Love working for yourself but feel awkward talking about money? You’re not alone. Setting your rates, communicating your value, increasing your prices—when you run your own business it’s all up to you. In this follow-up to my post on how to make sure you’re charging enough, we’ll cover:
- 5 signs it’s time to increase your freelance rates
- How to raise your rates: step by step guide
- Negotiation tips for freelancers
5 signs that it’s time to raise your freelance rates
Not sure if it’s time to increase your prices? Here are signs that you need to give yourself a raise:
1. You have more work than you can handle
Are you always full-booked? Working around the clock? Is your personal life “D.O.A?” These are telltale signs that you could be working less and earning more. When you increase your prices you will lose some clients—but that’s the point! By only keeping or taking on clients who are willing to pay your new, higher rates, you’ll have more free time, more energy to devote to the projects you enjoy, and be able to give better quality service to your customers.
2. Customers always say “Yes” to your proposals
When you share your fees with a prospective client, do they agree right away? Then you could probably have negotiated a higher fee. If customers are snapping up your service at $500 with little or no resistance, try increasing your price in small increments, for example to $750, until you find your sweet spot. The sweet spot is where enough customers are converting to reach your goals (whether personal or financial) and you’re comfortable with what you’re earning.
3. You haven’t reviewed your rates in 6 months or more
Prices go up with inflation. Your work is no different! Inflation rates vary by country, with rates of the UK and USA reporting rates of 1.7% in 2019 and Germany 1.1%. This means you need to increase your rates at least once a year to keep up with living expenses. Your professional development is another important factor—as you gain experience, you’ll bring more value to your clients. I recommend reviewing your rates every six months so you can adjust them to reflect any new skills, qualifications or training you’ve invested in.
4. Price is your main selling point
How many times have you ordered the second-cheapest bottle of wine in a restaurant? As human beings, we’re wired to associate price with value. For example, we’re less likely to choose the cheapest option available because we assume it’s going to be low quality. Big companies can often “stack-em-high-and-sell-em-cheap” when it comes to their products because even with small profit margins, they can afford to compete on price due to the large volume of products they sell. But when you’re a freelancer, there’s only so much of you to go around. If you try to beat your competitors on price, you’ll likely attract low-paying clients and burn out from overwork.
Raise your prices and focus on your unique selling point (USP) to make your business stand out instead. Do you offer an exclusive service, a twist on a conventional product or specialize in a particular niche? Learn more about how to communicate your value on your website.
5. You suspect a gender pay gap
In 2019, women earned an average of 21% less than men in traditional workplaces. But did you know there’s also a gender pay gap in the freelance sector? According to a study from AND.CO, even without a ‘boss’ to dictate their pay packets, male freelancers are still 4.5X more likely to make over $150,000 per year than women are, with nearly half of women surveyed earning less than $25,000 per year. In the UK, the ProCopywriters Survey reported that female freelance copywriters earned 30% less than their male counterparts in 2019.
So if you’re a female freelancer or a budding mompreneur, it’s even more important to be aware of your pricing and never undervalue your services. As a freelancer, you have the power to set your own rates—in this post, you’ll learn how to use it!
How to raise your rates: step by step guide
Decide how much to raise your rates by
If you’re increasing your rates to accommodate rising costs or new overheads, make sure your new prices cover these and still allow for a profit margin. Avoid raising your rates by a very small amount. Make the change significant enough that you won’t have to raise them again for at least six months. Customers still have to process a price increase, however small, and they won’t thank you for another price-hike in a few weeks’ time.
Give your current clients plenty of notice
Nobody likes to feel pressured! Especially by a contractor they know and trust. Before you increase your prices, let your existing customers know 2-3 months in advance. This shows that you’re serious and gives them time to review their budget and shop around if they aren’t willing to pay your new rate.
Reiterate your value
Think about how you’ve helped your clients this year. Has your social media strategy helped them drive 10X more sales to their online shop? If you have access to the numbers, that will help you show the value of your work. But it doesn’t have to be hard data, maybe you stepped in when their event photographer dropped out at the last minute, worked weekends to help them move into their new home before the holidays, or moved things around to accommodate their nervous pet in your dog walking service?
Focus on the positives
Never apologize about raising your rates—it’s a necessary part of running your business. Focus on the positive reasons behind your price increase instead and remind customers what they’re getting for their money. Are you bringing on more therapists so you can offer weekend appointments, have you switched to sustainable materials or increased your skills or experience? If you’re increasing your prices so you can give more energy to your favorite clients, make sure to let them know
Boost revenue with a limited-time offer
Raising your rates from January 1st? Offering customers a chance to book services at your “old” rate before the cut-off date is a great way to reward loyal clients and boost your sales leading up to the holiday season. It also gives you a reason to get back in touch with previous clients (subject to GDPR) and remind them that you still exist. For example:
“I’ll be increasing my rates from January 1st. As one of my most valued clients, I wanted to let you know first and give you the option to book any upcoming projects at my current rate.”
Offer an alternative
You may have some customers who simply can’t afford your new rates but still want to work with you. Try packaging your services to offer them a cheaper alternative. For example, lots of fitness coaches offer small group training with two to three people in addition to one-to-one personal training.
Raise your rates every year
Love your work but hate talking about money? Here’s a tip: Increase your prices at the same time every year. If price increases are a part of your routine, clients will come to accept them as a normal part of doing business with you. This shows clients that you’re professional, your decisions are predictable, and you won’t have to feel awkward about broaching the subject.
Negotiation tips for freelancers
When it comes to raising your freelance rates, always leave room to negotiate. That doesn’t mean giving in to your clients at the first sign of resistance—it means don’t go in with your minimum viable offer. Because there will always be clients you love working with, jobs that fulfill your creatively but perhaps don’t pay as well, and other cases where you’re willing to be a little flexible on pricing.
- Prepare for specific objections. Refer back to your market research or treat your pricing increase as if you were assessing your business idea for the first time. What do your customers want and need? Based on what you know, what objections are they likely to have? Plan ahead by drafting responses to each possible objection to show clients that you understand things from their point of view.
- Research rates in your industry. Having an industry benchmark gives clients something to compare your rates to, and supports your credibility. For example, many business owners have no idea what a freelance copywriter charges and wouldn’t realize if you’d been charging them a very low rate. Read my previous post for more on finding the “going rate” in your industry.
- Know when to walk away. You’re raising your rates for a reason. Keep your minimum price in mind and be prepared to let a client go if they won’t accept it. If they’re not willing to pay your new rate, they likely value your low price as opposed to your work anyway. Keep the conversation amicable, because they might come back in a few weeks when they realize you’re worth the price.