Discussing Rates with Clients When They Say Price is Way Too High

Have you had a client say your pricing is too high? The best consultants don't back down on their rates; and they back up their rates with sound rationale. Learning how to professionally and directly have frank conversations about your rates and pricing is a critical component of long-term success as a consultant.
Written by
Kim Le
Published on
March 11, 2024

Clients are looking for a deal, while you're looking for a way to pay the bills. Having been on both sides of the negotiation table, I've learned the best consultants don't back down on their rates; and they back up their rates with sound rationale.

Learning how to professionally and directly have frank conversations about your rates and pricing is a critical component of long-term success as a consultant.

"Your Rates are Way Too High"

When a client pushes you on your pricing, if you’re not yet confident in your trade or new to these types of conversations, your first reaction might be to question yourself: are your rates too high? Is your client right?

Your rates are probably not too high. Based on our research of rate setting calculators and our own experience with negotiating rates, your rates are probably too low. You can read more about how we think about pricing our time as consultants on our post Consultant Hourly Rates: How to Charge What You're Worth.

How to Explain Your Rates to Clients

cost of doing business as a consultant to justify rates to clients

Before you can confidently discuss your pricing, you must first have good reasoning on why you’ve set your rates they you have. There are a multitude of pricing approaches. We’ll summarize here three common approaches:

  • Cost-based Pricing
  • Market Pricing
  • Shift from Hourly to Retainer or Project Based Pricing

1. Cost Based Pricing

Clearly defining what your rates include can be the difference between a client seeing them as excessive or reasonable. Transparency in pricing builds trust and sets expectations. Breakdown your rates into the time it takes to complete the work, any overhead or materials, and the expertise you're bringing to the project.

📬 Example Explanation: “Our rate is set taking into consideration the risks and costs associated with being self-employed contractors. Like any business, we have overhead to cover. We do our best to keep costs affordable, but can not go any lower. “

2. Market Pricing

Another approach is to price yourself like everyone in your market do. Narrow the pricing down to comparable talent with similar years of experience, titling, comparable companies, and area of expertise. Ideally, go out and ask your peers (also competitors) what they are charging. Avoid getting public benchmarking data since that data is too broad. Use relevant hard numbers, recent research, and industry standards to justify your rate as a fair representation of the work delivered compared to market rates. The goal should never be to pressure the client but to communicate the value and the non-negotiable aspects of your rate.

📬 Example Explanation: “We try to be competitive with market rates when setting our own rates. We believe this is a fair rate for the value that we bring to your business. If the scope of work is not aligned with your goals, we can discuss and re-align on your business’ priorities.”

3. Retainer or Project Based Pricing

When discussing rates, offering a range of packages or services can help clients feel in control while ensuring you receive fair compensation. If your hourly rate is too high for clients, then switching to a retainer model or a project based pricing approach may be more appropriate. You can offer built in discounts to your hourly rate in exchange for more stable, guaranteed income in the coming months from a different pricing model. This can be particularly helpful for November and December months when billable hours tend to drop due to the holidays.

📬 Example Explanation: “As hourly contractors, there’s a lot of risk built into our revenue stream. We can offer a discount if we switch to a monthly retainer model. The lower rate is for a more consistent income stream on our side.”

Expect and prepare for objections. When a client pushes back on your rate, listen carefully to their concerns. Dig into why they feel the rate is too high, and be prepared to offer additional solutions or insights that might address their reservations while allowing you to stay your ground. Sometimes, simply adjusting the payment structure or delivery methods can turn a "no" into a "yes.”

How to Turn Down a Client Politely: Examples

turning down clients politely examples

Not all clients are going to work out. If a client is particularly difficult and also making it hard for you to earn a living, then it’s time to move on. However, ending those client work relationships without burning bridges can be difficult.

A Gentle and Firm “No”

Saying no to a client can be as daunting as discussing rates. But sometimes, in the face of unrealistic expectations, it's the best response. Be clear and diplomatic in your refusal. Reiterate the value of your work and why you are unable to meet their demands, and always leave the door open for future opportunities.

📬 Example Explanation: “While we appreciate where you are coming from, we are unable to meet you request to lower our pricing. Although we won’t be able to move forward in this partnership, we are happy to refer you to other consultants in our network or provide some self-service solutions for you and your team to explore as alternatives.

We appreciate the opportunity to get to know more about your business and your team; and we’d be interested in reconsidering working together at a later date if you change your mind.”

Predetermined Exit Strategy

One way to build in an "out" for yourself is to agree at the time of defining the scope of work or original contract a predetermined end date. This end date can be 30, 60, or 90 days out allowing both sides some time to work together without committing.

Not letting a contract auto-renew gives you a chance to renegotiate the scope of work, the rates you charge, and to whether or not to keep working with the client at preset times. Allowing you time to look for and lock in new clients before the contract ends.

📬 Example Explanation: “Thank you for working with us over the last few months. We’re excited for the work that has been accomplished together. As a reminder, our engagement ends on [month dd, yyyy].”

[For new scope or pricing:] “At this time, we will not be able to renew the contract as it is written. We’d be open to discussing a new scope of work based on our updated pricing.”

[OR For ending the engagement] “We are currently not renewing or taking on new contracts for internal business reasons. We hope to connect on any transition needed as this engagement winds down. Again, we thank you for the chance to work together, and hope to stay in touch going forward.”

Don’t Dwell, Move On

Every negotiation or client relationship is a learning opportunity. Reflect on each experience, take note of what worked and what didn't, and use those insights to refine your approach for future discussions. However, don’t dwell on losing a client. Focus on what you learned and apply those learnings to your next client.

By establishing clear value, mastering negotiation techniques, and ending relationships gracefully when necessary, you can build a reputation as a professional who not only delivers quality work at fair prices. Remember, the key to successful conversations about your rates lies in being well-prepared, confident, and always focused on the tangible benefits you provide to your clients. After all, they’re not just paying for a service; they're investing in a partner for success.

See other related articles

Consulting Best Practices: Do's and Dont's

Consulting Hourly Rates: How to Charge What You're Worth

How to Get Clients as a Freelancer

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