Two insider secrets to negotiating a higher contract rate

It’s spring, and a freelancer’s fancy turns to… work. Well, let’s be honest. Freelancers are always thinking about work. 

Our industry’s a bit up and down at the moment - while those in the energy sector are struggling, with layoffs and rate cuts everywhere, those in critical roles in financial services are seeing the industry finally start to spend some money after a few lean years. But whichever way your market is going, freelancers need to make sure they maximise their available rate.

As a manager who’s hired many freelancers over the years I feel a bit like the “masked magician” - having spent hours negotiating to keep the rates of the freelancers working for me at a reasonable level, I’m about to earn the ire of other managers by showing how to break the cycle. I know that this is a great example of a win/ lose negotiation - simply put, every pound the freelancer can increase their rate by is a pound that comes out of the company’s pocket. And that might make you think that it’s always going to be rough. But in fact you, as the freelancer, have one key strategic advantage, and one key strategic disadvantage in this negotiation.

Here’s the first secret: your key strategic advantage. Your negotiating partner isn’t playing with his own money.

OK. You’re not surprised. You already knew that. But think carefully about the incentives that this sets up for the client manager. The reality is that whatever lip service they pay to the need to constrain costs, the reality is that the incentive to deliver their work objectives almost always overrides the incentive to contain costs. In other words - if they deliver a project, but costs come in 5% over, they’ll probably still get a bonus. If they fail to deliver the project but stay in budget, they won’t.

To compound this, in some firms budget's aren't even set by cost. The biggest constraint your client may have is his headcount rather than his cash budget - further incentivising them to pay top dollar for the best staff they can get.

Happy days, you might think. Except for the second secret. Your key strategic disadvantage.  However much the client manager wants to pay you the sun moon and stars to join their team, there will be other people that they need to convince; or rules on rates that may need to be broken to do so.

OK. OK. You’re not surprised about this one either. But again, think carefully about what the impact of these two constraints (taken together) is. 

To get the best rate possible out of a manager, you firstly need to convince them that you (and only you) are the essential differentiator that will allow them to deliver a piece of work (or deliver it better, faster or cheaper than they otherwise could) - that your skills in doing so are better and stronger than anyone else available in the market. And to do that you need to demonstrate and evidence how your past performance and knowledge can help them.

And to get past the rules that are intended to constrain the client manager’s ability to hire you for a squillion pounds a day, you need to make this evidence concrete, and presentable to whatever internal processes are required so that the client manager can argue their case for a rate exception.

In other words concrete, convincing, written evidence is the thing that you need in order to be able to max out your rate. Anecdote won’t do. Warm feelings about you won’t do. Because even if these are enough to convince the client manager, they won’t be enough to convince the other people in the signoff chain.

That evidence could be your amazing CV; it could be your work portfolio; it could be your outstanding HiredByMe profile. But whatever it is, you need to make sure it’s easy for the person hiring you to convince those in the management chain to pay you all those lovely pounds. 

In the second part of my bean-spilling guide I’ll give you a practical, step-by-step guide to negotiating a great rate, and the 7 key points you need to follow for success. Follow me to make sure you don't miss it!

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Simon is a founder of HiredByMe - helping contractors, freelancers and interims get hired for better roles, faster. Check out our home page and join for free.