The Risks of Lowering Your Billing Rate

Let’s assume you charge the same as other freelancers with similar levels of experience. Should you ever lower your rate? Most freelancers have done it at one time or another because they were just getting started, or wanted to work with a particular company, or they had time available and knew that earning something was better than earning nothing. Lowering your rate every once in a while might not seem like a big deal, but it can negatively impact your entire client portfolio. Here’s why.

The long-term impact of over-servicing a client

As anybody who has been around client service long enough will tell you, for some unexplained reason, the lowest paying clients tend to require the most support. It’s a slippery slope when a freelancer over-services the lower paying client because it cuts into all of their available time. Therefore, it can impact the results the freelancer is able to achieve for their other, higher paying clients. This puts your reputation and existing client relationships at risk. It almost goes without saying that it’s harder to replace a retainer client paying $5K a month than one paying $2K.

Besides, if you undervalue your services, so will your clients. And there’s little to no incentive for them to increase your fees when you’ve shown that they can get the same, high level work for a lower price.

Even if you’re delivering fantastic results for the lower paying client, the situation makes it difficult to be excited about any referrals that come from them. The new business leads will expect to get the same, low rate.

When it makes sense to lower your rate

Here are three examples of when a lower rate is the best way to go.

1. You're charging too much

The first reason to consider lowering your rate is if you’re charging a lot more than other freelancers with similar experience offering the same services. When in doubt, ask other freelancers what they’re charging. Anecdotally, the range for experienced freelance communicators varies from $85-$250 per hour, on average, with many charging between $100-$150 per hour. Or, depending on the scope, the freelancer charges a monthly retainer that tends to fall between $3-$6K or more, on average. Also, to avoid wasting time developing proposals that don’t lead to contracts, ask the prospect up front about their requirements and budget. This will inform your billing rate.

2. Cost of living

The second exception is if you’re used to servicing clients located in areas with a higher cost of living. For example, Silicon Valley typically pays tech talent more than other regions. If you present a Silicon Valley budget to a company located in an area with a lower cost of living, the client is likely to get sticker shock.

3. Industry sector

The third exception is if you expand your services to get your foot in the door in a new industry or pursue a lower-paying one such as nonprofit. 

This post doesn’t mean you can’t or shouldn’t negotiate or ever lower your rate. If the client has a compelling story, is someone that you want to work with, and the opportunity aligns with your skills, then by all means strike a deal. Just make sure it benefits both sides. What you want to avoid is signing with a client whose budget is too small to make a meaningful impact.

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