Of all the things clients do to freelancers, asking you to lower your rates mid-project might be the most treacherous. It might be worse than being ghosted. When a client disappears, you know where you stand. Being asked to lower your rates after you’ve started work feels demeaning.
But, it’s not always an act of malice. Sometimes, it’s a justified business move.
It’s happened to me several times during the last 11 years. Here is how you should handle it.
Why does the client want to lower your rates?
Before you decide your next move, assess the situation - both on your end and on your client’s end.
There are sometimes valid reasons for clients to lower the rates for their freelancers (and the salaries for their full-time employees). Maybe their business is strapped for cash. Maybe they’re under pressure from higher up. Maybe they have better offers from other freelancers.
And maybe - don’t take this personally - your work isn’t good enough to justify your rates.
You can’t know for sure, but you can make an educated guess. Most of the time, the reasons belong to one of these three categories:
- They’re running out of money.
- They’re cheap.
- They’re not happy with your work.
Try to talk to them to figure out the reason. Only then, make your next move.
Reason 1: they’re running out of money
I love working for startups because it’s exciting and dynamic. But, startups often have financial problems which can trickle down to freelancers.
Startups usually rely on investments to stay in business until they turn a profit. Since most startups fail there is some risk inherent in freelancing for them.
So, what should you do if they say you need to lower your rates because they need to save money to keep the company going? There are two courses of action here:
- If you believe in the project, suggest lowering your rate in exchange for equity. If you’re a real believer in the startup’s mission, you can even suggest letting go of your fees entirely - in exchange for much more equity, of course.
- If you don’t believe in the project, start looking for new clients.
Reason 2: they’re cheap
If you suspect that the client is trying to reduce your rates because they’re penny-pinching even though their business isn’t in financial distress, make sure they understand that they get what they pay for.
Here, too, we have two courses of action:
- If you think they’re bluffing, hold your ground. Make sure they understand you have other options and your rates aren’t negotiable. Most of the time, they will back off. The cost of replacing you is likely higher than the cost of keeping you.
- If they are adamant about reducing your fees, suggest reducing your services in exchange. If they want to pay you less, take some bonuses out of your offer.
You did put bonuses in your offer, right?
Reason 3: they’re not happy with your work
It happens to the best of us. Sometimes we just aren’t focused enough or healthy enough to deliver at the top of our ability. Other times, we bite off more than we could chew.
I’ve been in both situations. Once again, two courses of action:
- If it’s a temporary problem (like health or family issues), explain the situation to the client and ask for one more chance at your current rate. Offer to reopen the rate discussion after that if they’re still not happy.
- If you assess that you have failed because of a lack of skills, ask what you need to improve. Show humility and, again, ask for one more shot at your current rate.
You will usually get one more chance. After that, if they’re still not happy, consider that your rates might really be too high for your current skill level. Get as much feedback as possible so you can improve in critical areas.
If they won’t tell you the reason and you can’t figure it out, pass the ball back to them.
Ask them the reason directly and repeatedly. Tell them you can’t lower your rates without a good reason, but give them the option to make a different offer - take something out of your service package, give you equity, or otherwise compensate you.
But, keep in mind: if they’re very secretive, they’re usually just cheap (or their boss/investor is cheap, which is the same thing from your perspective).
Don’t succumb to pressure
Sometimes, clients will surprise you with this discussion in the middle of a call. Don’t panic. You don’t have to decide right away.
You can flip the situation in your favor. Use the call to ask all the questions we listed above, then tell them you need to think about it and they will have your decision tomorrow.
See where they stand, then take your time to formulate a plan.
Focus on the long game
Does it matter so much whether you charge $1,000 or $800 for a project this month? Probably not, in the long term.
Keep that in mind. Fight for the best deal you can get, but keep your eyes on the horizon.