I have been designing for a couple years now, and while I have raised my rate in general there is one client who has been my bread and butter for quite some time. I manage all their sites and they keep bringing me new sites to build and maintenance to do on the existing ones. They are very happy with me. I have kept them at my original rate of $50 for over a year now. But the work is getting to be enough to where I need to consider bringing someone on, but I just can’t do it at that kind of money. I’m nervous they will leave, but I really don’t think they will. I plan on asking them for $65, even though my actual rate will go from $65 to $75. Does anyone have advice on doing this or best ways to present diplomatically? Thanks!
[font=verdana]The best approach is to be honest and to make it clear that you don’t want to put your prices up but you can’t afford to keep them as they are. Explain that as your business has grown and developed you’re having to take on an additional member of staff, and that you’re putting the price for new clients up to $75 but, in view of the fact that this is a valued client who has brought a lot of work your way, you’re prepared to offer them a discount. You believe that that is still a very good rate and you think it’s unlikely that anyone else can offer the same quality at a better long-term price, and you hope that they will understand.
Realistically, a client who is paying you less than you need to keep going is not worth holding onto, so if they walk away rather than paying $65 then you’ll probably be better off than if you keep them on at $50. A couple of things to consider – first, are you happy for them to pay a discounted rate in perpetuity, or would you want to bring them up in line with your normal rate in a year’s time? If you’re planning to do that, you should warn them that the discount is time-limited, otherwise you are going to come across as less trustworthy when you push their price up again next year. Second, using what you know about the client, think about whether they will want to haggle. Some people do, and like to think they’ve knocked you down, while others think that if you’re able to give them any more money off then you were trying to overcharge them in the first place – but think about whether you could afford to go down to $60 if they don’t sound happy, or if you’re better pitching for $70 so that you can drop it to $65 if they make a fuss.[/font]
I think you don’t need to over think this - just raise your rate. When you do, be sure to demonstrate your loyalty to your ongoing client by giving them a discounted rate (like you mentioned you would). That is all the diplomacy you’ll need - just be appreciative, and straight-forward and it should be fine.
"I wanted to let you know that I will be raising my hourly rate to $75/hr effective (some date, give them 30, 60, or 90 days notice). In appreciation of your ongoing business and our mutually beneficial relationship I would like to extend you a discounted rate of $65/hr… "
You can always start by raising rates for new customers and see how that goes.
[FONT=verdana]I agree with the previous answers, but would add just a couple of points.
Personally, I would avoid the word “discount”. To me, it sounds like a shop that’s trying to clear excessive stock, or getting rid of last year’s merchandise. Instead, I’d offer the client a “special low rate” - or, perhaps even a “preferred client rate”. But then you know your client better than we do, so judge that for yourself.
My second point is that I wouldn’t put a time limit on the discount (or whatever you call it). If, after a year, you still feel you are not getting enough out of the client, deal with it then.
But, overall, my advice would be not to worry. Nowadays, we expect fees and prices to rise occasionally. No doubt your clients have put their own prices up at some point, and won’t be surprised when other businesses do to the same. The main thing is to give the best possible service you can to your clients (as I’m sure you already know).
Mike
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Thnks everyone for all the great advice! I really appreciate it.
just do it, but consult your existing clients. Some may not be willing to pay the increase but to be honest these are possibly the ones your not making any money on. Just be honest and upfront
Have you considered not raising your rates at all?
Rather, outsource maintenance work. Let’s say, you’re earning $50 per hour now. Find another freelancer to partner with, one who charges a little less than you do currently (there are some, myself included). Then, outsource the work to that person and make a small profit on their work.
Do some math: There are typically 40 hours in a work week.
If you spend 40 hours doing work that gets you paid $50 per hour, that’s $2000.
If your outsourced help spends 40 hours per week doing work that gets YOU paid $50 per hour, that’s $2000.
If you have to pay your outsourced help for 40 hours per week at $40, that’s $1600 for them.
And $400 for you.
Without raising your rates for your clients and without having to turn away work. You will have to spend a few hours per week in management mode, though.
The problem in this is finding a competent professional to work with. You need to make sure you’re not outsourcing work that is going to reflect badly on your business. You might outsource things like updates and backups, but not front end design work just yet. Make sure you have a good non-compete agreement and a non-disclosure agreement as well. Make sure you have someone you feel can and will communicate and work with you well. Make sure you treat that person well and fairly … pay on time and be reasonable with deadlines.
I used to have a programmer that I worked with this way and it was a great way to work. His work was good and consistent and fast. I paid on time. We got along like a house on fire.
Missy
Don’t forget to add in the time you spend finding, managing that resource. It is not easy to find a good resource that will communicate well and provide good quality to your clients. It can certainly be done (I am in the outsourcing business, after all) but your math is hugely optimistic and simplistic. Expect to invest a lot of time into this kind of arrangement.
It was supposed to be simplistic. It was an illustration. And I did point out that he would have to spend some hours in management mode and that there were some important points to consider.
But, to his original post: He doesn’t want to raise rates on this one client BUT the work is becoming so much that he feels the need to bring someone else on. How much does he have to raise his rates before he can buy some more hours for his day to do this work?
It’s much better to address this issue fully now, while he does have the time and attention to give to finding someone. Later, when he’s all stressed because he’s working 16 hour days, he certainly won’t be able to find someone reliable and good. If he outsources a portion of work, he can divide the time saved between project management and finding new work at his higher rate.
And finding someone to outsource to can be time-consuming. I agree. But you have to follow all the rules you would for hiring any contractor: make sure you’re comfortable, that they have the knowledge, skills, and discipline to do the work you need done, check references, work in escrow for the first few projects, make sure your ass is covered with a solid contract. Once a good working relationship is established, it works like gangbusters.
Missy
Really great advice. And I do agree with @Mikl; I’d not say “discount”, it sounds weird unless you do consider yourself a web design shop (which some do). If I were a client, I’d prefer to hear that my loyalty to you has prompted you to arrange a special pricing scheme for me. Technically, it’s the same but I think the wording Mikl illustrated has a more personal note.
Some really great discussion here! I figured I would report back… I adressed the client and just explained that in order to continue provideing the great responsive service they like about me so much, I had to raise their rate. But explained that they would still be getting a discount compared to what my hourly rate would be now. Went smooth as butter…