There’s nothing worse than starting a new project for a client and realizing halfway through it that you’re undercharging them. Or even worse, being on retainer for a long-term client, only to realize you need to up your hourly or daily rate. Though these scenarios are by no means ideal, they’re an unfortunate reality for so many people in business.
It’s easy to start worrying about how to ask for more money from clients. But it’s far more important to spend time considering the steps you need to take to rectify this situation—and how to ensure it never happens again.
Breaking this process down into manageable, easy, and approachable options, is the best way to keep you and your clients happy.
Always Consider the Entire Scope of Work Required
While putting together quotes swiftly is a great way to secure a client, rushing the quoting process usually means you haven’t put much forethought into the scope of work required.
Basing your quote off past work may not take into account new variables that a client requires. You’ll then miss accurately charging for these add-ons. This means that while you may get the client, you’ll also end up working for less than your optimal rate.
It’s important to always keep in mind the entire scope of work required before quoting for a job. Take your time to consider all aspects and angles, and then put a quote together.
Take Market Fluctuations Into Account
The economy is an ever-changing landscape, and keeping a set annual rate doesn’t actually benefit you at the end of the day. This is why staying in the know regarding market fluctuations will stand you in good stead.
A monthly check should be enough to help you forecast rates for the new month. Though checking market rates monthly may sound like a lot of extra work, it means you’re only realistically checking what the markets are doing 12 times a year. If you pad your quotes to reflect dips and lows, you’ll keep on earning well, regardless of what the market is doing.
If you’re basing your quotes on set periods—such as every three or six months—then it’s worthwhile to quote higher than you normally would. This will help you to cover changes in the market and to avoid any shortfall on your end.
Check in with Your Peers and Competitors
While it’s good to stay ahead of the competition, it’s also good to keep up with peers and not price yourself outside of the market. Keeping an eye on the rates and increases that fellow entrepreneurs are charging will ensure your pricing stays within the industry range.
Checking in will also alert you as to precisely when peers are raising their rates. Are they doing so every new tax year, quarterly, bi-annually, or annually? It can also help you to see whether you should charge similar rates for each client. Or, as you gain more experience, you should raise your rate for newer clients to account for the upskilling they’re going to benefit from.
Alert Clients to Future Rate Increases
It’s only polite to let a client know when you’re going to adjust your current rates. This can be done with a straightforward email stating when the change will take place for their records.
Your price change should also get included on all future invoices to them—stating that your rate will be increasing, and noting precisely when the new rate is going to be implemented. If you use a printable invoice template ensure that you update this too. Making errors will make you look unprofessional. Plus, it may cost you money if clients end up paying the old rate when you were meant to bill the new!
Take the Loss Of Undercharging a Client
Though not ideal, sometimes you have to just take accountability for your mistake and absorb the loss of undercharging a client. Then, as noted above, alert the client to the fact you’ll be adjusting your rates in an upcoming billing period. This means you’ll be taking the loss of undercharging them for the current billing period and just finding a way to make it work for you.
On the plus side, you’ll have gained a valuable lesson and have the opportunity to pinpoint precisely where you went wrong. Then, for future clients, you’ll have more experience and be able to charge for your services rendered accurately.
Alert the Client to Your Mistake
Lastly, while not a point you should often consider, sometimes you can’t afford to take the loss of undercharging a client. This could be for a variety of reasons, but usually, because you’ll pay more out of pocket than you’ll be getting back.
This is why, as a final resort, if you’re on good terms with the client, then being honest with them is what you’ll need to do. This will, however, make you appear somewhat unprofessional. If you go this route, you can bring your mistake up in a short email, or over the next face-to-face meeting you have. You can approach the topic in a variety of ways, such as:
- Stating that you, unfortunately, underestimated the job specifics required and that you need to rectify this error by raising your rate.
- Broach the mistake made and discuss if they’re happy for you to reduce the amount of work to ensure you keep within the initial budget.
- Let them know that you forgot to mention that your rate increase wasn’t accounted for in the project quoted. Advise them of the new rate you’ll be working with going forward.
From here on out, undercharging a client will hopefully be a mistake you never make again.
If you keep the first few points in mind, you’ll have a framework in place to avoid being put into the same situation. With that said, as long as you have open lines of communication with your clients in place, making reasonable rate increases as you go will not be a problem either. All parties will be aware of what it is you’re providing. Then, you’ll also be able to be accurately paid for your skill set and for services rendered.