MBA2438 Q&A Wednesday: How do I increase my rates as a freelancer without losing business?

Summary

The $100 MBA Show - Episode MBA2438: Q&A Wednesday – Increasing Freelance Rates Without Losing Business

Release Date: March 6, 2024

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Introduction

In episode MBA2438 of The $100 MBA Show, host Omar Zenhom tackles a pressing concern faced by many freelancers: how to increase rates without jeopardizing client relationships. Drawing from his extensive 20+ years of entrepreneurial experience, Omar provides actionable strategies to help freelancers navigate price adjustments amidst rising costs due to inflation.

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Listener Question

Timestamp [01:11]

Omar addresses a question from Alex, a listener who has maintained his freelance rates unchanged for three years despite significant cost increases. Alex is seeking advice on how to raise his prices to ensure his business's sustainability without alienating his existing client base.

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Understanding the Value Proposition

Timestamp [03:15]

Omar emphasizes that freelancing isn't merely about trading time for money. Instead, it's about solving problems for clients. He illustrates this with the analogy of repairing a sock:

• Basic Fix: Using tape to cover a hole.
• Intermediate Fix: Stitching with random thread.
• High-Quality Fix: Stitching with matching thread.
• Premium Fix: Using a professional sewing machine for an almost invisible repair.
• Ultimate Solution: Replacing the sock entirely.

Omar explains that the quality of solutions offered determines the value perceived by clients, and thus, the price they are willing to pay. Higher quality solutions justify higher rates.

Notable Quote:

“The better the solution, the more the customer is going to be willing to pay for it.”
— Omar Zenhom [03:50]

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Strategies to Increase Rates by Adding Value

1. Enhance Your Offerings

   Timestamp [05:00]

   Omar advises freelancers to upgrade their services before adjusting prices. This could involve:

   • Improving the quality of deliverables.
   • Enhancing customer service (e.g., faster response times, dedicated support).
   • Introducing new features or services that complement existing offerings.

   Example:

   • A website designer might offer not just design services but also ongoing maintenance, SEO optimization, or collaboration with renowned artists, thereby increasing the package's overall value.

   Notable Quote:

   “Adding value could be adding value to the actual product or service... you can save them money because you're offering it to them right now.”
   — Omar Zenhom [06:30]

2. Productize Your Services

   Timestamp [07:15]

   By packaging services into clear, value-driven packages, freelancers can present their offerings as comprehensive solutions rather than standalone services. This approach makes it easier to justify price increases as clients perceive greater overall value.

3. Communicate Effectively

   Timestamp [08:45]

   Clear and positive communication is crucial when increasing rates. Omar recommends:

   • Advanced Notice: Inform clients 60 to 90 days in advance about upcoming price changes.
   • Highlight Benefits: Explain how the increased rates come with enhanced services and greater value.
   • Transparency: Break down the added features and their individual values to demonstrate the overall benefit.

   Notable Quote:

   “Show them the benefits... this is a great way to show people the value.”
   — Omar Zenhom [09:30]

4. Maintain an Open Door Policy

   Timestamp [10:10]

   Encourage clients to reach out with questions or concerns. Offering personalized discussions can help retain clients who might be hesitant about the changes and allows freelancers to address specific needs or negotiate terms that work for both parties.

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Implementation Tips

• Repackage Services: Transform your offerings into tiered packages that clearly delineate what clients receive at each price point.

• Detail Added Value: In your communication, specify each new element being introduced and its corresponding worth to emphasize the overall increase in value.

• Use Positive Framing: Position the rate increase as an investment in better service and outcomes for the client, rather than a mere price hike.

Notable Quote:

“You are making this more compelling. You're making it a no brainer for the customer to say, hey, yes, I want to continue to work with you because you keep getting better.”
— Omar Zenhom [09:50]

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Benefits of Increasing Rates Strategically

Timestamp [12:25]

Omar outlines several advantages of thoughtfully increasing rates:

• Higher Margins: Enhances profitability without necessarily needing to acquire new clients.

• Attracting Quality Clients: Higher prices often attract clients who value quality and are less likely to be a hassle.

• Business Sustainability: Ensures that the business can continue to grow and adapt in the face of rising operational costs.

