Everywhere you look, there seems to be a different piece of advice on how to price your services as a freelancer.
Some recommend charging by the hour. Others live and die by project fees.
But what about raising your rates?
In this article, we’re diving into the telltale signs it’s time to charge more and how to do that all without freaking yourself (or your clients) out.
Let’s Talk About Pricing in General for a Second …
This article will serve as a guide to help freelancers identify the pivotal moments — whether it be with their client relationships or in their career as a whole — when they should consider raising rates.
“Charge what you’re worth!” — a phrase that is usually backed by positive intention — isn’t the best advice when it comes to setting your freelance rates in the first place.
The same can be applied to raising your rates.
Well, it’s not as cut-and-dry as that.
A few factors are at play here:
- The value you can offer clients
- Your ability to deliver that value
- Your experience and skill set
- What the market can handle
So, “charging what you’re worth” goes beyond what you might typically think when you hear that phrase. Keep that in mind when raising your rates.
If you’d like to explore this topic more, here are a couple of excellent articles for your reading pleasure:
- Money + misdirection: the shadow side of “charge what you’re worth” pricing culture | Hillary Weiss
- Charge what you’re worth | Paul Jarvis
Back to our regularly scheduled programming.
Why Should I Raise My Rates?
Communicating your rates, in general, can be nerve-wracking at first. Therefore, it only makes sense that asking for more money can be just as uncomfortable, if not more so.
But let’s clear up why you should raise your rates to begin with.
Of course, you want to make more money, but the reasoning should go beyond that. Remember, you’re not increasing your rates for no reason; you’re a professional who is setting business goals and taking proactive steps to expand and improve your services.
Theoretically, the more experience you gain, the more you learn, and consequently, the more value you can offer your clients. This should influence your pricing in addition to what the market will bear.
Makes sense, right?
Think about it this way: Instead of thinking solely about how much money you want to make, think about the value you can offer your clients in relation to their goals as well.
After all, if you can’t deliver on the value you promise, maybe it’s time to take a step back and think about what the root cause of that is.
5 Signs It’s Time to Raise Your Rates
Now, how do you know when you should raise your rates?
Let’s take a look at five of the most common signs.
Sign #1: Your Agreement Is Up
Let’s say your contract is expiring with a client, but they’d like to keep working with you.
This is the perfect time to assess the work you’ve done, understand how much value you’ve provided throughout the project, and determine if you can justify a rate increase.
That’s precisely what John Forberger, President of Forberger Communications, does.
“Every time I renew a Public Relations Agreement with a client, there’s a discussion about what’s fair for them and me based on the results and time put behind the work. There are never major surprises about my time on tasks because I keep an open Google Doc with clients to see in-motion work. If something falls way out of scope, I immediately have ‘that’ conversation, which if you’re working with reasonable people is never as scary as you think.”
Whether you’ve worked together for six months or two years, if you can directly trace the work you’ve done back to something that has benefited the company (i.e., increased revenue, helped them grow their customer base, etc.), that’s typically grounds for raising your rate.
Sign #2: You’ve Expanded Your Knowledge Base Significantly
Now, we’re not talking about reading a few blog posts here and there or even taking one course and claiming to be an expert on a subject.
No, no. You don’t build on your expertise that quickly.
Building on your knowledge base takes time and effort. In other words, you work your butt off for a long time and learn all that you can.
Think about how much you learn throughout your career. A few of the big things include:
- How to better manage your clients
- How to optimize your onboarding process
- How to improve creativity, refine your craft, and develop your skills
The list goes on. And more likely than not, if you continually invest in your growth, and if that growth positively impacts your clients, that’s definitely a reason to increase your rates.
Sign #3: You’re Changing Up Your Services
A not-so-breaking newsflash: Things continuously change in the freelance world.
The work you were interested in doing when you first started freelancing may look different six months or even a year in. Maybe even longer than that.
Depending on what this looks like for you, like if you’re going from being a copywriter to a front-end developer versus simply adding a service to your offerings, it may justify a rate change.
Regardless, it’s probably worthwhile to assess your current rates.
Think about what you’re offering and the value associated with it. Are you going to be doing more work for clients (e.g., customer interviews, extensive research, etc.) that warrants an additional cost?
What value are you adding to your existing services that are going to benefit your client significantly?
It all comes back to value.
Sign #4: Your Costs Have Increased
Here’s the thing about the word “freelancer” — it somehow sounds like it’s free for you to do business.
