully justified in raising your fees; if you’ve implemented point 2, your clients should even be expecting it.
The benefit of raising your rates according to a strategic plan means that you have clear reasons and justifications for doing so.
If a client questions your actions, then try this:
- Explain the reasons behind the increase in a confident, non-defensive tone.
- Highlight any additional training, qualifications or investments you’ve made in the business which justifies the increase.
- Find a way to demonstrate the added value you can now provide to justify the increase
And don’t forget, in your explanation often just using the word “because” has been shown to induce a more accepting state in people.
As far as timing goes, don’t drop the bombshell on your clients a day before you expect them to pay your increased fees. Consider giving them at least 1 months’ notice and be sure to tell them when your new pricing structure will be implemented.
Sweeten the deal
I’m sure you’ve heard it before but it’s worth repeating… client retention is much easier and cheaper than client acquisition. So what does that actually mean to your business? It means that focusing on keeping your existing clients happy whilst you’re on the hunt for new clients is a smarter strategy than focusing all your energies on constantly generating new business to the detriment of existing ones.
That being said, this is not a reason not to raise your rates! Your existing, loyal clients are probably loyal because of the service you give them, not the rates you give them – the one exception being that your business USP (unique selling point – the thing that sets you apart from your competitors) is a low cost strategy.
If your loyal clients’ feathers get a little ruffled when you raise your rates, then consider offering them a value-added service to smooth over the ripples.
Some examples?
- If you’re a web designer, offer to give your best clients a complimentary review of one of their sites.
- If you’re a graphic designer, offer to make some tweaks to one of their existing designs or freshen up their logo.
- If you’re a coach or consultant, offer them, a colleague, relative or associate of theirs a complimentary session.
Not only is this a great way of thanking them for their continued business, it’s also a way to demonstrate the additional value you can add to their lives and perhaps introduce them to some of the other services in your range.
Once you have implemented your pricing increase, ensure you continue to deliver your highest quality service or products to clients. Continuing to demonstrate your ability to solve their problems and deliver what they ask should help to smooth over the initial impact of your increased rates.
If the worst happens, ask yourself “why?”
If clients walk when you raise your fees, it’s usually got something to do with the perception of value – they don’t feel they’re getting good value for what you’re charging or what you plan to charge.
If you suspect that’s the reason, then take an unbiased, honest look at the services you offer to ensure you are happy with the value that you provide.
On the other hand, if you’re more than confident with the value you provide, then perhaps the lost clients are not the greatest loss in the world. The clients who’ve walked are often the least desirable clients who never appreciate the value you provide; they may be difficult to work with and often end up costing your business more than they bring in, in terms of the additional time you spend keeping them happy.
If that’s the case, don’t sweat the loss and simply move onwards and upwards.
The fear of losing clients when you raise your rates is often nothing more than an irrational fear. Every year that you’re in business, you offer one more year of experience to your clients; one more year of learning; one more year of expertise. Doesn’t that in itself justify at least an annual increase in your rates? Follow the advice above and your clients won’t need to ask why, they’ll simply know it’s a standard part of your business policies.
The one thing that most people say to me once they’ve broached the subject of raising their fees is this: “I can’t believe I didn’t do it sooner”. I’m sure it will be the same for you.
Leave a Comment
whew this is nice.. thanks for sharing the pricing list per hour.. I dont rate per hour in my freelance thats why when I read this article I was spending time reading this one and print a hard copy on it… I like reading this one..wow this is nice thanks leo for sharing to us this very helpful starategies, hehehe, thanks again.
This is very useful and interesting topic to us as a freelancers…I’ve wondered before that if I increase my rates maybe my clients will suddenly gone…But, this article gives me an idea on how to deal with this kind of situation without loosing my client.
Thanks a lot Lea…
This is a great article. I don’t have any problem with raising my rates but a lot of people do. When you work for yourself it’s tough to gauge sometimes. Thank you
oh, Thanks Lea sorry for the wrong acknowledgment… your article is so nice, keep sharing to us lea.
