How do I go about negotiating higher pay for a current contract?

Negotiation like this is not simple. If you are running your own business I would recommend some negotiation seminars. They will pay off in the long run. I have taken courses at Karass with great success.

In your situation it is all about information.

What does the client know?
Do they know that they are the only customer of yours?
Are you willing to walk away?
Does your contract with them include terms for renegotiation?

I do consultant work from time to time, and when I am busy I quote outrageous rates, sometimes I get the work, sometimes I don’t.

I would say you should approach your client and say something like “My time is limited, and I have other customers who are willing to pay me much more to do similar work. I have to make a business decision to keep you on as a client. But only if I can market adjust the rates.”

Now this depends on the feild and type of job that your contract is under but from my experience what we done in the modular construction business we back charge back charge back charge find more reason {on the job in question} to charge them for the work. Like a mechanic they fix one thing but when there done they have someelse that they need to fix because it is not up to standard we can get more into to depth on this and I can give you someideas on this matter I do this kind of thing for a living

When approaching the client I would plan to tell them clearly why you feel the pay rate should be increased. EXplain just what you have said here, you have more knowledge. Then, I would offer a carrot….. increase your obligation or goal (how ever you measure the service you provide). Keep it reasonable so you are not shorting yourself, but it will be an indicator to the client you are able to compromise and work things out.

Aside from impeccable manners and somewhat honed negotiation skills, as a business owner working with contractors, I can say that I respond best if contractors show me some solid market research that shows me that their vendor schedule has really fallen behind market average.

If you can show solid research with credible numbers you may not have to negotiate at all.

Key is to come up with credible stuff, and not some hypothesized/wishful-thinking pricing model that will be hard to verify.

And first and foremost, never lie, but also do not let them know they’re your only client.

Makes sense?

I agree completely with mjoyce. Could not have said it better myself.

I’m with Marina, saw this question hours ago and decided that there couldn’t be a better answer given than mjoyce’s.

PS:

A word to the wise. Whilst I somewhat agree with previous posts, you should consider that claiming to have plenty of other clients that pay more will result in two side effects:

First of all, you bring yourself in a position where you will have to maintain the appearance of running at full capacity. Savvy buyers know this argument all too well and hear plenty of it – heck half of my vendor base constantly tells me about their “other” more-paying customers, however, they hardly ever leave when we don’t agree to raise rates. The “many other clients” is one of the oldest ones in the book. So your outcome may vary based on your buyer. This approach comes at the risk of total defeat, because if they refuse to raise the rate, what are you going to do? Stay at the old low rate, despite having announced you have so many other well-paying clients?

Second, in my company, if we raise a consultant’s rate based on such argument, and later on get the feeling that we’ve been hustled, we deal with that. Not always to the consultant’s delight.

While previous posts make a very valid point and offer a sound and common strategy, I wouldn’t necessarily apply it in your situation of having only one buyer. You’d make it very easy for them to state well, we can’t pay those rates, but since you have so many other well-paying buyers…....good luck.

If you decide to go with claiming you have more clients that pay better rates and you win…good for you. Just be aware that if they don’t go for it you’re in a really, really bad position. It’s virtually impossible to stay there at the old rate without losing your face and giving them so much more leverage. It’s a gamble really.

I’d really suggest you show your buyer that you’re charging much below market average….aside from everything else it is more honest, and there is such a thing as karma. ;)

Great points, TaoSan.

That is why it is important to ask yourself if you are willing to walk away if they don’t agree to the increase. If you believe that your skills should be better compensated, you could simply go out and find other clients that might be willing to pay more and then present that scenario to your current employer. But the only difference would be that it would be easier to walk away if they did not agree because you had a supplemental income.

Another good thing to know is what the employer’s return on investment is for your services. Do they recognize that ROI, or do they have a lower perceived value to the service.

Generally, as businesses grow they tend to offer legacy rates for their long time clients and then just ramp up the price point for newer clients. But it also depends on the service you provide, if there are resources being consumed, then an annual reassessment can be perfectly legitimate.

Absolutely, fireside:

I perfectly agree! Especially on the issue of perceived value!!!

Plain numbers can be the best tool for reevaluation. Show them their actual ROI, show them on a solid basis how much less they pay compared to market average. I prefer that over vague conventional negotiation approaches. The reason I am persistent on providing actual market pricing is the fact that if you provide it in your negotiations, you can proactively undermine ideas of “replaceability”. If your approach opens with showing that a service is purchased substantially under market price, your buyer will think twice before rejecting off the bat (let alone think easy replacement).

Even better than anything though, do go and actually get new clients if possible!

Do you actually have a contract, or a job?

Contracts aren’t typically open-ended with respect to time, and long contracts (over a year) typically allow for a mechanism to increase/reduce payments.

If you do have a contract, then you need to ensure that you are working within the agreement, or else you have to break the contract (which may or may not have financial consequences), or re-negotiate the contract.

If you simply have a job, then that’s how you need to approach it.

Many good ideas already stated, but I wouldn’t stray too far from arguing on the basis of your value to their success. Saying you have other clients…or that you didn’t charge enough…are not helpful to your cause.

You also have to be prepared to walk away if any increase is non-negotiable.

It is a long term contract so it would have to be renegotiated. They already know that they are my only client. I am a contractor at my former employer. I think they know I am paid under market rate as they hire many a contractor for various projects. One contractor that we use within my project gets three times the hourly rate that I do….....she has many more years of experience and it’s for a totally different role, but still….what they pay me is nothing compared to her.

Your at risk of being seen as “employee with simplified admin requirements” :)

One approach would be to go to www.salary.com and getting the median of what your position usually pays.

How is your general relationship with your “buyer”. If everybody get’s along well, your performance is okay and the general atmosphere is “employee’ish” then it might be best to simply bring it up.

now in the envent of a pre bid contract rated thru negotionation by professional project managers and feild estimator/superintendent or c.f.o.. You will have a price range standard that is set per foot per manhour “man power report log” times that by the cost of material and that if your honest should be your qoute. with most multi million dollar contracts contractor get payments on there bids in monthly incriments to maintain production and cost. now in which case where you are the sub-contractor. The one that is doing the work not the one with the plan. You have the power of manpower and operation so you change the plan. keep the same idea just make it better. Now this is where the renegotiation “BACKCHARGE” process takes place. what was allready fabricated is faulty and not in the revised plan and is going to take (ManHours + ManPower X Material)the is the triangle thery cost, quality, or production but you can only choose two