Notable Quote:

“You're allowing yourself to be more valuable, increase your value and get more valuable customers.”
— Omar Zenhom [13:15]

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Conclusion

Omar wraps up the episode by reinforcing the excitement and positive impact of increasing rates:

• Personal Growth: Elevating your pricing reflects your growth and commitment to delivering superior value.

• Market Positioning: Higher rates position you as a premium provider in your niche.

• Client Satisfaction: Enhanced services lead to happier clients who are more likely to engage in long-term relationships.

Final Thought:

“Increasing your prices, changing your packaging because you're allowing yourself to up your game.”
— Omar Zenhom [14:30]

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Key Takeaways

1. Focus on Value: Enhance the quality and scope of your services before adjusting prices.
2. Effective Communication: Clearly articulate the benefits and reasons for price changes to clients.
3. Strategic Packaging: Offer tiered or bundled services to present comprehensive solutions.
4. Client Engagement: Maintain open lines of communication to address concerns and reinforce value.

By implementing these strategies, freelancers can successfully increase their rates, boost their income, and foster stronger, more value-driven relationships with their clients.

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Support the Show

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For more insights and resources, visit 100mba.net.

Transcript

[LinkedIn Representative]

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[Jim]

And we're back, folks. It looks like Jim from sales just got in from his client lunch and he's got receipts.

[Colleague]

His next meeting is in two minutes. The team is asking, can he get through his expenses in that time?

[Jim]

He's going for it.

[Colleague]

Is that his phone?

[Jim]

He's snapping a pic. He's texting Ramp.

[Colleague]

Jim is fast, but this is unheard of.

[Jim]

That's it. He's done it.

[Omar Zenholm]

It's unbelievable.

[Ramp Representative]

On ramp expenses are faster than ever. Just submit them with a text. Switch your business to ramp.com.

[Omar Zenholm]

