Working with long-term clients can be a lucrative approach to freelancing. Amongst other benefits, it means you spend less time and marketing and more time working billable hours.
There is, however, one popularly perceived downside of working with long-term clients: difficulty raising rates. If you have high client turnover, you can simply increase rates as the new clients come along, but when you have an established relationship with a long-term client, asking them to pay you more can seem like a rather daunting prospect.
But it shouldn’t be. Here’s how you can increase your overall hourly rate for long-term clients with minimum risk.
Key assumptions and understandings
This article is written on the assumption that you have several long-term clients (say four or more). Put simply, the fewer clients you have, the more risk you are exposed to with this strategy. You can certainly still carry out this strategy with only one or two clients, but it would be remiss of me not to point out that the risk is relatively high.
And that leads me to a more general point that is vital to understand when it comes to rates negotiation: the entire process is a question of risk and nothing else. It should not be subject to emotional thinking or subjective analysis. As much as possible, you should view your approach to rates negotiations as mathematical or scientific — i.e. how can you quantify a positive outcome, and what is the likelihood of that outcome being achieved?
Step 1: Get to know your clients
To negotiate rates, you need to carefully analyze the worth of each of your clients. (Click to tweet this idea!) I am not only talking about how much they pay you, but also how easy they are to work with, whether they refer additional clients to you, and if there are any other benefits (direct or indirect) of working with them. Before you even begin to think about negotiations, you should be able to “rank” your clients in terms of their worth to you.
There are many ways in which you can do this, but it ultimately comes down to money — that is typically the most important factor. So let’s start there.
For each of your clients, you need to know how much you earn in terms of an equivalent hourly rate. If you charge per hour (which I do not recommend as it limits your earning potential) then your hourly rate should already be apparent. But if you charge per job, you need to calculate exactly how much time you spend on each client’s work and calculate your equivalent hourly rate from that. If you do not currently track your time then this is a good reason to start — it’s really a necessity.
Once you have created a “ranking table” of sorts, listing your clients by how much you earn from them per hour, it is time to add all of those less quantifiable considerations to your list (as mentioned above). When you are finished, you should have a well-formed opinion of each of your clients in terms of their worth to you.
Step 2: Calculate rate increases
Take into account these three things when it comes to calculating an increased rate for an existing client:
How much you want to be paid
How much you should be paid
How much you think the client will pay
How much you want to be paid will be the easiest question to answer, but the other two are more complicated.
The question of how much you should be paid can be answered by (a) comparing your existing rate for that client against other clients and (b) comparing your existing rate against what you consider to be a fair market rate. This is not a particularly scientific process; I wouldn’t beat yourself up too much about it. However, I will say this: in my experience, most freelance writers undervalue themselves.
The question of how much you think the client will pay is down to nothing more than your intuition. But consider this: as far as I am concerned, there are two broad “types” of clients:
Those who want a job doing and are not going to bicker about an extra few bucks per article
Those who do not value quality written content highley and may argue over the slightest increase
Let me be frank: in the long run, you do not want to work with that second type of client. Furthermore, there are plenty of the first type around. So, if your intuition tells you that a client is likely to argue over any kind of increase, that may be a sign for you to move on anyway.
If you are happy with the rate paid by your most “generous” client then this process is relatively straightforward — that is the benchmark by which all other clients should be measured. If on the other hand you feel that all of your clients are underpaying you, that requires a little more thought.
Once you are finished with the decision-making process you should have a new rate for each client (where appropriate) that you intend to propose. That rate will be a result of the calculation you made based upon the want, should and will considerations.
Step 3: Propose your rate increases
The key to this process in terms of reducing risk is diversification. It is quite simple: the more clients you have and the more proposals you make, the greater chance you have of increasing your rate overall.
Let me give you an example. Say you have five clients with a relatively diverse range of rates and hours worked per week:
You propose new rates to each of these clients. Clients 1 and 3 agree to the new rate ($60), Clients 2 and 4 negotiate with you, and Client 5 considers your rate too high and moves on. With the new rates in place and one less client, how do your earnings look now?
Although you’ve lost one client, you are now earning $5 more per week and are working ten less hours! That’s the power of spreading your risk by proposing multiple rate increases at the same time.
In terms of actually making the proposal, experience is the best teacher and you will soon find that each client is ideally approached in a personalized way, one that best suits their attitude and behavior. If you’re interested in learning more about client negotiation, check out this great article from Copyblogger.
Don’t fret too much about the particulars — it is not as frightening a process as you may think. Just stick to the basics: you have reevaluated your business and are proposing new rates accordingly. You appreciate their business and look forward to taking your working relationship forward.
Act in a professional and courteous manner then let the client do the rest. It’s only business.
Assessing the risk
There is, of course, a risk inherent in any kind of rate increase, but in reality the risk is probably far smaller than you think. For starters, if a client is happy with your work then they are unlikely to walk away just because you propose a rate increase. They will typically do one of three things:
Negotiate with you
State that they are not willing to pay you more
Any of those outcomes puts you in a better (or no worse) situation than before. As for those clients who do walk away — they were likely to walk away before long anyway. They certainly weren’t going to grow with you, that’s for sure. So although you may incur a short-term financial loss in losing them, it will be better for your business in the long run.
Earn more, work less
You may think this a dream scenario, but I can tell you from personal experience that it works. I employed this strategy at the end of last year and lost one client but ended up making more money in fewer hours. I would recommend that any freelancer working with more than a handful of long-term clients pursue this strategy and reap the rewards.
Have you ever tried to raise your client rates? If not, what’s stopping you?