Banking

When is it time to raise your rates?

Raising your rates take a little more planning than just telling your clients that you'll be charging them 10 percent more per hour. Here's how you can justify an increase and keep your clients.


If you are turning away business, or if your consultancy has become so successful and well established that you have more work than you can handle, it’s time to raise your rates.

Business savvy says that if the demand for your business is greater than you can supply, you should be charging more. If you respond simply by turning business away, you’re undermining your financial success.

And you don’t have to be discouraged by the current economic recession. The work you do now while organizations are struggling can set the stage for a rate increase when the economy improves.

In this article, I’ll tell you how to raise your rates without upsetting your clients and how to determine when you should be ready to make your move.

Supply and demand
It isn’t unethical to raise prices in response to demand. It’s the way business is done. And if you do so, you’ll find that you’re not only making more money, but you’re also happier because you can afford to take only the jobs you want.

For example, when I started contracting, I signed a yearlong contract with one client, for whom I worked both full time and part time. During the downtimes, I did short-term projects for other clients. By the end of my first contract, I had requests for more work than I could possibly handle.

My skills had also increased—and so had my business savvy. So I explained to each client that given the restrictions on my time and the additional training and skills that I had pursued during the last year, I was raising my rates—not by a huge amount—but by about 5 to 10 percent, depending on the work. I lost only one client but still continued to have plenty of work with other clients.

So how do you do it?
If you feel you've already increased your business and technological savvy enough to warrant increasing your rates, congratulations. If not, here’s how you can get there.

Work on the right projects
One important factor in evaluating a potential project should be how the experience you gain will increase your ability to market your services to future clients. If you look at the contracts you take as a path leading you to a goal, they will.

For example, as a documentation consultant, I would take a project developing and implementing an online help system over one creating a simple, paper-based documentation system anytime. Working on online help not only keeps my skills current, it’s also a more compelling project to show to potential clients. If properly developed, online help is generally easier to use and less expensive to maintain and update than printed manuals.

Specialize, specialize
It’s simple: If you make yourself into one of the only contractors in your area who can provide a particular skill, the demand for your services will skyrocket. With this in mind, consider seeking out the projects and training that will increase your skills in a particular area.

On the other hand, don’t lock yourself into a technological specialty that will put you out of business when it disappears—an ever-present possibility in IT. Keep an eye on trends, and keep your skills current. While specializing is important, it’s also good to be able to move beyond that specialty.

Remember that you can also specialize in an industry as much as a technology. That industry could be anything—from government contracts, where experience and discretion is highly valued, to the IT needs of restaurant suppliers.

Several years ago I took on a long-term project documenting a smart-card technology system, from the smart card itself to the card reader to the server that tracked transactions, because I believed that that technology would take off. Now, we’re seeing commercials for smart cards, and I have an advantage over contractors that are unfamiliar with the technology.

Do the job right
It sounds obvious, but I’ve worked with too many contractors who ignore this rule: The best way to build demand is to do the job professionally. Unsurpassed expertise doesn’t play well when it’s accompanied by unsurpassed arrogance and an impolite attitude. Believe me, I’ve seen contractors like that passed over in favor of less-skilled folks who didn’t have a reputation for being impossible to work with. Don’t let your head get in the way of your pocketbook.

Making more money shouldn’t be your ultimate goal. You’ll impress clients most if your first priority is to do the job.

Selling it to the client
Selling your higher rates to clients can take some finesse, but when you can make a convincing case and then deliver the goods, you can do it. If you’re certain a client will end up paying more in the long run with a less-expensive contractor, point that out to the client. A hundred hours at your rate is still less than three hundred hours with someone charging half what you do. In addition, make sure the client understands the cost of taking three times as long to complete the project.

If the client just doesn’t like your rates, if you’re in demand, you’ll be better off spending your time finding a client who will compensate you for your work instead of working for less than you deserve.

When was the last time you raised your rates?
How long has it been since you increased your hourly rates? Did any of your clients protest? Tell us about it: Send us an e-mail or post your comments below.

 

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