Ask HN: Budget season. How to justify rate?
I am increasing my rate. Haven't done so in years. Client is going to be shocked. Project manager said "as long as you can justify it". I could just say "inflation", but I think he means that I link to some published rate metrics. I did some googling and only found an IEEE rate guide - which costs $45. Anyone have some resources to share?
15 comments
Example.
Hi, my rates in our contract are going up from $xx/hr to $yy/hr to adjust to market rates effective ______. You know that I have not had a rate revision for several years. The new rates are reflective of the additional skills, knowledge and experience I bring to the table. As a long-term partner, I would be happy to lock these rates for a period of ___ years and include an inflation/cost-of-living adjustment from year ___ onwards in our new contract. Let me know what you think. Thanks.
a. Your client already knows your capabilities. So, no need to rehash that, I think.
b. If there are new skills you will be bringing to the table in the future (eg: you can now program in Rust), that can be stated as part of the value you bring.
c. Don't worry about the client being shocked. If they like your work and your increases are reasonable and worth the value you bring, they are likely to accept your proposal.
d. Some of these elements in the proposal are negotiable. For example, you are proposing a rate increase, but also proposing to lock those rates for a longer period. You are also hinting at an inflation-adjusted rate down the road. If the client likes your longer-term rate lock at the higher rate, you can decide to knock-off the inflation-adjustment clause.
Remember that every negotiation begins with what you are comfortable with and ends (successfully) with what the other party is comfortable with that you can accept.
Good luck.
Hi, my rates in our contract are going up from $xx/hr to $yy/hr to adjust to market rates effective ______. You know that I have not had a rate revision for several years. The new rates are reflective of the additional skills, knowledge and experience I bring to the table. As a long-term partner, I would be happy to lock these rates for a period of ___ years and include an inflation/cost-of-living adjustment from year ___ onwards in our new contract. Let me know what you think. Thanks.
a. Your client already knows your capabilities. So, no need to rehash that, I think.
b. If there are new skills you will be bringing to the table in the future (eg: you can now program in Rust), that can be stated as part of the value you bring.
c. Don't worry about the client being shocked. If they like your work and your increases are reasonable and worth the value you bring, they are likely to accept your proposal.
d. Some of these elements in the proposal are negotiable. For example, you are proposing a rate increase, but also proposing to lock those rates for a longer period. You are also hinting at an inflation-adjusted rate down the road. If the client likes your longer-term rate lock at the higher rate, you can decide to knock-off the inflation-adjustment clause.
Remember that every negotiation begins with what you are comfortable with and ends (successfully) with what the other party is comfortable with that you can accept.
Good luck.
> I think he means that I link to some published rate metrics
Depends, sometimes people mean "justify by referring to our shared project history, context, process & logic" as opposed to business-world metrics. Which to a lot of people is more impactful for negotiating.
So you could say, look. Here's what I've done on this project so far. I've made it possible to do this, that, and the other. I'm already up to speed, which took years, and I know it inside and out. I see the following benefits of working with me in the future (examples). My rate is $$$ but I'm aware that this is below industry right now, for people who can do what I do (recapped above).
The last sentence would help you contextualize the impossibility or improbability of finding someone who can look at your work and tell you exactly what dollar amount you're worth on the hourly.
Regardless this is really important for you from a relationship standpoint, often the unspeakable elephant in the room for business. Their response to even the sloppiest negotation you can produce will help you understand your next set of moves compared to what you thought they'd be, and that is really helpful to know. Good luck.
Depends, sometimes people mean "justify by referring to our shared project history, context, process & logic" as opposed to business-world metrics. Which to a lot of people is more impactful for negotiating.
So you could say, look. Here's what I've done on this project so far. I've made it possible to do this, that, and the other. I'm already up to speed, which took years, and I know it inside and out. I see the following benefits of working with me in the future (examples). My rate is $$$ but I'm aware that this is below industry right now, for people who can do what I do (recapped above).
The last sentence would help you contextualize the impossibility or improbability of finding someone who can look at your work and tell you exactly what dollar amount you're worth on the hourly.
