Some time ago, I had a discussion with a vendor who had been working for me several hours a week for about 18 months. I was very pleased with her work. With inflation, her business expenses and living costs were increasing. Yet she was still charging me the same $25 per hour rate she had started with.
It’s important to me that contractors and employees who work for me are paid fairly, so I thought it was time she raised her fees. I asked her, “What are you charging new clients?” I knew she had stopped taking new clients because she was so busy. She said, “$30 an hour.”
I suggested I should also be paying $30 and asked if she had raised her rate for current clients. She had not. She said, “Going from $25 to $30, that’s a big jump.” Which it is, 20%. Then I asked, “What’s your fear about charging your current clients 20% more?” “Well, they might leave.”
I said, “And if they leave, you’ll need to take on new clients, right? And you have more people wanting your services than you have time for, right? So if you raise your rate from $25 to $30, and an existing client leaves, you can take on a new client at $30, right?”
At that point I could see the light come on.
As we talked further, I explained that if she told me her rate was going up, my thought process might go like this: “Well, I probably could find somebody else at $25, but I’m really happy with her work and I just don’t want the hassle of looking for someone else. I’d rather pay her the higher rate.” Eventually, we agreed that, beginning with the next pay period, she would charge me $30.
That fear of raising fees is an issue with almost every self-employed person who provides some sort of service, from house cleaning to lawn care to financial planning or therapy. What are the emotional underpinnings of this? What might be some of the money scripts?
Here are just a few possibilities:
- “I have to settle for whatever someone pays me.”
- “It’s greedy to ask for more.”
- “If I charge more, I’ll lose clients and other people won’t hire me.”
- “Maybe my clients can’t afford to pay me more.”
- “The work I do isn’t worth more.”
- “I’m not worth more.”
In my own career, it took me years to figure out that, any time I underbid a project or agonized over raising fees that I knew were below market rates, part of the issue was not respecting myself. If we are providing a service while we carry niggling thoughts about “others doing this same work are charging more,” chances are we are going to become resentful. We don’t feel honored or noticed or respected by those we work for, when in part we don’t honor and respect ourselves.
That resentment ultimately will affect the quality of our work, coming out as apathy, less sense of engagement, a lower sense of responsibility, and poor performance.
It is normal to go through fear and resistance around raising fees. At the base of it typically is a fear of being rejected or abandoned, as well as financial insecurity and anxiety about going broke. These are things to pay attention to. I also want to emphasize that it’s important not to criticize yourself for wanting to raise your fee, especially if what you are charging is below market rates.
If you like your work, respecting yourself by charging market rates will assure that you show up fully for your customers and clients, which benefits them as well. If you are an employer, the same is true for your employees or your contractors. Paying a fair market rate translates to a happier workplace, more satisfied clients, and ultimately a more sustainable business.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.