Increasing prices can be a sensitive and tricky issue for any business. Freelancers are no exception. You don’t want to run the risk of losing any of your hard-won clients to your competitors. If you’re a freelancer, you probably charge for your time and/or for a deliverable. Your time and your skills are valuable, but your clients also need to perceive value for the service you’re offering for you to increase your rates.
You’ll know there are two potential sources of business – new clients and existing clients. There are many studies that show the value and importance of generating repeat business. New clients can be harder to win, but treat them well and provide value and hopefully they’ll turn into repeat clients who’ll use your services again and again. And they’ll tell others about how good you are, which might generate more new clients for you.
There is a temptation for freelancers to quote aggressively to win new clients, but the challenge then becomes how to raise your rates for repeat business once they become your existing clients. The increased rate will most likely better reflect the value of the service you have delivered, and will continue to deliver in the future.
Time is a key resource for freelancers. There are only so many hours in a week for you to charge for your time to generate your revenue. Some freelancers choose to avoid the risk of raising their rates for their existing clients for fear that they’ll lose them. Instead, they only charge their increased rate to new customers.
That’s understandable and it’s a way of rewarding client loyalty, but you’ll earn less for your time if you follow that strategy. If you do that over the long term, you could find yourself missing out on a lot of money. You might also end up in the position where you have so many existing clients at a lower rate that you simply don’t have the time to take on new clients at your increased rate.
Let’s do some simple maths to illustrate. Let’s say you work 40 hours a week as a freelancer. Your rate is $40 an hour. You could earn $1,600 a week if you’re fully booked. But if you charge 20 hours of that week out to existing clients at a cheaper, older rate (e.g. $35 an hour), you’ll miss out on $100 for that week. Over time, that adds up!
Here are a few tips on how you can increase your rate with existing clients and retain them.
Communicate the rate increase before it happens
Don’t just drop an unexpected rate increase on your customers without any justification. That’s a sure-fire way to encourage them to look elsewhere in the future. A freelancer/client relationship is built on trust and communication. There shouldn’t be any nasty surprises for either party. For example, if there is a major reason for the increase (e.g. the cost of materials you need to use to provide your freelance service has gone up significantly), make sure you explain that to your existing clients.
Don’t increase your rate by too much
Most people and most businesses understand that prices need to increase over time to cover the effects of inflation. If you don’t increase your freelancer rates while your costs are increasing, you’ll be going backwards. But don’t overcompensate for inflation with your rate increase. A significant increase in your rates for providing the same service will only encourage your clients to consider using one of your competitors.
Remind your customers of your quality
Hopefully you’ve built up strong relationships with your existing clients over time by delivering a quality service. Remind your customers of that when you want to increase your rates. Provide examples of the high-quality work you’ve done in the past for them in case they’ve forgotten, or the times you’ve gone above and beyond what they expected. If you’ve proven that you can consistently deliver value to them, they won’t want to lose you, just like you don’t want to lose them. You might find they agree to your increased rate without any hesitation. They might even have been expecting it!
Deliver a better service
Your existing customers may have become used to paying a set rate for the service you deliver. That figure may be in factored into their budget for doing business with you. The best way you can justify a price increase is to deliver a better service. If you want to put your price up by 5%, justify it by delivering them a 5% better service.
Know how important your service is to your client
Is the freelance service you provide crucial to your clients? If not, they might decide to walk away if you increase your freelance rates. They might decide that they simply don’t need the service you provide. But if it’s crucial, it’s much more likely they’ll accept your increased rate.
Know how much competition you have
Is the freelance service you provide highly competitive? For example, are there many freelancers who can provide the same quality service for a similar price? If there is (and if you haven’t differentiated yourself enough in terms of the value you’ve provided to your existing clients in the past), you’ll run the risk of losing them to a competitor when you increase your rates. Again, it comes back to you much your clients value the quality of the service you’ve provided to them in the past. If you take the time to “go the extra mile” for your clients, they’ll be more likely to stick with you when you increase your rate.
Know how important existing clients are to you
You should know the value of new and existing clients to your freelance business. For example, 60% of your regular freelance revenue may come from your existing clients. And some of those clients may provide you with more regular revenue than others. They’ll be the clients you don’t want to lose. Use all the tips provided in this article to make sure you don’t.
How did you increase your freelancing rates with existing clients? Let us know in the comments below!