Regardless this is really important for you from a relationship standpoint, often the unspeakable elephant in the room for business. Their response to even the sloppiest negotation you can produce will help you understand your next set of moves compared to what you thought they'd be, and that is really helpful to know. Good luck.
I've done very well with the following rule of thumb: If you're not a little bit embarrassed by the amount you are charging, you are not charging enough (also applies for making offers on a house and any other kind of financial negotiation)
You don't need to justify it beyond "it's the market rate for your skills"
You don't need to justify it beyond "it's the market rate for your skills"
"We update our rates in response to market changes and on a regular basis as we continue to improve our business."
Businesses regularly update their financial targets in order to grow. There isn't anything to explain here.
Any post here that deviates in fundamental details from the statements above is selling you a point of view that is irrelevant.
Businesses regularly update their financial targets in order to grow. There isn't anything to explain here.
Any post here that deviates in fundamental details from the statements above is selling you a point of view that is irrelevant.
“Justify” doesn’t mean shopping rates in the market, it’s means “demonstrate the ROI we are getting for the rate you are charging”.
Comparing it to the market only matters if they decide you’re unlikely to be worth the value they are getting from your work.
Comparing it to the market only matters if they decide you’re unlikely to be worth the value they are getting from your work.
There is no one-size-fits-all answer to this question, as the justification for your rates will vary depending on your specific situation and the budget of your potential client. However, some tips on how to justify your rates may include:
- emphasizing the value of your services and how they will benefit the client - stressing the importance of quality workmanship - highlighting your experience and expertise - outlining a flexible payment plan that works for both you and the client
- emphasizing the value of your services and how they will benefit the client - stressing the importance of quality workmanship - highlighting your experience and expertise - outlining a flexible payment plan that works for both you and the client
If you're a real contractor you don't have to justify anything, it's just a price change of your services. I assume you're an "employed contractor" (someone who works for 1 client only) which technically means you're employed. So just go with the usual: Go interview for someone else and then say "I have an offer from another company for $X/hour, will you match it?"
if you only have one client you and your client can get into trouble as you might be classified as an employee. saying that you have another offer might add weight to that. as a contractor you don’t need another offer. the increase is due to cost of doing business.
If you’re good at your job, customers who whinge about your rates aren’t the customers you want. Generally, customers who pay more are far less trouble.
Lol, don't justify shit. What andrewmcwatters said is all you need: "We update our rates in response to market changes and on a regular basis as we continue to improve our business."
If that's not cool with them, wish them luck in finding someone else who will accept whatever they've been paying you.
If that's not cool with them, wish them luck in finding someone else who will accept whatever they've been paying you.
Most reasonable people understand that rates and salaries go up. Going in with the attitude of "we don't need to justify shit" is going to turn reasonable people into unreasonable ones.
i recently did the same. i work as a contractor. inflation, cost of living, cost of doing business, are all valid reasons. i don’t see why you would need to justify beyond that. if you offer a specialized skill they should have no issue paying more.
that said i suspect managers discuss rates with finance or hr people while they should not. these people have their own ideas on what to pay people which IMHO are based on hearsay. i’m interested to hear other people’s opinion on this as i’ve had at least one situation like this. i’ve walked away from it.
that said i suspect managers discuss rates with finance or hr people while they should not. these people have their own ideas on what to pay people which IMHO are based on hearsay. i’m interested to hear other people’s opinion on this as i’ve had at least one situation like this. i’ve walked away from it.
hmm, apart from already mentioned statements by other posters; I think inflation as we see it today, is perfectly understandable reason to justify increase in rate, companies increase rates for services all the time, sometimes accompanied only by meaningless jargon
in the end I think it all comes down to who has more leverage:
- can they find someone else for the old rate + risk and cost of hiring someone new
- can you walk away and find another customer for the new rate
in the end I think it all comes down to who has more leverage:
- can they find someone else for the old rate + risk and cost of hiring someone new
- can you walk away and find another customer for the new rate
> Haven't done so in years
Easy, then: you’ve grown as an engineer. You would see raises at a salaried job. Give yourself a raise.
Easy, then: you’ve grown as an engineer. You would see raises at a salaried job. Give yourself a raise.
i watched this enjoyable presentation a while ago -
https://youtu.be/jVkLVRt6c1U