The truth is, there are costs associated with what you do for a living. And lots of them. Here are just a few “hidden costs” you might not think about, and your clients certainly don’t keep track of:
- Home office supplies and equipment (i.e., computer, printer, ink, paper)
- Monthly fees (i.e., phone, internet, other utilities, paid software subscriptions)
- Opportunity costs, including all of the hours you invest in running your business (i.e., writing proposals and contracts, invoicing)
- Professional fees (i.e., accountant, lawyer)
- Rent for a co-working space or office
- Snacks and coffee (Full disclosure: I’m a coffee snob, and I have a Ghirardelli chocolate chip obsession. It adds up.)
See what I mean?
There’s a long list of overhead that you take on when you work for yourself. And inflation is real — if you had a salaried position, you’d likely get an annual increase to account for cost of living increases.
So, it makes sense for you to fold a portion of the cost of doing business into your rates. That way, you have enough left over to pay your employee (ahem, you) a fair wage.
Sign #5: You Get Too Many New Leads That You Must Turn Down
Nice problem to have, amiright?
Yes and no.
One of the greatest freelancer fears is how to get clients. And so, we work hard to exceed client expectations, building an impressive freelance portfolio and a matching stellar reputation in the process.
So, it follows that your dance card is getting more and more full. You’ve got great long-term clients you want to keep serving, and you also have exciting new prospects coming in. This leads to a whole new kind of stress: more work than you can handle.
But don’t let this make you feel anxious or, conversely, like it’s some undeserved privilege to be in this situation. You earned this opportunity to evaluate your current workload and decide if it’s more money or new challenges (or both) that you prefer.
Either way, keep in mind the law of supply and demand: you’re a limited commodity, and your services are in demand, so naturally, your value is higher.
That’s proof positive it’s time to raise your rates.
So, How Much Should I Raise My Rates?
This can be tricky because there’s no one-size-fits-all process when you begin wondering, “How much should I raise my prices?”
How much you raise them will depend on what you think is fair based on your experience, education, and other variables, as we discussed above.
Here’s the kicker: Don’t just pick an arbitrary number.
Customize each rate increase per client based on the value you offer plus what the market can withstand.
However you decide to raise them, make sure you can back it up with the quality of your work.
How to Tell Your Clients You’re Raising Your Prices
There may be many things you’d rather do than tell your clients about your rate increase, especially if you haven’t done it before.
But rest assured, it’s not that difficult, especially once you do it a few times. Setting boundaries with clients is a necessary skill that benefits both them and you in the end.
Regardless of how you communicate with your clients, it’s best to send this message in an email or discuss it on a call. Also, this doesn’t have to be a long, complicated message. Short and sweet is usually the best.
Here are a few tips to keep in mind when doing this:
- Don’t ask them if you can raise your rates. You work with them, not for them.
- Give them plenty of time to get their finances in order. (This may be a long process for some clients depending on the industry or company.)
- Don’t apologize — you haven’t done anything wrong!
- Send them a small gift. While you’re not doing anything wrong, you still need to cater to their emotions. Here are some client gift ideas to help you choose.
Not sure what to say or how to approach it? This template should help:
Hi [Insert Client Name],
I hope all is well. I’ve really enjoyed working together over the last [time frame].
I wanted to notify you that my rates will be increasing by [percent or dollar amount] beginning on [date new rate will go into effect].
If you’re content with the new rate, no action is needed on your end. If you’d like to discuss this or have any questions, let’s schedule a time to chat.
If you’d like to include your reasoning as to why your rates are increasing in the email, more power to you, but if you’re more comfortable with speaking about that on the phone, that’s an excellent way to go, too.
The name of the game is keeping it simple while being as straightforward as possible.
Keep in mind that you may have to do a bit of negotiating. If they want to discuss your new rates, hear them out and see if you can reach an agreeable middle.
Raising Your Rates Is Important for Growth, But Be Strategic
As you grow your business, learn more, and improve your skills, the value you can provide clients increases as well.
You should be paid according to the value you consistently deliver upon, not because one day you wake up and decide to jack up your rates. That probably won’t go over too well.
Also, consider setting boundaries to reduce unpaid work and overhead, rather than raising rate every time you take a step forward.
One last thing: Don’t let the fear of an awkward conversation — or worse, imposter syndrome — stop you from getting paid for the fantastic work you do.
Want to keep increasing your value to others and, equally as important, to yourself? Be sure to tune in to the Unemployable podcast for more freelance advice and best practices.