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Serving your customer, valuing yourself
My brother-in-law is a freelancer like me. He’s a camera operator and sets all the cabling for larger live streamed tv-events - mostly sports related. He called me the other day to ask for help raising his rates. You see, he’s been working for the same company for seven years and hasn’t renegotiated his rates at all. It is especially daunting to ask for an increase when you’ve worked for one company for so long. Many of us have found ourselves in very similar situations and this is tough to navigate.
Communicate your value
I told Johan, my brother-in-law, that I think its well deserved and he should begin think about solid reasons he can present about his need to raise rates. I explained that his customer would be motivated to agree to this raise if he gave a convincing argument. He came back with some great options: more experienced, more qualified to do specialized things, loyal to the company, and hasn’t received a raise for seven years.
When working with one customer for so long, it becomes easy for them to lose track of your personal growth during your time together. Whether its experience, skills, or certifications/education, its important to clearly communicate this increase in your marketability. This discussion can lead to not only talks of increased rates, but of further opportunities to continue to grow. It can be a win / win situation for both of you!
Why packaging is a wise method of increasing rates
When I asked Johan about what he wanted for a raise, he said 150%. That’s a steep raise! When I said that may be going too far, he was certain that it was in-line with what others with similar experience were billing. I asked him if he had given any thought to how he would increase rates and what his customer would feel most comfortable with. There are a few options out there, so I asked him what he had in mind.
He wanted to charge the same base rate, but put an hour limitation on it. He would charge $500 for the first 10 hours and then for every additional hour, he would charge an extra $50. This flat rate with extended billable time method ensures that he is guaranteed his usual rate if an event runs short, but also raises his pay for those insane 12 or 14 hour days. He actually gets paid for the extra hours of work. I understand this and it’s something I’ve done in the past too. But take my word for it, it’ll get your more money that day, but won’t make your fiscal year any better.
You see, when you go into a restaurant or shop in a store, you prefer to know the price before your order. That’s just common sense, right? What if your email provider charged you according to the amount of email you receive? The first 500 are free, but each additional one is $0.02. I’d be terrified at the end of every month. Just like you and me, Johan’s boss wants to know the price before he signs the deal. He doesn’t have any influence over how many hours the work is going to take so it’ll be impossible for him to calculate - and budget for - the cost of the work upfront.
I recommended packaging his services instead to make it beneficial for his customer to invest in him. Let’s say he charges $500 dollars for a day’s work (he doesn’t, but it’s just simpler for the mathematics). Instead of selling them one day at a time, maybe he could put them into packages to add a sense of savings. How about offering the employer the possibility of buying 20 days for $11,000? Or ten days for $6000?
Make your pricing as friendly as possible for your customer - and make sure you benefit from it too! This, is in it’s most simplest form, is seen in almost every software as a service (SaaS) today. Monthly is $9.99 and yearly is $99 - a quick way for their customers to get 20% off by subscribing for a full year. For the company providing the service, it gives them cash upfront as well as committed customer for the next year.
Regardless of what business you are in, how can you rethink your pricing strategy?