How would you inform a client of 2 years that you will be raising your hourly rate by 60%?
The background:
2 years ago, I was asked by my boss' developer friend to help out on a house design. All my work for him has been on a singular residential project in which I have been providing design, drafting, animation, rendering, code research, and model-making services. The workload has varied a lot, anywhere between 5 hrs to 40 hrs per month.
I see him as a long-term client that has the potential to lead to future work and maybe even some architect-led development projects down the road. I feel that I've brought a lot of value to his project and that it's time to increase my rate.
My rate has been $25/hr for the past 2 years and I am looking to raise my rate to $40/hr.
Also, in the past year, I have been working with a new client and I am currently charging $75/hr. He frequently needs as-built drawing sets and drafting support (no design services).
The increased rate makes me feel more valuable and respected. The other client, of 2 years, is a great guy, but I wonder if he realizes the value I bring to his project. Just thinking out loud now- look forward to hearing your thoughts.
Thank you in advance for your attention and feedback.
Non is right. You've been working way too cheap, and if the client is a developer he knows it. Of course he will squawk. If he's a cheap dick he will walk but if he has a brain he'll have a little more respect for you and will stick. Remember, he will have to replace you with someone else willing to give it away, which might not be that easy.
I had a similar situation recently. I was working with a developer that I had hoped would lead to more work, so I offered them a reduced rate.
After a year of small projects here and there, it became clear that they were just interested in the inexpensive fee and the fast turn around. I was really trying to impress them!
At the end of the calendar year, I raised my rates across the board. I brought the rate for their projects up to the same as I was charging others. I sent an email with my first invoice of the year, telling them of my rate increase, and said I'd be happy to talk about it with them if they had concerns. They didn't.
I do get fewer calls from them, but when I do it doesn't hurt so bad to do the work, since I feel like I'm getting paid appropriately for my time.
If they are a good client they will understand, if not they will go away (or at least call you less). As long as you are being fair, they can't fault you for valuing your time appropriately.
if it's a single project, we hold on the contracted rate during its duration, even if it bridges a rate change. if a client comes back with a new project after we've bumped rates, the new rate applies.
Yes, you need to do this as soon as possible, but be upfront. Working for a lower fee than you are worth is not only bad for you, but bad for the client long term. The client deserves your best effort and work, and will only happen if they are paying what other clients are paying. As others have said, if they are only trying to find the cheapest service, then don't waste your time with them, as there will always be someone willing to give them cheap work for cheap pay.
This is always a tough question involving repeat & long-term clients…mostly involving private work.
Loyalty is fleeting for architects; unlike doctors and lawyers….loyalty in today’s business environment is almost extinct. I rewarded loyalty and with two clients that stayed with me my entire 40 year career I operated on the same fees I started with, never changed them. I just found ways to economize within…it’s cheaper/faster to work with a repeat than to learn new…repeats don’t require marketing expense either.
Finding repeat clients is a godsend, why punish one.
cacti: you don't say whether you have a written contract with this client or not.
In that context, proto raises an important point above. Your contracts should contain language addressing the conditions under which hourly rates may be adjusted.
For example, below is sample "Standard Terms and Conditions" language that I've seen frequently: "Current billing rates under this Agreement are defined in the Professional Fees section of this Agreement. Once accepted by the Client, billing rates are held constant until completion of this assignment or 12 months from the date of this Agreement (whichever event occurs first) after which time rates are subject to adjustment."
Contract language like this makes the conversation you're about to have much easier.
Remember to weigh it against intangibles. My first client is on a 40% discount over my newer clients: why haven't I raised my fees? Instant payment. I send an invoice and I can count on having a check within 7 days.
Yikes. I can't get past the fact that you have only been charging this developer $25 per hour. At least where I live (Los Angeles) that is less per hour than the least skilled laborer on a job site is billed out at. You are getting paid less than the guy who doesn't speak english, digs holes, and sweeps the floor.
Even $40 per hour is woefully low for an architect.
