Best practices for raising rates?
September 10, 2014 7:05 PM   Subscribe

I am a freelancer. Please help me understand how to raise my rates.

I'm a freelance book editor. This is something I've done quietly, behind the scenes for years. Then exactly a year ago I sort of came out about it, made a website, started advertising, etc, to make a real push at turning this into a viable living. It's gone very well. I've got some great, important clients. And now in 2015 I'd like to raise my rates. Please help me understand how to go about doing this, what the best practices for doing such a thing are, etc.

I currently charge X. I want to charge X + 25%. I have three (or four) groups of clients:

Group 1: The 2 bestselling authors (one of whom is a personal friend) who were the ones who convinced me to do this in the first place. I think I would like to tell them that I will never raise their rates. Aside from the fact that I'm good at what I do, a HUGE part of my success stems from my relationship with them. They sing my praises, share my info with other writers, credit me in their bestselling books, etc.

Group 2: Very important authors -- meaning, bestsellers, professionals, people who are writing exactly what I want to be editing, who give me testimonial quotes, whose books look great on my list of what I've edited, etc. I would really like these people to pay the new price. But I don't want to lose them.

Group 3: Non-pros. Some are very talented writers and are destined to have full careers if they keep going. Some are just so-so. Some were dreadful, but I no longer accept work from dreadful writers, no matter the price they'll pay. It's just too painful for me. I want all of these people to pay the new price when they re-book with me. If they don't want to pay it, I don't care if I lose them.

Group 4: Okay, so I guess the 4th group is future clients as yet unknown. I want all of these people to pay the new price if/when they book with me.

Caveat: in Groups 1 and 2, four writers have pre-booked a total of 14 projects with me for 2015. No money has changed hands. No prices have been quoted, since my prices depend on word count and we never know what a manuscript's word count will be until I actually have it in hand. should I go about doing this? Some ideas:
-- send a letter to all existing clients saying "I love working for you! And FYI my rates are going up!"
-- add that any project that is pre-booked with me before the end of 2014 can be had in 2015 for the current rate? I won't love this, but I will definitely accept it as the cost of doing business
-- don't announce anything, and just mention it as the projects start (this seems wrong)

What am I not thinking of?
posted by BlahLaLa to Work & Money (9 answers total) 18 users marked this as a favorite
Best answer: What am I not thinking of?

A lot of people manage this transition by setting the new rates at some useful transition point (beginning of 2015 for example) and then opting in to giving existing clients a discount if this is onerous for them. I think a lot of people don't balk at minor rate increases. 25% seems like it could be non-minor depending on how you were charging before.

I think it's worth doing a little market research to figure out where your current rates and your increases put you in terms of where you fall in the field. So like were you undercharging to make sure you could get clients and now that you're more of a known quantity is this your "ready for prime time" rate? Is it in line with what other people with your level of experience or skills are delivering?

You have a website. Does you website have rates? Might it start (even if it's ballpark for an average customer)? Do you charge hourly or by the project or is it flat by-word? Could you include something else along with the rate increase so there's some perceived value-add? How did you tell people what your rates were originally?

I'm of the opinion that most people who are self-employed tend to undervalue themselves if they are worried about losing clients To my mind, once you have regular clients and are paying your bills and etc, you should raise your rates to keep your client list full but not overfull (i.e. be okay losing some people if you bring in new people at new rates and you're still staying flush) and be prepared to tweak it, but not much. Most people who hire for quality and not just lowest cost can work with this.
posted by jessamyn at 7:16 PM on September 10, 2014 [3 favorites]

Best answer: One idea from this thread is that if you're not already a member of a professional organisation in your area, you could become one and this might make a rate increase necessary if you were actually charging below industry standards before. Professionals that you work with would be hard pressed to argue with that!
If that's not applicable for your situation, ignore this obviously.

Here is another thread that might help you prepare for how your clients might react.

These threads are about different situations to yours (translation, not editing) but a lot of the translators on ProZ are freelance, so their experiences might be helpful for you.
posted by kinddieserzeit at 7:52 PM on September 10, 2014

Best answer: Here's how I would break it down:

Overall - People who have pre-booked - I think you should honor your current rate.

Group 1 - Say nothing about your rates. Don't say you will never raise your rates. You may need/want to in the future. Do send each a personal email saying thank you so much for all the wonderful work. Also, I am a big believer in a handwritten thank you card or small gift for very valuable clients. Something small but heartfelt and something that seems connected to your work with them somehow.

Group 2 - Announce a 15-20% rate increase. Individually by email. Starting for any projects initiated 2 months from the announcement. Say how grateful you are for their work, you love working with them. And your market value / experience / skill / knowledge has increased and therefore your rates are increasing to keep pace. Emphasize how valuable they are to you and that you want to continue working with them.