Hey, yo. Welcome to the Hundred Dollar MBA Show. Because a better business begins with you. That's why we deliver practical business lessons. I'm your host, your coach, your teacher, Omar Zenholm. And today's episode is Q and A Wednesday, where we answer a question from one of you, one of our listeners. If you've got a question you want to ask, go ahead and email me [e-mail] Today's question is from Alex. And Alex asks, how do I increase my rates as a freelancer without losing business? My costs have gone up significantly because of inflation, but my prices have stayed the same for the last three years. I need to earn more per customer if my business is going to have a chance of surviving. Would love your advice on this. Thanks, Alex. I love this question because Alex's head is in the right place. He wants to earn more so he can reinvest in his business. He can continue to grow his business and this becomes a flywheel. He's also conscious of the fact that he hasn't raised his prices in a while and things have gotten expensive. And I'm sure there's many people who are in the same boat as Alex right now. So in today's lesson, I'm gonna show Alex and you how to make more revenue. It's not just about pricing. It's about making more revenue without disgruntling your customers, without making them upset. Actually, you're gonna make them happier. We're gonna increase your margins. We're Gonna increase the buffer between you and not being able to stay in your business. We're gonna make things a little bit easier, a little bit more enjoyable. Cause you're making a little bit more money, hopefully a lot more money. So let's get into it. Let's get down to business. Whatever you're offering as a business owner, whether you're a freelancer, you're a contractor, a consultant, you're. You sell software, you sell advice, you sell coaching, whatever it is, okay, let's step back for a moment and recognize that you are not in the trading time for money game, okay? You might think so because you're like, oh, I'll have an hourly rate or I have a package rate. But that's not really the reality. The reality is that people are coming to you to solve a problem. You are solving problems for profit. That's what you're doing. They're paying you because you solved the problem for them. Or perceived pain, an issue that they have. Now. There are levels to solving a problem, okay? There are different ways to solve a problem. There's different levels of quality of solving a problem. So, for example, let's say you had a hole in your sock, right? I can cover up that hole with a piece of tape. Or I could stitch it with some random thread, right? Or I can stitch up the sock with the same color thread as the sock. Or I can use a professional sewing machine and make it look like it's never been damaged, right? There was never a hole there. Or I can replace the sock altogether. I can give you a brand new sock. These are all solutions to the same problem. And your business needs to always think about what's the next level of the solution I offer. Because the better the solution, the more the customer is going to be willing to pay for it. In other words, the more value you give your customer, the more they're going to value you and be willing to give you money. This goes for any product, any service. I'll give you another example. You can get your website designed for $500 on Freelancer.com you can get it done for $1,000 on Upwork 2000, 3000. There are companies that pay 30, 40, 50, 100,000. A million dollars on a redesigned website. And more than a million dollars, by the way. Same job, same solution, but different levels. Why would somebody pay a million dollars to design their website? You'd think that's crazy. No, it's not crazy. They're getting something that they can't get for half a million or a Hundred thousand or ten thousand for that matter. And it could be something beyond the actual pixels on the screen, beyond the design. It could be that they are responsive, that they'll get back to them within 24 hours or within one hour. They can just jump on a call and get a response from the designer. They might guarantee that your design is absolutely unique and no elements about it have been used before. They might be collaborating in this project with a world renowned artist that they can then say, hey, this website was also done in collaboration with Banksy or something like that. Right? So again, levels of value. Let's get back to Alex to get back to Freelance World. Let's go back to your business. Okay, what kind of value can you offer your customer that goes beyond what you're doing now? This is a better way to look at things than just saying, hey, I'm just going to raise my prices without raising the value. If you raise the value of what you offer your customers while raising prices, this makes sense to the customer. I'm getting more, so therefore I'm paying more. This excuse of inflation unfortunately kind of lands flat. Doesn't really help. Hey, due to inflation, raising prices doesn't really resonate really well with customers. But if you go to your customers, say, hey, you know how we do XYZ right now? But we're also going to be doing this, this and the other, as well as making it easier for this to be done, right? Whatever those things are. And because of that, we have repackaged our services to offer these things. And this is the new price to the customer. It makes more sense. Okay, you're giving me a whole lot more than what the price increase is, so I feel like I'm getting a deal. So your job is to add more value. Remember, adding value could be adding value to the actual product or service. It could be how you deliver the service, like your, your responsiveness, having a dedicated agent, having somebody that can call or message or WhatsApp. It could be something exclusive, it could be something special, it could be something that they already need and are paying for somewhere else. And you're going to be saving them money because you're going to be offering it to them right now. An extra service, an extra piece of software, whatever, an extra feature. It could be a discount on something that they're using right now. And you might partner with that company and get them a discount. The point here is, is that you're making this more compelling. You're making it a no brainer for the customer to say, hey, yes, I want to continue to work with you because you keep getting better. And I want to continue to work with people that keep getting better. And if the price is not so significantly more expensive, it's gonna make more sense. Most companies don't even need to increase their prices that much, so they need just to add a bit more value and increase by 10, 20, 30% more. And they're gonna be laughing because that extra 20, 30% they're making extra from each. Each customer is going to make a whole lot of difference when they look at all of the revenue they make. So the key here is increase your value so that you can increase your prices comfortably with your customers. That's the first thing. Second thing is communicating this, communicating your change and your pricing change really matters. How you package it, how you word it. The first thing you need to do is you need to make sure it's positive, and you immediately show them what is in it for them, why this is in their best interest. And thirdly, it has to be clear. It has to be easy to understand. Don't bury this information. So something that would go along the lines of, hey, customer, I wanted to let you know that we are continuing to get better and we just updated our plans currently. This is what you're getting with your plan, and this is how much you're paying. We will now offer you this. So it's everything they're getting plus all the new added value they're getting, and tell them how much each of these things are worth. So a dedicated customer service agent valued at, you know, $300 a month, whatever it is, so they can see the total value of all these extra things is more than the difference of price or the price increase. And then you say, hey, this new package is this much. Then you got to close and show them why this is important. We have found that when our customers have more of this value, like, you know, when we give them the support they need, we give them this feature and that feature and these extra things, they are more successful. They actually get to their goals faster. And of course, this has to be true. And of course, you have to give them things that actually help them. And this is why we have reframed this package. And this is what the new price is. Lastly, what is in it for them. These are the results you can expect with this new package. This is what you're going to experience. And it doesn't have to be like you're going to make X amount of more dollars a month or whatever. It could just be lower Wait times, more convenience, less stress, less emails will take care of all these issues for you. More time for you to work on the things you love in your business. Instead of admin, we'll take care of the admin. Whatever you do in your business, show them the benefits. It doesn't have to be a dollar value or like we guarantee you're going to make. I would stay away from that. Just show them what these new things that you're adding value to actually means for them. One of my favorite phrases is so you can. This is a great way to show people the value. So for example, if you say we're going to give you a dedicated customer service agent that you can email directly and get a response from them within 12 hours, this is so you can get fast response time, fix things in your account faster, be on top of your project regardless of what time zone you're on, and having the peace of mind and convenience of working with one person so they understand what they're getting. So you can, so you can do this, that and the other thing, experience this. This makes it exciting. This makes it valuable.