Unless you are an employee of another architect and therefore have no stake in the game you should be insulted to be receiving anything less than $125 per hour.
good point - prevailing wage around here is around $60 for a laborer. Don't think of it as asking someone to pay you 120k a year, that rate takes into account your additional tax burden, insurance, lack of unemployment benefits, and other expenses that a traditional employee doesn't have
in your situation i prob wouldn't even raise your rate, I'd just say that you did the $25 an hour with the expectation that it would be a quick and easy project. If you still working on it 2 years later it might be best just to tell the guy that you are busy (everyone is) and want to move on.
I duuno where you guys come up with these fantastic salaries straight out of lala land.
The crude reality is, if you are not be developing CD's and stamping, you are seen as drafter / glorified drafter aka "designer" and there's plenty on those jobs right now around here in LA starting at $16-18/hr & up depending on experience and very seldom go above $25/hr.
If you want to command more respect and remunerations a professional architectural licence is required.
Mar 21, 16 4:51 pm ·
·
cadomestique,
First off,
A real professional designer operating as a business does not charge $16-18 hr. to a client. That's direct labor wage and a low one at that for this occupation. As a business, you are charging closer to 3 times direct labor wage at least. An employer paying a person $20/hr wage is actually paying closer to $30/hr. when you take social security, health insurances, worker's comp., etc. Which as an independent contractor, you have to pay yourself.
If you charge a client the base wage an employer pays you, then you are a fucking idiot.
Don't forget, stamp or no stamp, license or no license, if you conduct practice as an independent contractor (ie. as a business of your own.... a contractual relationship between yourself and the client not between the client and a company that you are an employee of), you have liability to the project to the statutes of repose / limitations.
Charge clients, as a real business or STAY the hell out of the game and don't take on clients.
The so called "going rate" is more like the "going out of business rate".
If you want to be in business, having your own clients and establishing contract between you (the principal / OWNER of your own business even if its a SOLE-PROPRIETORSHIP operating under your TRUE and REAL NAME) and clients........ BILL like a real business. Otherwise, charging $16-18 an hour is really working less than minimum wage.
Bill design services is not all that different than billing for construction. There is 4 basic parts. You got labor. You got Overhead. You got Material expenses and you got your planned profit margin.
Labor is the cost of your employees or work YOU perform directly associated to the project. This would be your direct labor costs. You could compile direct and indirect labor costs but its for the hours you work. Overhead would be associated business expenses and costs not directly associated with the project like your rent, or utilities associated with the business including business phone, business website and email expense, licenses (yes, business licenses not just occupational licenses) and certifications, continuing education, insurances (PLI, E&O, general liability insurance and other insurances) and so on. A reflected proportion should be made there as no one client should pay for all those things unless they are the only client. You distribute it across the volume of work. You need to pay it and only through volume of work can you reduce the sting of that on your clients. You still have to account for it. Materials would be material & supply you use on the project. Paper, Ink, so on.
Then you have profit. In that, you account for what you want to reserve specifically for rainy day fund and the rest for retained earnings saved and used to build up the business over time. The rainy day fund that is separate is for events like when a client sues you. You don't want to be caught with your pants down and not have money available to hire a lawyer if or when you need one.
In all this, don't forget to account for taxes as you need to set aside to make your tax payments.
So even in a sole-proprietorship / sole-practitioner, you are not paying for one. You are paying for two. You and the business from an accounting point of view.
Those who are low balling are clearly operating on a "Going OUT OF BUSINESS rates".
Mar 21, 16 6:26 pm ·
·
Short point:
DON'T CHARGE LIKE YOU ARE TRYING TO GO OUT OF BUSINESS.
It doesn't matter if you are licensed or not. You do have a legal right to charge like a business because the same liabilities applies regardless of licensure, especially with exempt buildings.
Rick's first paragraph is right-on. Every firm I've ever worked for has billed clients for my services at ~3x my hourly wage. If you're self-employed, that's what you should charge.
Yeah, if your firm "requires" a license to move up and you have no plan to get licensed, find another firm. There's plenty out there who don't need all of their staff to be licensed, even in upper management.