Group 3 - Announce a 25% (or 30%-40% if you really don't care if you lose them) rate increase. Individually if possible, but as a group if there's a ton. Keep is short, simple, professional. "Thank you for all the past projects. For future projects, rates are increasing to XX. I appreciate your business." For those who have prebooked, mention individually that you are happy to honor your current rate for that project.

Group 4 - Easy peasy, just quote your new rate.

This assumes you are comfortable having different rates for different clients, which I am. My clients don't necessarily know I have different rates, since they don't communicate between "levels" (i.e. my Group 2 clients would never come in contact with my Group 3 clients). In my records for each client, I have notes on their current rate and the history of their past rates.

Sometimes if I know a Group 2 client has referred me to someone else, I will use the Group 2 rate, but just as often I use the Group 4 rate. As a person who works with freelancers, I never assume that the rate they're giving me matches the rate they're giving someone else. I also don't publish my rates or send around pricing cards or anything.

Good luck and good on you for raising those rates!
posted by Uncle Glendinning at 8:47 PM on September 10, 2014 [2 favorites]

Best answer: There are many legitimate reasons to raise rates:
1) Your costs have risen. And yes, that can include how much you value your time.

2) You want to focus on higher-end clients. Your new pricing will put you out of reach for certain potential clients while also putting you in competition for others. Freelancers are constantly struggling with keeping rates low as a way to attract clients, but many medium-to-large companies won't even look at you if the numbers sound like a joke to them. They have budgets to justify.

3) You want to earn more money. Well who doesn't it? But this isn't something that will help you retain clients so it's not something you should say. Still legitimate though, you're better off justifying with either 1) or 2)

In reality though, you don't need to justify increasing rates to anyone but yourself (or your investors). Most freelancers undercharge. Only explain if you feel you have no choice and might lose the client otherwise (in which case, you probably would anyway, you'll see).

Group 1: since the relationship is very win-win, keep the same rate until you would lose money by working with them. The reality is that if they love you and feel they're underpaying you, they won't hesitate to suggest giving you more or at least, responding positively when you say that you need to increase your prices.

Group 2: You will lose some of them, and that's ok. If you do the numbers right, calculate how many people at the new price you would need to retain to earn at least the same revenue from the current group, then you can tweak as you go. In theory, you should be able to at least make the same revenue while working less.

Group 3: You answered your own question. Use the new pricing as a filter for only the most serious people of this group.

Group 4: See 2)

Don't raise rates on any projects where the terms have already been settled unless you absolutely have no choice because you'll lose money. In which case, give the client an out if they can't/aren't willing to pay the new rate.

Any client will appreciate having as much warning as possible. That said, it needs to sound believable i.e. you wouldn't say 'my costs have just risen, so my rates will rise in 6 months'. Happy clients want you to be able to continue working for them.
posted by jshare at 11:19 PM on September 10, 2014 [2 favorites]

To add to jshare's last point about timing - I suggest you give that aspect some thought. If you announce too early, you might get slammed with project before the new pricing scheme starts and end up editing tons of pre-booked deals in 2015. On the other hand, short notice might upset some customers. I find a window of 2 - 4 weeks ideal, but the book world is notorious for slow moving, so my gut feeling might be off. But the aforementioned two months seem rather long to me. Otherwise, I like Uncle Glendinning's approach.
posted by travelwithcats at 5:12 AM on September 11, 2014

You don't have to charge the same rate to every client. Just raise the rates to new clients as a start and see how it goes. At some point you can go back to groups 1 and 2 and tell them that you've raised your rates and have been honoring the old rate for them for x months, but that has become untenable so effective whenever, the new rate will be in effect. I suspect professional authors buy editors on quality and not price, so I don't think you'll have a major issue.
posted by COD at 5:14 AM on September 11, 2014

For groups 1 and 2, definitely let them know that your rate has increased but that you will be giving them a discount so their rate is effectively the same (or increased more modestly).

This way they know your regular rate, should they refer you to others. And they also know they are getting special treatment, which they will likely appreciate. (And the next time you raise your rates, you could leave their discounts the same so they do pay more.)
posted by jimw at 9:02 AM on September 11, 2014 [3 favorites]

What am I not thinking of?

It's not always about price - lots of people are OK with paying more for known good-quality work, and lots of people understand that periodic cost-of-living/cost-of-doing-business adjustments are necessary.

(While I'm no longer a freelancer (mostly), I work in an industry that, I think, is kind of similar, in that we have a lot of repeat or regular clients, a lot of quasi-personal relationships with a lot of clients, some of the same concerns with a limited amount of available time to do the work.)

