How do I tell a client that I'm working fewer hours because they pay me much worse than my other clients?

Question

I have a client that I have worked with for 5 years. We have a great working relationship. However, since I've graduated university and found other clients, I've noticed that I'm severely underpaid by the old one (I'm paid about 66% of what I should be). In turn that makes it difficult to rationalize doing development for them, even though I enjoy the work. It's just not logical from a money standpoint.

The issue is that this client is very reluctant to pay more than they currently are, even though I should be paid much higher given market rates and the fact that it's freelance (so no benefits, no 401k, etc.).

How can I either:

1. ask the client to give me a raise to match (or come close to matching) the market rate (thus what my other clients are paying me)

   or

2. let the client know that I have to severely cut my hours due to this pay disparity

I really do like this client and have a great relationship with them, but I have no idea how to discuss this issue without sounding like I'm trying to extort them. They probably wouldn't take it that way, but it isn't uncommon to hear talk of "the budget is tight right now", "we need to see profits in XYZ before investing more development into it", etc.

PS - if it matters, my last raise was over a year ago, and it was a conversation that I had telling the client that I needed to be paid closer to the market rate, but I hadn't yet determined that I was still underselling myself (apparently by about 33%).

Answer 1

Simple, either raise their pricing or drop the client. It's business. There's little point in working even a few hours for less money than you could earn with another client. Businesses typically do not provide individual pricing merely because you've been doing business with them for a while.

Hi [client],

As of [Month day year] pricing for my services will be increasing to $x per hour.

I've absolutely enjoyed working with you n your projects, but unfortunately cost of living and market demands necessitate a price increase. I hope this increase is acceptable and we can continue working together.

As always, I'm available for further discussion if necessary.

Thank you

I think the biggest mistake freelancers make - and I am no exception here at times - is to not be confident when discussing pricing.

The less confident one appears when discussing pricing, the more the client gets a sense they can have it altered. If you subconsciously convey that you "aren't sure" if you can get the pricing, the client picks up on that to some degree and it opens a whole flood gate of discussion which is not warranted. State your price. Clients pay it or they don't. It's that simple. If they don't want to pay it, they can find someone else. I, personally, have tried to get in the habit of repeating "Pricing is non-negotiable".

I do have some prospective clients that refuse the rates and move on... but, since my pricing is set, the clients I do retain make up for any lost prospect which wants me to lower pricing for them. I'd rather work for clients that see my pricing as acceptable. I detest "haggling" when clients have no reasonable understanding of my overhead or market standing. It all comes across as a "yard sale" for my time which seems entirely undesirable. This is my price. That's it. If it's too expensive, I understand and that means you'll need to shop elsewhere, not that I'll reduce pricing for you.

Answer 2

In 5 years of working with this client, your skill level has probably increased: you definitely do the same job faster than 5 years (and even a year) ago and most likely you do your job better. This (and not graduation itself) should be the main argument in the negotiations. Your client can now get from you per each hour more than before, and therefore it is logical if this hour will cost more.
Good luck in your negotiations!