Don't Be Afraid To Ask for More
A new client needed editing work done, and I was confident I could deliver. But then came the part of the discussion I always dreaded: “What do you charge for this kind of work?”
Gulp. In my first few years as a small business owner, my response might have been, “What are you willing to pay?” I mean, who was I to dictate price? Wasn’t my value determined by my client’s expectations and budget, not by my promises and mortgage bill?
But I quickly realized that this strategy was leading me straight to the poor house. I was bogged down with work but barely making enough to pay the nanny (who, I realized, was earning more per hour than I was). So I learned to ask for more.
I needed to establish the minimum hourly rate necessary to cover my expenses and earn the income I required to justify being in business. All projects then had to be priced accordingly. And, because negotiation is sometimes required, I upped that figure by about 25 percent. I wrote the number down on a piece of paper. Whenever someone asked me, “What is your rate?” I didn’t “hmmm” or “errr.” I read the number, with no apology, and waited for a response.
When this client heard my hourly rate, he paused. “That’s more than I paid my previous editor,” he said. In fact, it’d been more than I’d charged my previous client. But I wanted a rate increase, so I went into sales mode. “I charge a premium because I bring unique skills to this field,” I said, and listed them off. I added that I work more quickly than most, so he might actually wind up spending the same or less by using my services. And I assured him that we’d work together through the process and, if at any point he was unsatisfied, I’d do whatever possible to rectify the situation. “Okay, that sounds good to me,” he said.
By having the confidence to not only ask for more but explain why I was worth it, I’d raised my rates by 25 percent in one phone call. Keep reading for more strategies to earn more–no matter what field you’re in--and why it’s crucial to the success of your business.
Higher rates boost your credibility.
When I was looking for a daycare center for my child, I crossed off the list any place whose rates were too low. Odds are it meant they lacked amenities, training and staffing that other facilities had, and didn’t I want the best that I could afford for my child? The same goes with many other service-related industries. If your prices are too low, your clients might not feel they are getting a quality product.
“Raising my rates has helped me be taken more seriously,” says JeFreda Brown of Brown Accounting Solutions in Birmingham, Ala. “And I’m able to show that my services are quality services.”
It also shows that you have confidence in your product. “I was successful because I knew what I had was valuable and was certain that if people invested in me, they would be better for it,” says speaker, writer and consultant Ann Marie Houghtailing, mastermind behind the Millionaire Girls Movement. “If there is a market for your business and you’re underpricing yourself, you’re doing no service to the people in your industry and are not helping the people who will come after you.”
Stop being all things to all clients.
When business coach Nancy Butler first started her financial planning business, her goal was to deliver great service that met all of her clients’ individual needs, “regardless of the amount of money I earned,” Butler says. As a result, “I realized that I was doing much too much work for most of my clients and no longer being paid fairly for it.”
So instead of providing everything for one rate, Butler came up with a “menu” that included budgeting, retirement planning and college funding and allowed clients to pick and choose what they wanted–and then pay accordingly. “When adding up the cost for each service it almost always came out to more than their current fee,” says Butler. “Within a short period of time my work load decreased and my annual income went up dramatically. Everyone was charged fairly and I was paid fairly for my expertise and time.”
Many entrepreneurs fail to see the full scope of the services they are providing for a client, says business coach Debora McLaughlin, author of “The Renegade Leader.” Because of that, they wind up charging too little. “I suggest business owners list out all the different things they might do with their client,” McLaughlin says. “Then they stand back and look at a long list. This helps give them the confidence to ask for a higher rate.”
Creating packages or products, such as Butler did, also helps business owners raise their rates in a passive way. If the client sees increased value in purchasing a new product from you, then they will be willing to pay more, McLaughlin says.
Ask for more and you can do more.
When your business brings in more money, you don’t just make a few more bucks. You now have funds that allow you to grow your business in ways that can benefit your clients. You can invest in technology, hire more staff and create new products.
“When I raised my rates I was able to pamper my clients more,” says Stephanie Hetu, owner of the French-language Succes Internet in Quebec, Canada.”With a larger profit margin, I can create a truly unique experience for each client, making them feel like VIPs.”
More profit allows McLaughlin to spend more money on professional development. When she becomes better at what she does, that’s an added value for clients. “Every time I invest in myself I really feel like I’m doing that work to invest in my clients too,” she says. “And the more I up my game, it gives me more of an opportunity to raise my rates.”
Remember you’re “working” not “helping.”
The service or product you provide is a business transaction, nothing more. Stop taking pity on your clients, even the ones who helped you earn your first dollar or who you think can’t shoulder a price increase.
“Women entrepreneurs erect their own glass ceilings,” says Houghtailing. “They often give their work away because ‘I want to help them’ or ‘I like them.’ They are held hostage by this belief system that someone did them a favor early on and now they have to continue returning it. But we have complete control over this.”
We control it, Houghtailing says, by learning to negotiate for our interests, accepting instead of deflecting credit and by learning to praise ourselves in the first person. Women have a bad habit of “shrinking” themselves, she says, by not taking public credit for successes, lauding the “team” instead of themselves and standing by while others take credit for our hard work (an assertion buoyed by a recent Bloomberg report of CEO earnings, which found female CEOs earn 18% less on average than male counterparts.)
“People don't pay you because the like you,” says Houghtailing. “They pay you for the quality of your work. Which means you need to understand that ‘gosh darn it, I deserve it.’ I think it’s great that you’re appreciated for your work. But I don’t think it’s great if you’re being paid 25 percent less than your male counterpart.”
Be prepared to walk away.
Some people will push back against your rate increase. They might outright say no. Set them free. By doing so, you’re making room in your business for new, higher paying clients.
“You have to say, ‘Just as you can’t find it in your budget to meet my number, we can’t sustain this relationship without increasing what we charge for it,” says Houghtailing.
The simple fact is this: If you keep working for clients who keep paying you the same amount year after year, you can’t afford to remain in business. Your costs will continue to go up. Inflation will increase. And you’ll feel that you are working harder for less money. And is that why you went into business? No. So ask for more, know that clients who value you will pay it, and see any lost clients as the potential to create new business.