Negotiating the rates

24.10.2014

I have been asked by some colleagues if there are any ways to persuade your existing customer to raise your rates. I can share my experience, what actions I took and what was the result.

When at the beginning of 2014 the rouble exchange rate dropped abruptly by 15%, this immediately affected by income, because money earned from work with Russian agencies are mostly spent in a foreign currency. So I started hinting the managers of my biggest Russian customer that my work is no worse than a year ago, probably even better, but now I get less, and this is no good. All the rest in the work with this agency suited me, a constant flow of jobs, sane (in their majority) managers, but if we do not agree on rates inflation indexation, every year the real income will be less and less, until it becomes an infinitely small quantity.

But my hints did not bring anything, so when I became necessary to sign a new contract, I raised the issue bluntly. The negotiations went brilliantly, I was bargaining like at the eastern bazaar, and the new rate, higher by 20%, was entered into the contract. But instead of an increase in the income I got a decrease in the jobs amount. They became less frequent, either small and urgent, or very difficult, obviously refused by other contractors.

I assumed that other contractors would not tolerate the fall in income as well, as we know that regardless of the official inflation rate everything becomes by 10% more expensive in Russia every year. So I thought that most people have already raised their rates, and only me is a fool who works at last year’s rates. But it turned out the majority preferred a bird in the hand, although it was already 30% thinner. When I settled in Poland in September 2012, a Polish zloty was 10 roubles, and at that time it was already 13.

I am not going to play it back, inflation is an objective factor, and it has to be dealt with. And the unexpected surplus of free time is very good for finding European and American customers, and the number of such jobs is slowly growing. But, I guess, it would be more reasonable not to make a revolution but gradually reduce work with this company, refusing cheap jobs only when you have more expensive ones. Although this poses another risk – having to refuse more expensive jobs because all your time is booked with cheaper ones. So the golden mean should be found somehow.

Thus the answer to the question if it is possible to persuade your existing customer to raise the rate is positive. But there is no guarantee that you will like the result. Because if your raised rate will be higher than what most of contractors bid, you will just be getting less jobs. So probably beside “I want more” you also need to offer something instead. Something that will make your services more valuable to the customer. If I succeed in this, I will tell you how.