Mar 21, 16 8:10 pm ·
·
While I do agree that occassionally one may discount for a regular repeat client or certain exceptional cases. However, it shouldn't be the normal prices and with repeat clients, it should still as much as possible pencil out in the long run.
HOWEVER, the normal fee should be respectful to yourself and your business and look after yourself in the long run.
Take into consideration that the client will haggle so starting off at say 5-6x your direct labor and settle for no less than half that amount. You'll probably haggle out for somewhere in between.
My above being the minimum. In this game, you try to get as much as you can. 2.5x direct labor would be the critical minimum. 3x being the lowest level you want to charge but starting at 6x maybe a little higher like 7 or 8x isn't a bad area to start to allow room for the inherent haggle business. It's all in the game of negotiation and playing the art.
Mar 21, 16 10:02 pm ·
·
I won't say what the right direct labor rate for anyone here should be but with the level of responsibility involved, it should be respectful. I don't care if you are licensed or not, you probably took a significant amount of time, energy and even money to get where you are at.
Treat yourself respectfully.
Then billing at a billed hourly rate of 3x to 8x or so (the negotiation game will usually draw it down a little) or the equivalent amount under other billing formats like percentile of construction or $ per sq.ft. or whatever which would assume an estimate of time it would take. Just be fair and provide what you are worth and aim for getting paid respectfully.
Unless for extreme exceptional cases, one should not charge less than 2.5x direct hourly rate or equivalent amount.
When we all learn and apply better more business sound pricing, we all gain instead of a rotten rat race into bankruptcy.
Mar 21, 16 10:15 pm ·
·
"If you want to command more respect and remunerations a professional architectural licence is required. "
This is only half-true. An architect license should command more respect and remuneration. So should professional building design certification and above either...... experience and good work.
Technically, a license or certifications are just pieces of paper and a number on it and some text. However, it is what you do to get there and after that that matters. License or certification doesn't make you a true professional. There's no substitute for actually being professional. A track record and reputation from that can and should go a long way.
distant: no contract with this client. But, now you got me thinking.
I am going to move forward with the rate increase and implement it for the next phase of the project which will start in a month or so (wrapping up a planning submittal for the end of this month).
Along with the rate increase, I plan to implement a formal contract. In the next phase of work, I will be assisting with the building permit & construction documents. So far, I've been mostly providing SD level services.
I'm also quite certain that a licensed architect will be brought on for the remainder of the project, so I'm not sure exactly what role I will have moving forward. Either way, I think the next phase of work is a good transition point to up my rate and take a more professional approach with a contract.
Mar 21, 16 10:55 pm ·
·
cacti,
Not all contracts are written but if you been doing services for compensation for the past 2 years, there is essentially a contract. A verbal one... maybe but it is a contract.
If this is a new distinct project.....
I would recommend using a formal written contract.
Mar 21, 16 11:56 pm ·
·
When it comes to a pre-existing project / contract, it's usually messy and bad to change terms and usually results in a lot of squawking (complaining and ballistic behavior).
If you are doing a new contract (previous contract for previous phase of work that had been completed and paid for according to those terms), then better. Completely new project like a different building or an addition or accessory structure built after the original house was designed.... new project.... new terms.
In any case, never blindsight the client. They almost never like that.
In any case, never blindsight the client. They almost never like that.
amen.
Mar 22, 16 1:22 am ·
·
Actually, looking closer at the exact word and I meant to use is "blindside" but in either case I think the intended point was clear.
In any case, never blindside or blindsight the client. They almost always never like that, either.
The point being, never lead the client on a primrose path to project failure or be deceptive. Even if we aren't intentionally doing so, we can without being forthright and candid mislead them into a false sense and in turn they get blindsided.
When it comes to changing terms of contract, this is a delicate road as with anything regarding money or effecting money. That is one thing clients takes seriously.... obviously.
The amen was more for the almost than the blindsight. I understood the negative experience you conveyed of those two sentences, but got stuck on the thought of one or more clients you may have had that necessitated the almost, twice.
Mar 23, 16 12:07 am ·
·
Oh well...... Shit happens. :-)
At least we are on page.