One thing that's not clear to me is how many of your Group 1 & 2 authors were working with you before you "went public." Because if you've worked with someone for years already, those are actually likely to be the people most willing to accept a rate bump without much of a fuss. I could see people balking at a price raise after only a year, but if you've already got years' worth of projects together under your belt, they know you do good work, and will be willing to pay more to ensure that they have a lock on your limited time and energy. Plus it sounds like the authors from groups 1 & 2 could possibly be doing well enough that a price hike won't really affect them. (Honestly, I wouldn't be surprised if the reaction from some of these authors is "Geez, I was wondering when you were gonna raise your prices, I feel like I've been getting the deal of a lifetime at your previous rate. Good for you.")

I want to charge X + 25%.

I'll second the idea that 25% all at once might be a bit steep, especially after only a year (if that's the case with any given author), and second jessamyn that you should probably try to do some research into where your current and proposed prices fall in the industry.

-- send a letter to all existing clients saying "I love working for you! And FYI my rates are going up!"
-- add that any project that is pre-booked with me before the end of 2014 can be had in 2015 for the current rate? I won't love this, but I will definitely accept it as the cost of doing business
-- don't announce anything, and just mention it as the projects start (this seems wrong

I don't think a general letter is the way to go, here, I think a personal conversation with each of the authors is really the best way to approach this (yeah, this can be a little nerve-racking) because I think the personal touch can help soften the blow and a detailed conversation can help clarify to your clients why you're looking to raise your rates. You don't have to let them in on the details of your finances like the IRS doing an audit, but being able to point out that you now have additional expenses, or given that you can only put in 40 hrs/week editing, you need to devote that time to better-paying clients, will make your clients feel like your price hike is more than "GIMME."

And like COD says, you don't have to charge the same rate to every client. So having one-on-one conversations with your clients will also allow you to do some negotiating if necessary. I'm not clear on how it works for you with "pre-booking" vs. actually starting the work vs. when you get paid & how much, but it sounds to me that if no money has changed hands and no prices have been quoted (have contracts been signed?), then you kind of have not much more than a guesstimate about how many projects & how much work and income you'll have in 2015.

So the ability to negotiate with each author individually could be really useful, depending on how they react to your proposed price increase. Like you could raise one author's price 10% in 2015 and another 15% in 2016; another author you'll agree that anything finished in the first half of 2015 is at the old lower price, anything after that is at the new price; if an author can effectively guarantee that you'll get "x" number of projects out of them in a year, you can give a "quantity discount" of only 15% above your old rate. This approach can definitely be a way to keep old clients while still raising your prices.

And new clients just get quoted your new price - I think the most likely way they would know your old price is if one of your current authors told them when recommending you, and it's really perfectly OK to tell someone, "I'm sorry, that was my old price for old clients, I can only afford to take on new clients at a higher price."

This all may seem pretty complicated (negotiating, and keeping track of who's getting what rate), but IMO that's kind of the cost of doing business in a kind of semi-personal-service kind of business.

I think I would like to tell them that I will never raise their rates.

Ack, no, don't do that.

I mean, it's a perfectly understandable impulse to demonstrate your gratitude for the career help they've given you, but you still have a business relationship with these authors, and they and you should respect the "business" aspect of that.

Like I said above, it's entirely possible that these clients will be the ones most willing and able to roll with a price increase without balking, so not asking them for a better rate would just be leaving money on the table.

And in the long run (because this is not the last price bump you will want or need to make), eventually, you will no longer to be able to afford to work with these authors. As you get more new clients willing to pay higher prices and/or keep old ones willing to roll with your occasional price increases, there will come a time when working for these authors is actually costing you money, because they're paying so much less than everybody else, and all the time you devote to editing their books is time you can't devote to your clients paying you a better rate.

Then what happens is you either have to make a big price jump for these old clients, or you just have to drop them as clients, more-or-less suddenly, as far as they're concerned. And both of these scenarios seem likely to generate more ill-will and shock and hurt feelings than if you just treat these clients as clients, subject to the same occasional & negotiated price increases as all your other clients.
posted by soundguy99 at 11:41 AM on September 11, 2014 [2 favorites]

Response by poster: Thanks so much for the advice. I could have marked them all best answer. I haven't acted on this too much yet -- I purposely asked long before I wanted to actually start implementing this change.

But I did get a new client from Group 4-slash-3 -- meaning, a brand-new client who is non-pro. I quoted her the new rate. It was a teeny-tiny project, so the 25% rate increase really only added up to something like a $15 difference, which meant I had zero discomfort about asking for it. It was good practice in just stating the higher rate.
posted by BlahLaLa at 12:45 PM on October 11, 2014

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