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Contractor Rates: Negotiation Done Right


One of the most difficult questions you can be asked as a contractor is “what is your rate?”. The concept of negotiating rates can be unwelcome for many contractors, but it’s important you get it right. For most contractors, determining an appropriate rate is a balancing act that depends on a number of factors. That includes:

  • The amount of work you have at the time
  • The extent to which you want to work for the client
  • The length of the contract
  • The type of work you’ll be involved in
  • How difficult you’ll find the project
  • Whether the client promises to give you more work in the future

Failing to negotiate a suitable rate can have serious consequences for your business. For example, if you habitually undercharge for your services, there’s a risk you could attract problem clients who don’t value your expertise and experience. Equally, if you quote a rate that’s too high, clients may feel they could find better value elsewhere which could create unwelcome gaps in your workload.

So, what can you do to get your contractor rate negotiations just right? These are our top tips…

  1. Set a minimum acceptable rate

In the early days of life as a contractor, you’ll be eager to build a client base and may be willing to accept lower paid work to do so. However, as you become more established, it’s important to set an absolute bottom line, that is, a rate you will not go below. That should take into account your personal outgoings, your business outgoings and the tax you have to pay.

As your business grows, it’s common for your minimum acceptable rate to grow too. For example, what you might have perceived as an acceptable rate in your first year of business is unlikely to apply in year three. If you let your proposed rate be driven by what you hope to achieve as a contractor (within reason), you might be surprised by how high it can go.

  1. Think about your client’s perception of value

A common mistake contractors make when negotiating their rate is thinking about what their services are worth, rather than basing their rate on their client’s perception of value. The work you do might seem relatively simple to you, but that’s because you’re an expert with many years of experience. To the client, you have a skill set they do not possess in-house that could add real value to their business and boost their bottom line. So, make sure you charge accordingly.

  1. Do your research

One unexpected surprise for many people is just how friendly and open the contractor community can be. Rather than being overly competitive, many contractors are willing to share their experiences and even details about how much they charge for certain types of work.

If you’re not in contact with fellow contractors in your sector, specialist recruitment agencies in your industry could give you a better idea of the type of fee your skills could attract. For example, at LynxPro, you can see what clients are willing to pay for software and mobile app development, AI and cyber security projects. That will help you gauge your rates and see how they compare.

  1. Decide whether you’ll charge by the day or the project

One of the first things to consider when negotiating your rate is to decide whether to charge by the day or the project. For longer projects, it typically makes more sense to negotiate a daily rate as that ensures you’re not left out of pocket if things take a little longer than expected. For shorter projects, perhaps those around a month in length, it can provide more clarity to negotiate a rate for the project.

Whichever way you choose to go, make sure you communicate with your client to establish an accurate assessment of the work involved. You should also discuss whether revisions and amendments will be included in the price you offer.

  1. Always put it in writing

Finally, once you’ve negotiated a rate both you and the client are happy with, make sure you put it in writing. No matter how amicable and understanding the client appears to be now, there can still be disputes when it comes to payment time. A simple quote and a statement of work is something you can refer back to if it’s required.

Find great rates for contractor work

At LynxPro, we work with some of the UK’s leading companies that are on the lookout for talented ICT and tech contractors like you. Register for free to secure the rate your worth or get in touch to find out more.