I’ve raised my rates a handful of times over the past five or six years, usually by about $20 each time. Never lost a client. Just did it again this morning, feeling like I was pushing my luck but knowing, also, it’s what I needed to do to be less stressed in 2008. Sent out a short, clear explanatory e-mail to all clients. A few “thanks for the info” replies. Then, later in the day, I was talking to one of my favorite clients on the phone and she actually thanked me for the e-mail. Every time I do this, it makes me wonder just how far back I could have been charging the higher rate!
Hi,
I’ve triad before to do that but the worst has happen, now i know whay
thanks a lot for this topic
Please share why. Anything you can bring to the table is appreciated.
I’ve been arguing with myself over how to go about raising my rates next year. This gives me some good tips to use as a starting point. Your article was excellently timed (for me, anyway)!
Getting swapped with low paid work is also bad for your clients because you only have a limited amount of hours that you can work each day.
I’ve been thinking about the idea of changing premium rates for urgent next day delivery jobs, like press releases etc. I think it might give the client some incentive to rationalize which jobs are really urgent, rather than expecting next day delivery for everything they send.
Freelanceswitch has become one of my top ten reads! I’ve never actually commented before but always wanted to. Another really informative post – thank you.
Idil
Great, great article.
Since we opened our business, we made a point of sitting down to examine our pricing structure twice a year, about a month before the 1st of January and the 1st of June – every year. We check to see if the industry rates have changed, whether we’re competitive, whether we’ve diversified or increased services to buyers, related expenses and costs of doing business… Then we decide whether we adjust our rates or not.
Clients never get surprises because bi-annual adjustments mean very small ones. Clients are never surprised or indignant either – this is a business, not a charity. Restaurants adjust prices based on the cost of ingredients, grocery stores adjust the price of coffee… why should any other business be frozen in time when the cost of living increases each year?
We have lost one client only because of rate increases but have heard over 50% of the others say, “I’d happily pay more for your services!”
(To our credit, that doesn’t mean we charge them more – we charge what we feel is fair and right.)
Love the detailed explanation of it. I increase my rate quarterly, and to my understanding the client still eats it up. Of course I can’t just increase it without increasing the quality of my work first.
Excellent, informative, and practical post.
Dugg!
Good article! Thanks.
I’ve recently raised my rate (actually doubled it) because I was overwhelmed and I understood the quality of the work I provide, for the price I ask, was a bargain.
Guess what happened? Now I am overwhelmed again, but mostly new clients.
This is fantastic advice Lea! Its highly timely for me as i prepare to raise my hourly rates in January. I have never had any clients disagree or balk at any price rises, they understand its a standard business policy and appreciate the excellent value and level of service you offer them.
As a sweetener i usually offer a complimentary consultation. I find clients really enjoy being able to discuss their ideas or needs for the future in terms of their website/branding/business etc. It also provides me with a clear idea of how they want their business to progress and also how i can be a part of making that happen!
Hmmm… great article. I think I will follow your advice and see where it gets me.
I have nothing to lose.
There are some great additional tips in this article:
http://www.entrepreneur.com/money/moneymanagement/pricing/article69504.html
Things like: it’s better to call, than to email your top customers.
Over my 30-year career, each time I have raised my rates I have ended up with more work rather than less. There is the perception in the marketplace that if something costs more it must be better.
- J.
Exactly! You have to look at your business as a “luxury” brand. The more expensive, the better the quality (most likely!)
Thanks for the nice post. People must realise also that those rates above are for examples only.
Terrific information and advice, thanks. I was literally fighting with myself in the car this morning about this exact topic. I’m going to be bold now and push the prices up. And like Jeff says above, I’ve read several times of people increasing their prices and getting more (and often better) clients.
Lea,
EXCELLENT article.
I raise my rates at the beginning of each year (and sometimes in the middle if I get a monster backlog). My strategy is to have a higher rate for new clients and keep the rate for existing clients at least for one full calendar year (older clients move up to last year’s rate). That way, I can see if the new rate will “stick” and not get in the way of new business while using a “proven” rate on existing clients.
I do the same as Andy, with charging more for new clients and raising rates slowly for long time clients. It’s working pretty well. I like how I can “try out” new rates and see how well they jive.
I purse a similar tactic to Andy. Where I charge new clients slightly more and raise existing client rates slowly.
