So you’re sold on value-based pricing, and now you want to start commanding a higher price point by raising your freelancing rate. Awesome!
…But how do you broach the topic with your existing clients? How do you raise your rates with your existing clients?
This is one of the most frequently asked questions I hear whenever I give a presentation or conference talk on charging more as a freelancer. Once somebody understands how to sell a client on the value that they’re delivering (and the resulting price increase that value justifies), it becomes obvious how to sell future clients at a premium price. Almost inevitably, the followup question will be: “Well, what about my past clients?”
As a freelancer, you’re constrained by your time and availability.
Some companies should grandfather in their existing customers when they decide to raise their rates. A software company can happily keep you onboard as a customer and sell 10x more licenses to their software without increasing their overhead by ten-fold. But you only get so many hours a week that you can help your clients.
So any time you’re spending working with old clients who are paying you a low rate is an opportunity cost you’re missing out on. If you’re getting paid $50 an hour for that hour, but could have billed $100 for that same hour, you’re literally losing money.
Raise your rates by offering a better product
If you want to charge more to your clients, you know you need to provide a more premium product. This doesn’t mean that you need to become significantly better at your craft or diversify your skill-set; rather, you just need to learn how to be more solutions-oriented.
When you decide to raise your prices on your current clients, you can’t expect to just say something like “starting Monday, I’m going to be charging you $100 an hour instead of $50.” As you can probably expect, that won’t go over well. And if your client does go along with your price hike, they’re going to do so begrudgingly — and you can guarantee they’ll be immediately start looking for your replacement.
This is the tap dance that most freelancers don’t know how to get around.
It’s often expected to maybe raise your rates by a few percentage points each year to compensate for inflation. Plus, most of your employed counterparts expect to get a small raise annually, so why shouldn’t you?
But sudden upward shifts in pricing is usually met with resistance. Most clients aren’t willing to start paying a lot more for the same “product.”
So if you want to charge your current clients more, you’re going to need to sell them a more premium product.
The best way to deliver a better product is to make the work you do more likely to deliver the business value your client’s expecting of you.
Practically speaking, it means that you spend more time on high-level business-y things than you’re probably doing now.
- You’re actively working with the client to help them figure out how to solve the business problem behind their project.
- You’re helping prioritize the work that has the most impact and chance of yielding a return-on-investment (ROI).
- You’re tracking and analyzing KPIs (key performance indicators) that matter to your clients, like conversion rate, customer lifetime values, etc.
So instead of just doing the technical and creative work you’ve been doing, you’re focused on actually consulting with your client.
Depending on the relationship you have with your clients, it’s sometimes an uphill battle to let them know that you’ll no longer be just a “hired gun,” but that you’re also going to want to help them on a high level. Some clients just won’t buy it. And that’s OK, because you can’t win them all. But for the ones that will…
“I’m making some changes to my freelancing business that will help me deliver successful projects to my clients, and not just technically correct projects. I’m going to start getting more involved at a higher level and helping my clients make sure that the work I do for them guarantees an ROI for their investment in me.
In concrete terms, this means I’ll be helping my clients in a lot more ways that I have been in the past, and this will multiply the business value that I’m able to deliver.
Because of this increase in value, I’m going to be raising my prices across the board with all of my clients, current and new. I value our relationship, and I realize that you probably haven’t anticipated or budgeted for this — but that’s OK.
For the next two months, I’ll be delivering this new service to you at no additional cost. Starting immediately, you’ll be getting more valuable deliverables from me. I’m confident that two months from now you’re going to see just how much more valuable the service I offer you is. And if you don’t, I’ll make sure that I’m here to help you transition to another freelancer between now and when I’ll be raising my prices.”
Give your clients a free trial
You’ll notice that what we’re offering is to give them a more valuable product at the price they’re currently paying.
This creates an imbalance. The value you’re deliver far outweighs the value you’re receiving from them (money.) And you’re unwilling to negotiate your costs.
Instead of you stiffing your client with an extraordinary and arbitrary price increase, you’re giving them something unexpected and a new service that’s better than what they’ve been getting.
They’re now getting to trial a new and improved service at no additional cost — so, psychologically speaking, you’re not the thief, you’re the hero.
Should your client not see that you’re not worth your new price, you’re giving them an out. You’re letting them know that when the time comes, you’ll help them transition off you. What you’re doing here is you’re overcoming a huge objection they have to paying more, and giving them a risk-free trial.
Clients will pay for value, especially when it’s obvious to them how what you’re giving them will generate an ROI for their business.
So don’t be afraid to raise your rates on your past clients. Be confident and charge what you’re worth. If you don’t end up converting 100% of your clients to your new pricing, that’s perfectly fine — you can’t win them all, and your time and availability is in limited supply.