Mar 23, 16 1:41 am ·
·
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How to inform a client of a rate increase?
Hello forum,
How would you inform a client of 2 years that you will be raising your hourly rate by 60%?
The background:
2 years ago, I was asked by my boss' developer friend to help out on a house design. All my work for him has been on a singular residential project in which I have been providing design, drafting, animation, rendering, code research, and model-making services. The workload has varied a lot, anywhere between 5 hrs to 40 hrs per month.
I see him as a long-term client that has the potential to lead to future work and maybe even some architect-led development projects down the road. I feel that I've brought a lot of value to his project and that it's time to increase my rate.
My rate has been $25/hr for the past 2 years and I am looking to raise my rate to $40/hr.
Also, in the past year, I have been working with a new client and I am currently charging $75/hr. He frequently needs as-built drawing sets and drafting support (no design services).
The increased rate makes me feel more valuable and respected. The other client, of 2 years, is a great guy, but I wonder if he realizes the value I bring to his project. Just thinking out loud now- look forward to hearing your thoughts.
Thank you in advance for your attention and feedback.
gently, but they will agree.
in short, you say - look man - not worth it anymore, help me out.
Non is right. You've been working way too cheap, and if the client is a developer he knows it. Of course he will squawk. If he's a cheap dick he will walk but if he has a brain he'll have a little more respect for you and will stick. Remember, he will have to replace you with someone else willing to give it away, which might not be that easy.
I had a similar situation recently. I was working with a developer that I had hoped would lead to more work, so I offered them a reduced rate.
After a year of small projects here and there, it became clear that they were just interested in the inexpensive fee and the fast turn around. I was really trying to impress them!
At the end of the calendar year, I raised my rates across the board. I brought the rate for their projects up to the same as I was charging others. I sent an email with my first invoice of the year, telling them of my rate increase, and said I'd be happy to talk about it with them if they had concerns. They didn't.
I do get fewer calls from them, but when I do it doesn't hurt so bad to do the work, since I feel like I'm getting paid appropriately for my time.
If they are a good client they will understand, if not they will go away (or at least call you less). As long as you are being fair, they can't fault you for valuing your time appropriately.
good luck.
if it's a single project, we hold on the contracted rate during its duration, even if it bridges a rate change. if a client comes back with a new project after we've bumped rates, the new rate applies.
Yes, you need to do this as soon as possible, but be upfront. Working for a lower fee than you are worth is not only bad for you, but bad for the client long term. The client deserves your best effort and work, and will only happen if they are paying what other clients are paying. As others have said, if they are only trying to find the cheapest service, then don't waste your time with them, as there will always be someone willing to give them cheap work for cheap pay.
This is always a tough question involving repeat & long-term clients…mostly involving private work.
Loyalty is fleeting for architects; unlike doctors and lawyers….loyalty in today’s business environment is almost extinct. I rewarded loyalty and with two clients that stayed with me my entire 40 year career I operated on the same fees I started with, never changed them. I just found ways to economize within…it’s cheaper/faster to work with a repeat than to learn new…repeats don’t require marketing expense either.
Finding repeat clients is a godsend, why punish one.
cacti: you don't say whether you have a written contract with this client or not.
In that context, proto raises an important point above. Your contracts should contain language addressing the conditions under which hourly rates may be adjusted.
For example, below is sample "Standard Terms and Conditions" language that I've seen frequently: "Current billing rates under this Agreement are defined in the Professional Fees section of this Agreement. Once accepted by the Client, billing rates are held constant until completion of this assignment or 12 months from the date of this Agreement (whichever event occurs first) after which time rates are subject to adjustment."
Contract language like this makes the conversation you're about to have much easier.
Remember to weigh it against intangibles. My first client is on a 40% discount over my newer clients: why haven't I raised my fees? Instant payment. I send an invoice and I can count on having a check within 7 days.
Yikes. I can't get past the fact that you have only been charging this developer $25 per hour. At least where I live (Los Angeles) that is less per hour than the least skilled laborer on a job site is billed out at. You are getting paid less than the guy who doesn't speak english, digs holes, and sweeps the floor.
