In the world of business, they say getting started is the hard part. But what happens when you’ve been in business for several years, and your original rates just aren’t cutting it anymore? Many people are afraid to raise their freelance rates, thinking they’ll lose clients and ultimately fail.
But that’s just not the case.
In fact, raising your freelance rates is a sign of healthy growth for your business, whatever it may be. And since many freelancers are charging only 67% of what they should, there’s a good chance you’re already undervaluing your services.
Still, that knowledge doesn’t make telling your valued clients that your rates are going up any easier.
You Should Never Be Afraid of Raising Your Rates — Here’s Why
The biggest factor stopping freelancers from raising their rates is the prospect of losing clients. After all, your clients are the only thing guaranteeing your income each month.
But when you break it down, deciding to raise your freelance rates shouldn’t be a scary one. Instead, it should be an exciting sign of growth.
You see, even if your rate increase loses you some clients, your higher rates will help offset this immediate drop in business. And since you’ll have fewer projects on your plate, you can devote more time and energy to delivering top-notch services to your remaining clients.
Plus, with higher rates, you can work less while making the same amount. Entrepreneurs and freelancers are notoriously prone to burnout (often because they’re charging too little from the start!) and a rate increase might be exactly what you need to get a bit of your personal life back.
So, don’t be afraid of raising your rates. Instead, focus on learning how to do it the right way.
When Is It the Right Time to Raise Your Freelance Rates?
At the end of the day, freelancing is a business. Because of this, many up-and-coming and established freelancers fall into the trap of trying to be the cheapest option out there.
Yes, this pricing strategy might net plenty of clients. But those clients and their projects aren’t really worth your time when you break down your income to an hourly rate.
Plus, markets can change. What was once a fair rate for your services might now be half of what it should.
There are countless reasons to increase your freelance rates, but they’re not always easy to see when you’re up close. Here are some of the top reasons to think about raising your rates today:
1. You’re unable to keep up with demand
This is probably the biggest sign that your rates are too low and you need to do something about it fast.
As a freelancer, it’s exciting to have new clients interested in your services and, ultimately, choosing to work with you. But there comes a point where even the best freelancers will drown under the workload.
If you’re taking on work faster than you can blink, it’s probably time to examine your pricing structure.
Yes, your stream of new clients might slow down. But the ones you do take on will be paying a higher rate, more than making up for the loss.
2. You’re the lowest-priced in your market
Again, freelancing is a business. And, as such, you need to occasionally take a moment to survey the competition.
When you account for work experience and education, are others in your market offering about the same rates as you? Or are they leagues above you in terms of pricing?
It’s fine to discount your rates slightly when you’re first starting out. But staying at the bottom of the pricing barrel for too long can do more harm to your growing business than good.
3. Your skills or education have changed
Ideally, you didn’t enter the freelancing field with the intent of halting your professional growth.
As you develop new skills, earn certifications, or even complete a formal degree, your freelancing rates should reflect this new experience.
And don’t be shy about these achievements! Let both your existing and prospective clients know the steps you’ve taken to improve your skillset and deliver even better services to them.
4. Your business costs have gone up
Are you suddenly seeing a massive chunk of your income go toward business expenses?
Maybe you recently expanded into a private office space. Or, perhaps you needed to invest in a costly software package to better meet your client needs.
Whatever the reason, your rates should, more or less, keep in line with your average business expenses. If your regular expenses have taken a steep increase, there’s a good chance your clients are benefiting from these costs as well!
5. You’ve charged the same rates for over a year
You might look at the scenarios above and think that none of them apply to you, so your rates must be fine the way they are.
If you’ve been charging the same rates for over a year, though, chances are you’re due for an increase.
As we said, markets change constantly. And, especially if you’re in a rapidly expanding field like consumer tech, your rates need to keep up.
No matter your services, it’s good practice to survey your pricing structure (including looking at competitor rates, business costs, and the demand for your services) on a yearly or bi-yearly basis.
How to Raise Freelance Rates the Right Way (a.k.a. Without Losing Valued Clients)
So, you’ve decided it’s about time you raised your freelance rates. Now what?
Oftentimes, freelancers already know they should raise their rates. However, the thought of approaching their clients, both long-term and new, with these changes is enough to stop them dead in their tracks.
Here’s how to do it:
Choose the right time, place, and audience
First, treat this announcement with some care. While you shouldn’t be nervous about telling your client about your rising rates, you also shouldn’t tell them at 11:00 on a Saturday night.
If you can, try to notify long-term clients of your rate increase in person. But if that’s not possible, such as with remote clients, pick the means of communication you think is most appropriate based on your existing relationship.
Even more important than when and how you notify your client, though, is to whom you deliver this announcement.
If the client in question is a singular person, then you obviously only have one person to tell. But if your client is a business or organization, don’t leave a message with the administrative assistant and leave it at that.
Instead, go directly to your designated point-of-contact or to the highest rank you know.
Keep your discussion value-focused
When you tell your client about your changing rates, especially if they’re someone you have a close working relationship with, it’s tempting to be apologetic.
Don’t be, though, because that’s the complete wrong mindset!
In reality, increasing your rates will ultimately add value to your services. With higher rates, you can devote more of your focus to each of your clients and their needs.
Once you understand this for yourself, it’s your job to then communicate this with your clients.
Give plenty of notice
Okay, this piece of advice should hopefully be obvious:
Give your clients plenty of notice about your rate increase before it actually goes into effect.
This is more important for those who take on long-term clients who are billed monthly or quarterly. However, don’t hesitate to reach out to clients that come to you for work once or twice a year as a small courtesy.
After you’ve informed the client, you can add a note in your next invoice to remind them that their future invoices will have an increased rate. That way, it doesn’t come as a surprise to them.
If you’re using a tool like invoicely, it’s as simple as adding a quick note in before you send off the invoice.
Offer loyalty discounts to valued clients
If the thought of increasing a long-term client’s rates still makes you sick to your stomach, step back and look at the big picture.
Is this client someone who you value beyond just their business? Maybe they’ve sent multiple referrals to you or have helped your business grow in some other way.
If so, you do have the option of offering a discounted rate to such clients. Ideally, this rate should still be an increase to your existing rates. However, it won’t be quite as high as the rates you plan to charge new clients.
Avoid Dramatic Rate Increases with These Final Tips
How do you avoid making drastic changes to your rates in the first place? Simple — you charge a fair rate from the start.
With that said, sometimes it takes a year or two in business to really nail down what your rates should be for your services. Once you have a year’s worth of paperwork, you can sit down and crunch the numbers for yourself.
Tracking your business expenses and billable expenses is also crucial to keeping your rates fair and accurate.
If you don’t know how much you spend on travel, supplies, and other necessities, you don’t really know how much you’re taking home each month. Plus, you might be undercharging your clients for things like software registration and project materials.
All of those costs add up!
If the thought of adding even more bookkeeping to your to-do list is just too much, you have options. Services like invoicely offer a way to keep everything organized so you can see what you’re really earning for your work.
So before you decide that your rates are fine as they are, do the math and see the numbers for yourself.