I underpriced a prior job, how should I tell my client that I'm charging significantly more for new work?

Question

I made a mistake last year by underpricing an illustration work. What should I do now that the client is back with new requests?

The client has contacted me to ask for new work, without mentioning a price.

I need a polite way to tell him that I could do the job, but he should expect the price to be at least three times what he paid last time.

(I'm not trying to increase my prices in general. It was just a mistake to agree on such a low budget last time. It was done partly because I support the client's activity, partly because that kind of visibility was quite valuable for me at the time.)

In principle, I could just refuse the job. On the other hand, it makes sense for the client to have the new work done by me in order to keep a consistent style.

How can I convey a concept like this:

I'm afraid I can't take the commission at the same conditions as last year. The price you paid last year doesn't reflect neither the market standards nor my fees. I can reconsider it if you're willing to pay at least three time as much.

with the right balance between dignity and politeness?

Answer 1

I think your reply is fine. I would perhaps alter it slightly, you don't need to rationalize prices and doing so can often convey a weakness in negotiation:

I would really enjoy completing some additional work for you. Unfortunately, I can't take the commission at the same conditions as last year. My rates have increased. I can consider new work if you're willing to revisit pricing.

This 1) lets the client know you want to do the work, 2) removes the emotion from the statement, and 3) tests the waters to see if they are even willing to renegotiate pricing.

It's a more open, less "defensive" response in my opinion.

Answer 2

Tell the truth, it does no harm.

Perhaps try:

I'm afraid that for the project we did last year I underestimated the amount of effort, and I ended up out of pocket, so I'm going to have to quote a more realistic price this time round.

or

I was short of work last year, so I bid a very low price to be sure of getting the contract, partly because I knew that it would increase my visibility and reputation. I'm pleased to say that I've now got a wider range of clients, so I'm going to quote what I think is a fair rate for the job.

or

I'm pleased to report that you're not the only client who has been appreciative of the work I completed for them, and I'm now unable to take on all the work that people are putting my way. This means that I'm now charging prices which I believe reflect the value of the work that I'm doing.

Answer 3

Your basic confusion or problem is this:

You are assuming that in some way your new quote has to refer to the old quote in some way.

Here's the entire formula for telling the client what price you want for the new job:

1. State the price you want

Here's an astounding fact! In 100.0% of cases in this universe when someone has stated the price they want, the other party has said they want to pay less. The other party then almost always proceeds to give rationalizations about why they should pay less. One of these rationalizations may be "oh but last time you charged ..."

If the client says "Last time you charged ..." or any other rationalization, the secret is to not become involved in a discussion. Simply restate the price you want.

If anything, just say "Yes, unfortunately that price was incredibly too low. You have my quote for the new job thanks."

It's that easy! Good luck!

Answer 4

As a customer, I would be gobsmacked if a supplier came at me for similar work with a price quote that multiplies my experience by 3.

I don't care how you explain it. I don't care how you rationalise it. X3 is a big amount that you can't justify with "I underpriced it last year so you are paying for my mistake" It is never good to let a good client walk away.

Here is my take on the subject and how I would resolve.

1. Last year was my mistake which the client enjoyed. My fault not his/hers. However I need to recover from that mistake.
2. You will not recover in one fell swoop. It will take maybe two takes or more.
3. I assume you want to either retain the client or retain the clients good books.
4. I assume your style can be copied and slowly transformed over a couple of iterations so you are not really a monopolist at all.
5. Work in your industry is swings and roundabout. Right now x3 maybe good but next year, you may be willing to do it x0.5 - depending on market conditions so retaining a customer/client is important.

Solution:

Price the work at x 1.5. At a stretch x2 but I as a customer will baulk at x2. You will have to convince me to accept x2. Don't even think of x2.5

I, as a customer, will not give you time of day with x2.5

Explain nicely (you've got lots of nice answers above that works) that you made a spectacular mistake and underpriced last years work. You are trying to recover but you appreciate the clients' business and don't want to lose him/her.

Explain that point with as much force as possible. Let them know that the price was really a deviation from the norm in the marketplace. Hopefully the marketplace will bear you out.

You really can't do it at last years rate and will as a special consideration do it x1.5 or 1.75.
If that is OK with him, you can start as soon as possible. Throw the client a few bones (freebies if possible)

Let that stew for a while and if he decides that even 1.75 is too high, let him/her know that the realistic price is x3 but you will not take on such a job when a supplier x3 his next quote so you are putting yourself in his/hers shoes. But you can't do it at the old rate. You will rather not do it. Let that sink in well.

I do cleaning and I have made mistakes like this. The good thing is customers know when they are getting a good deal and even when they are getting a "too good to be true" deal but I have never succeeded in jacking my prices back to normal levels with the second deal. It usually takes two or more additional deals.

The problem is that the customer is fixated on YOU, your pricing mechanism and will not entertain a x3 price increase. He will be happy to pay that price with a different supplier - just not you.

Why? Humans have all kinds of hangups but the strongest one is "fear of a rip-off"

How do they know you did not get a good deal on your materials, tools anything that can explain their irrational reaction to them and YOU are trying to cheat them?

You see it is all about YOU. Not them.

Good Luck and if you manage to get x3, do please come back and tell. Really. I will like to know. For my own experience and business strategy.

Answer 5

You could just say that it was in your interest at the time to accept a lower fee, but at the moment you're busy with work and cannot compromise on budget anymore so the proposed new cost is X. Don't be embarrassed, if your work is good there will presumably be plenty of other opportunities at your current pricing level.

Remove the "i'm afraid" and the "you" to make this less personal.

Answer 6

I like your response. It attempts to level with the customer while still being firm in your decision.

A quick grammatical note: You may want to change

The price you paid last year doesn't reflect neither the market standards nor my fees

to

The price you paid last year reflects neither the market standards nor my fees

Source: I worked 2 years as a cost-estimator/quote-sender of manufacturing jobs