Raising rates is sometimes a difficult call. Often I wish my rates could fluctuate with a particular client because they ask for projects that require varying degrees of time, difficulty, etc.; I earned this account when I was starting out and originally quoted them a very low price as I was an unproven designer at the time. Everytime I try and broach the subject of a rate increase they discuss going another direction. This is an excellent strategy for raising my rates without incurring the discussion of other designers.
Thanks FSW,
e.
I have to say I think this post of Lea’s has to be one of the best on FreelanceSwitch, I was blown away when she sent it in!
Raising rates is always hard, when I freelanced I raised my rates all the time, the hard thing I found was that I couldn’t bring myself to do it to every client all at once, so there were always some clients on different rates which became really hard to keep track of, after a while!
Aaaaw Collis, you are lovely!
And thanks everyone for the comments – there’s even more great evidence in the comments thread that there really is nothing to fear from raising your rates and some of your clients may even thank you for it – thanks for sharing your success stories!
Starbucks charges $5 for some coffee, and I haven’t heard anyone complaining. If you do good work, rate raising is justified.
Thank you for useful advices. Hope when I use them I won’t lose clients
Thank you Lea for this great article to think about my own price strategy. Everybody know how important every customers is, but everybody have to pay the bills every day. Your ideas will help to improve the own position in the business.
Ralph
This is a two year old blog. Try raising your rates now. If they haven’t got anymore money you aren’t going to get anywhere. I’d stand pat for awhile to show solidarity with the current economic climate. It’s hitting everyone but the bankers now.
Amazing article, Lea.
(Geeze, I love this blog…)
Every time I quote a per-project Price to a client, and they quickly accept it without hesitation I think to myself “Well…that certainly wasn’t high enough!”
I personally find that if you NEVER hear any complaints about your prices, then they are TOO LOW! Don’t be stagnant, this is your business – NOT you helping a buddy move his couch.
You mantra should be “keep raising your rates until you start to hear complaints, that’s when you know you’re there!”
Good luck!
ez
Pricing does matter. It communicates your value. Be confident with your skills and you have nothing to fear. There will be enough clients for you to capture if you are competent.
I am a Hand Analyst here in India. I reveal the unique Life Purpose to clients on line. Two years ago I was taking mere US$ 40 only. Now I take US 100 and every client is happy and satisfied to pay for that. Clients usually come by references. Someone told me that if clients come by reference then you should increase instead of decreasing because your efficiency has been established.
Your Life Purpose is in fact true you yourself who when live effortlessly the life you were meant to live. It’s having an infallible Instruction Manual for Your Life. It’s being in direct touch with the deep unshakable roots of your existence or being. It’s like understanding what holds you back so with this help you can turn your greatest challenge into your greatest strength.
Some clients say whatever I take is in fact is nothing comparing to my services rendered. Wow! What is the compliments. But for the time being I will not increase. Some experts are taking US$500 for that.
Lea, absolutely fabulous article. Thoughtful, detailed, powerful!
People do still cringe at the idea of raising their prices, when in actuality, even in this economy, it’s possible.
You just need a plan for what to charge and how to share your price.
Personally, I favor no naked numbers. Let me explain…lol
Clients expect to pay for services. It’s not a secret to them. What seems mysterious sometimes is how the price is set. It’s your job to reassure your client that they aren’t being taken for a ride. (Not because you’re that type of pro but because we are ALL consumers who worry about that)
Hence, no naked numbers. You have to clothe the number in context that your client understands and can acknowledge the value he will receive.
This is where you educate the client about the fabulous-ness of you and the pleasure of having an ongoing, successful relationship with you. (You want to write this down and practice if you’re not used to tooting your own horn.)
Half the battle of getting the price you want is know how you want to grow your revenues, and the other half is having the confidence & courage to say it!
I’m passionate about this because I did a pricing survey last year where folks told me how much they hated this topic.
Thank you for the great advice. I am about to go through with my first price increase with my clients and was dreading it but feel better prepared now!
I’ve been working as a VA and Online reputation manager. I’ve gradually increased my rate from $1-$4.5per hr but the problem is, it’s not easy to convence existing client’s to increase the rate. And i’ve many existing clients with lower rates. So i don’t know what to do now. I can’t end the job because i work on odesk there they have rating system.