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

0:08Heyo! Welcome to the$100 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 Zinhome. And today's episode is Q &A Wednesday, where we answer a question from one of you, one of our listeners. If you've got a question you wanna ask, go ahead and email me over at omar at 100mba.net. 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.

0:45I 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 going to show Alex and you how to make more revenue. It's not just about pricing.

1:18It's about making more revenue without disgruntling your customers, without making them upset. Actually, you're going to make them happier. We're going to increase your margins. We're going to increase the buffer between you and not being able to stay in your business. We're going to make things a little bit easier, a little bit more enjoyable because 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 sell software, you sell advice, you sell coaching, whatever it is.

1:49Okay. 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, I'll have an hourly rate or I have a package rate, but that's not really the reality. The The reality is, 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 solve the problem for them or perceive 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.

2:23So, 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, right? 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.

3:03In 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,$2 ,000,$3 ,000. There are companies that pay$30 ,000,$40 ,000,$50 ,000,$100 ,000,$1 ,000 ,000 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.

3:39No, it's not crazy. They're getting something that they can't get for half a million or 100 ,000 or 10 ,000 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?

4:17So again, levels of value. Let's get back to Alex, 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. It doesn't really help. Hey, due to inflation raising prices.

4:50It doesn't really resonate really well with customers. But if you go to your customers and say, hey, you know how we do X, Y, Z 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.

5:27It could be how you deliver the service, like 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 that you're making this more compelling.

5:59You'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 going to make more sense. Most companies don't even need to increase their prices that much. So they need to add a bit more value and increase by 10, 20, 30 % more. And they're going to be laughing because that extra 20, 30 % they're making extra from each customer is going to make a whole lot of difference when they look at all of the revenue they make.

6:29So 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.

7:11Currently, 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$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've got to close and show them why this is important. We have found that when our customers have more of this value, like when we give them the support they need, we give them this feature and that feature and these extra things, they are more successful.

7:53They 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. We'll 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.

8:28We'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.

9:09So you can. So you can do this, that, and the other thing. Experience this. This makes it exciting. This makes it valuable. 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, or the new package, I should say, is tremendous. It's going to really help your business in a big way. Next, you want to give them fair warning, okay?

9:44You want to 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 going to be. 60 days, I would say, is the 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 going to 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.

10:15Sometimes 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 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, oh, 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 wanna 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 a valuable package for you, schedule a time with on my calendar, Put your schedule link and make it easy for them to be able to jump on a call with you and hash it out.

11:00This is going to allow you to not lose as many customers as you might perceive. It's going to allow you to rekindle that relationship with your customer, make sure that they feel happy and they feel 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.

11:33It'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.

12:05And therefore, you're going to start attracting other valuable customers that want more and want to get the best products or services. You've 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.

12:37I'll see you then. Take care.

12:48Thank you.