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Jun 12

The Balancing Act of Setting a Rate

Setting a rate when you’re dealing with a new client can be a tricky task. On one hand you want to ensure that you’re paid a reasonable rate but you don’t want to give them sticker shock and scare them off.

balanceOne of the most frequently asked questions I see is about setting an appropriate rate when pitching for work or responding to a request for a quote. I’ve covered how to set a rate before.

It’s important to understand that you need to be flexible when setting rates. What is right for one client might not work for another client. Also, you might be prepared to take a lower rate from one client as you’ve been able to secure a higher rate from another.

The thing is, it might be tempting to take a low pay rate in order to secure a job. The problem is that the price you set for your work goes a long way to defining its value.

Here’s a practical example of this from the retail world.

Let’s say you were shopping for wine. You know that the sticker price of your favourite is $25 but it’s often on sale for $15. So, even though it’s price is $20, the market now perceives its value as $15. If you set the rate for your work too low, you aren’t just offering a low price, you’re establishing the value.

The balancing act of setting a rate means finding the medium ground where you’re paid enough but you don’t scare the client off.

Do some research into the client. Are they a large company or sole trader? Large companies are often prepared to pay premium rates in order to get a job done and free up their own people. But smaller operators might be more constrained and less able to pay higher rates.

Have some flexibility in your rates but don’t compromise yourself onto poverty.If a small discount lets you get the job and make a reasonable profit then go for it. But donut work at a loss – ever.

Be prepared to say no to a job. If the client can’t afford the rates you need in order to pay your bills then you’re better off saying no and using the time to chase better paying clients.

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