Even $40 per hour is woefully low for an architect.
Unless you are an employee of another architect and therefore have no stake in the game you should be insulted to be receiving anything less than $125 per hour.
good point - prevailing wage around here is around $60 for a laborer. Don't think of it as asking someone to pay you 120k a year, that rate takes into account your additional tax burden, insurance, lack of unemployment benefits, and other expenses that a traditional employee doesn't have
in your situation i prob wouldn't even raise your rate, I'd just say that you did the $25 an hour with the expectation that it would be a quick and easy project. If you still working on it 2 years later it might be best just to tell the guy that you are busy (everyone is) and want to move on.
I duuno where you guys come up with these fantastic salaries straight out of lala land.
The crude reality is, if you are not be developing CD's and stamping, you are seen as drafter / glorified drafter aka "designer" and there's plenty on those jobs right now around here in LA starting at $16-18/hr & up depending on experience and very seldom go above $25/hr.
If you want to command more respect and remunerations a professional architectural licence is required.
cadomestique,
First off,
A real professional designer operating as a business does not charge $16-18 hr. to a client. That's direct labor wage and a low one at that for this occupation. As a business, you are charging closer to 3 times direct labor wage at least. An employer paying a person $20/hr wage is actually paying closer to $30/hr. when you take social security, health insurances, worker's comp., etc. Which as an independent contractor, you have to pay yourself.
If you charge a client the base wage an employer pays you, then you are a fucking idiot.
Don't forget, stamp or no stamp, license or no license, if you conduct practice as an independent contractor (ie. as a business of your own.... a contractual relationship between yourself and the client not between the client and a company that you are an employee of), you have liability to the project to the statutes of repose / limitations.
Charge clients, as a real business or STAY the hell out of the game and don't take on clients.
The so called "going rate" is more like the "going out of business rate".
If you want to be in business, having your own clients and establishing contract between you (the principal / OWNER of your own business even if its a SOLE-PROPRIETORSHIP operating under your TRUE and REAL NAME) and clients........ BILL like a real business. Otherwise, charging $16-18 an hour is really working less than minimum wage.
Bill design services is not all that different than billing for construction. There is 4 basic parts. You got labor. You got Overhead. You got Material expenses and you got your planned profit margin.
Labor is the cost of your employees or work YOU perform directly associated to the project. This would be your direct labor costs. You could compile direct and indirect labor costs but its for the hours you work. Overhead would be associated business expenses and costs not directly associated with the project like your rent, or utilities associated with the business including business phone, business website and email expense, licenses (yes, business licenses not just occupational licenses) and certifications, continuing education, insurances (PLI, E&O, general liability insurance and other insurances) and so on. A reflected proportion should be made there as no one client should pay for all those things unless they are the only client. You distribute it across the volume of work. You need to pay it and only through volume of work can you reduce the sting of that on your clients. You still have to account for it. Materials would be material & supply you use on the project. Paper, Ink, so on.
Then you have profit. In that, you account for what you want to reserve specifically for rainy day fund and the rest for retained earnings saved and used to build up the business over time. The rainy day fund that is separate is for events like when a client sues you. You don't want to be caught with your pants down and not have money available to hire a lawyer if or when you need one.
In all this, don't forget to account for taxes as you need to set aside to make your tax payments.
So even in a sole-proprietorship / sole-practitioner, you are not paying for one. You are paying for two. You and the business from an accounting point of view.
Those who are low balling are clearly operating on a "Going OUT OF BUSINESS rates".
Short point:
DON'T CHARGE LIKE YOU ARE TRYING TO GO OUT OF BUSINESS.
It doesn't matter if you are licensed or not. You do have a legal right to charge like a business because the same liabilities applies regardless of licensure, especially with exempt buildings.
^didnt you once say that you did a project for 5$?
Rick's first paragraph is right-on. Every firm I've ever worked for has billed clients for my services at ~3x my hourly wage. If you're self-employed, that's what you should charge.