[LinkedIn Representative]

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[Ramp Representative]

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[Omar Zenholm]

By doing this, if you notice you're productizing your business. You're taking your services and making them products, packages, a solution for your customer. Now, you might have customers that just don't want to pay more and you might lose a customer too. But the benefit you're going to get from all the other customers moving on to the next package is, is or the new package, I should say is tremendous. It's gonna really help your business in a big way. Next, you wanna give them fair warning, okay, you wanna give them maybe at least 60 days. I like 90 days. And then some reminders say, hey, in 90 days, this is what your package is gonna be. 60 days, I would say is a minimum. So they know and they kind of seen it before and they warm up to the idea and they're kind of like, okay, they told me before this is gonna happen and it happened, it's fine. And that's pretty fair enough in this situation, in this transition of changing your prices and your packages. Be open to talk to your customers, say in your email, hey, if you want to jump on a call, you want to get on a video call, I'd Be happy to. Sometimes they have small, niggly questions that don't really make a difference to you but makes a huge difference for them. Like, hey, can you do this for me included? Or maybe I'm on a tight budget, can I get a payment plan? Or maybe can I start this not in, you know, 60 days, but 90 days? And if they can't find a way to reach out to you and talk to you, they might just say, ugh, I can't do it, so I will just cancel. Make sure you have the open door policy of, hey, if there's any questions you have or you just want to jump on a call, ask me some questions about how things are going in your business or how we can modify this to make it a win win or, you know, a valuable package for you. Schedule a time with on my calendar. You know, put your schedule link and make it easy for them to be able to jump on a call with you and hash it out. This is going to allow you to not lose as many customers as you might perceive. It's gonna allow you to rekindle that relationship with your customer. Make sure that they feel happy and they feel, you know, rewarded and valued by you. And at the same time, you get to learn from your customers. Oh, this is what they really want. This is what they actually need. This is what they actually struggle with. And then you can create new solutions and offer them to your customers. Alex, I hope that helped today. I hope it helped everybody who's listening. If it did and you love this podcast, show us some love by hitting follow on your favorite podcast app. It's the best way to support the show by just going to Spotify Apple Podcasts, whatever app you use to listen to podcasts and follow the show, subscribe. So that way you get our next episodes automatically and you get access to our back catalog of amazing, amazing content. Over 2400 episodes in our back catalog. Before I go, I want to leave you with this. This is exciting, by the way, increasing your prices, changing your prices, changing your packaging because you're allowing yourself to up your game. You're allowing yourself to offer more to the world, offer more value, be more valuable to the marketplace and be more valuable to your customers. And therefore you're going to start attracting other valuable customers that want more and want to get the best products or services. You got to remember, there's a lot of people out there that will qualify you as a business based on price. They're like, well, they're pretty cheap. They can't be that great. So sometimes you are actually pushing customers away because your pricing is quite low. So by increasing your prices you allow yourself to be more valuable, increase your value and get more valuable customers. Customers that are less headaches and easier to manage. Thanks so much for listening and I'll check you in the next episode. I'll see you then. Take care.

[Jim]

And we're back, folks. It looks like Jim from sales just got in from his client lunch and he's got receipts.

[Colleague]

His next meeting is in two minutes. The team is asking can he get through his expenses in that time?

[Jim]

He's going for it.

[Colleague]

Is that his phone?

[Jim]

He's snapping a pic. He's texting around.

[Colleague]

Jim is fast, but this is unheard of.

[Jim]

That's it. He's done it.

[Ramp Representative]

It's unbeliev on ramp expenses are faster than ever. Just submit them with a text. Switch your business to ramp.com.