3x your hourly wage? Nice. Mine's 5-6...
You should get a raise.
Agreed.
Yeah, if your firm "requires" a license to move up and you have no plan to get licensed, find another firm. There's plenty out there who don't need all of their staff to be licensed, even in upper management.
While I do agree that occassionally one may discount for a regular repeat client or certain exceptional cases. However, it shouldn't be the normal prices and with repeat clients, it should still as much as possible pencil out in the long run.
HOWEVER, the normal fee should be respectful to yourself and your business and look after yourself in the long run.
Take into consideration that the client will haggle so starting off at say 5-6x your direct labor and settle for no less than half that amount. You'll probably haggle out for somewhere in between.
My above being the minimum. In this game, you try to get as much as you can. 2.5x direct labor would be the critical minimum. 3x being the lowest level you want to charge but starting at 6x maybe a little higher like 7 or 8x isn't a bad area to start to allow room for the inherent haggle business. It's all in the game of negotiation and playing the art.
I won't say what the right direct labor rate for anyone here should be but with the level of responsibility involved, it should be respectful. I don't care if you are licensed or not, you probably took a significant amount of time, energy and even money to get where you are at.
Treat yourself respectfully.
Then billing at a billed hourly rate of 3x to 8x or so (the negotiation game will usually draw it down a little) or the equivalent amount under other billing formats like percentile of construction or $ per sq.ft. or whatever which would assume an estimate of time it would take. Just be fair and provide what you are worth and aim for getting paid respectfully.
Unless for extreme exceptional cases, one should not charge less than 2.5x direct hourly rate or equivalent amount.
When we all learn and apply better more business sound pricing, we all gain instead of a rotten rat race into bankruptcy.
"If you want to command more respect and remunerations a professional architectural licence is required. "
This is only half-true. An architect license should command more respect and remuneration. So should professional building design certification and above either...... experience and good work.
Technically, a license or certifications are just pieces of paper and a number on it and some text. However, it is what you do to get there and after that that matters. License or certification doesn't make you a true professional. There's no substitute for actually being professional. A track record and reputation from that can and should go a long way.
Thank you all for the insight, great stuff.
distant: no contract with this client. But, now you got me thinking.
I am going to move forward with the rate increase and implement it for the next phase of the project which will start in a month or so (wrapping up a planning submittal for the end of this month).
Along with the rate increase, I plan to implement a formal contract. In the next phase of work, I will be assisting with the building permit & construction documents. So far, I've been mostly providing SD level services.
I'm also quite certain that a licensed architect will be brought on for the remainder of the project, so I'm not sure exactly what role I will have moving forward. Either way, I think the next phase of work is a good transition point to up my rate and take a more professional approach with a contract.
cacti,
Not all contracts are written but if you been doing services for compensation for the past 2 years, there is essentially a contract. A verbal one... maybe but it is a contract.
If this is a new distinct project.....
I would recommend using a formal written contract.
When it comes to a pre-existing project / contract, it's usually messy and bad to change terms and usually results in a lot of squawking (complaining and ballistic behavior).
If you are doing a new contract (previous contract for previous phase of work that had been completed and paid for according to those terms), then better. Completely new project like a different building or an addition or accessory structure built after the original house was designed.... new project.... new terms.
In any case, never blindsight the client. They almost never like that.
In any case, never blindsight the client. They almost never like that.
amen.
Actually, looking closer at the exact word and I meant to use is "blindside" but in either case I think the intended point was clear.
In any case, never blindside or blindsight the client. They almost always never like that, either.
The point being, never lead the client on a primrose path to project failure or be deceptive. Even if we aren't intentionally doing so, we can without being forthright and candid mislead them into a false sense and in turn they get blindsided.
When it comes to changing terms of contract, this is a delicate road as with anything regarding money or effecting money. That is one thing clients takes seriously.... obviously.
The amen was more for the almost than the blindsight. I understood the negative experience you conveyed of those two sentences, but got stuck on the thought of one or more clients you may have had that necessitated the almost, twice.
Oh well...... Shit happens. :-)
At least we are on page.
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