Most freelancers would love to raise their rates. But how? When? Will you lose clients?
This isn’t a decision freelancers should take lightly -- and I doubt you do. It involves stepping back, assessing the value you’re bringing to clients, and developing a pricing strategy -- not just a one-time price increasae.
It means being more intentional about what you’re charging clients. It means not allowing fear to prevent financially stability.
Why raise your prices?
There’s only one reason to raise your rates: because you are providing more value to clients.
(Not because you just want to make more money, or because you just bought a house, or because you hear about other people doing it.)
But what does it mean to provide more value?
- You’ve gained more experience that you’re applying to your clients’ projects
- You’ve learned new skills
- You’re offering new, complimentary services
- You’re offering the same services with a higher quality
- You’re paying more attention to your clients
If you’re working as a full-time freelancer, chances are that you’re gaining experience and skills at every gig. Your work gets better and you learn more about your field. So the longer you work with a client, the more you’re worth to that existing client and the more you will be worth to new clients.
If you’re delivering more value to clients, you deserve to be compensated for it.
This is the foundation for the whole idea of raising your prices. You have to deserve it, and then you have to believe you deserve it.
The extra benefits of raising your prices
Even if you feel you deserve a raise, you’re probably still unsure about the impact that decision will have on your business and your clients.
Obviously, the main benefit of raising your prices is that you get paid more per client. This has a lot of related benefits that may not be as obvious to you:
1. Yes, you may lose clients. But chances are, if your rate increase is reasonable, you’ll be getting rid of your cheapest clients -- the ones who are the stingies, the hardest negotiators, and the clients who don’t recognize your worth. These are probably also the most time-consuming clients.
2. If you have fewer new clients, you will be able to use that extra time with the clients you care more about. So your current clients will be getting even more value. This is also great for your stress level; you’re not running around answering 1,000 emails from a hundred little clients, you’re spending the same time answering 30 emails from 10 bigger clients.
3. A rate increase may actually make you appear more valuable to new clients. Some freelancers have found that raising their rates makes them more appealing to clients, not less. According to freelancer Corbett Bar, “I’ve raised rates twice already since I started six months ago. Raising rates doesn’t necessarily lead to fewer clients. On the contrary, there is a perceived value effect that can lead more people to want to work with you when your rates are higher,” he wrote here.
4. It will change your attitude about your business. There’s nothing like getting a raise for giving you a new sense of value and purpose. I think most people do better work when they feel that they're properly compensated. In fact, research says feeling underpaid is the leading cause of work stress! You may actually do better work because you raised your rates.
5. You’re making sure that you’re on the right track. Even the process of considering raising your rates makes you take a step back to evaluate your business. You may see that your current business plan -- how you market yourself, your job title -- isn’t bringing you the kinds of clients who will pay more for you. Perhaps you’ll realize that you’re not just a copywriter, you’re a Content Strategist. You’re not just a Personal Assistant; because of the client work you’ve taken on, you’ve become a Project Manager or Email Marketing Specialist.
In cases like these, you’re raising your rates because of your new business strategy and because you’re now effectively communicating your true value. You’re marketing yourself differently and providing a better set of services.
How do you go about increasing your rate?
As you probably guessed, it’s easier to change your rates for new clients than to up your rates for existing clients.
That’s why many freelancers change their rates by increasing them for new clients first. And some even test out their market’s acceptance of these rates by only asking one new client first, and gauging their reaction.
This is a smart strategy for freelancers who are still nervous about rate increases. See if your market will bear your new rate, and if they accept that rate without blinking an eye, maybe you’ll try an even higher rate for your next new client.
But how do you raise your rates on existing clients?
The best strategy I have ever heard of comes from personal finance expert Ramit Sethi. I think he has a killer strategy for raising rates on existing clients -- and he even provides a script for exactly what to say.
1. Ask your client how you can improve your work with them. I was nervous about this one at first, but this doesn’t have to be a very formal thing. In your next phone call with your client, ask them whether they’re OK with the way you’ve been working together and ask them if there’s anything they’d like you to do differently. I bet that your client will admire your professionalism and forthrightness in asking this question.
This will give you invaluable insights into how your clients see you. They may even tell you a value you’re providing to them that you don’t even realize you’re providing.
2. In a separate discussion, start by letting them know what you’ve done this year. “First of all, in the last year, we’ve done x, y, and z together. We designed a website with great response times and great user feedback that resulted in an increase in sales and web traffic. We did A that got B result.” Give them stats. Remind them of all the good times and the rough times that you helped them through.
3. Repeat back to them what they’re looking for to this year...and provide that service for free. “This year, you’re looking for a, b, and c.” This a, b, and c is information about what values your client already appreciates in your services and what improvements or new services they said you could offer. So something like, “This year, you’re looking not just to increase your blog traffic, but to develop affiliate relationships with other high-traffic blogs and news sources. I am now offering 1 hour of affiliate partnership consultation per week as a complementary service to all my best clients.”
This is the most important part of the process -- it’s the part that makes all clients willingly accept your rate increase (which is coming next).
For clients, whether or not they’re going to continue to work with you is simple. Are you going to be making their lives better? Are you going to make them more money, save them more time? Are you going to become so valuable, so tuned into what they want and where their business is going, that they can’t possibly let you go?
4. Tell them you’re becoming more selective with your clients. “I’m becoming more selective in the clients I work with. You and I have had a great time working together and I hope we can continue to work together in the future. In order to have more time to work with my best clients and provide even more value to you, I’m going to raise my rate from X to Y.” Here, you’re reinforcing your value through selectivity. They know only a few people have access to you, and so the access you’re offering them just became more desirable.
5. Offer to refer them. “If that’s something you’re not comfortable with, please let me know. I’d be happy to refer you to someone else that might be a better fit for your cost needs.” Now you’re not only behaving in a professional way but you’re still offering value to them.
This entire script is talked through in Ramit Sethi’s interview with master career coach Marie Forleo here:
6. If appropriate, let them know what your competitors are charging. If you’re in a position where you know that agencies or larger companies charge X for your same services, tell your client. Chances are they already know, but make sure they know that you know.
7. Do this over the phone if possible. This is a serious discussion, and shouldn’t be left to a surprise email in the middle of your clients’ stressful day, that’s then forgotten about.
These freelancers increased their prices...and were happy they did
I’ve found many freelancers who were willing to share the stories of how they increased their prices. Hopefully they inspire you too!
Leah (The Freedom to Freelance Project)
Looking for other freelance tips? Join Freelancers Union today to gain access to even more great content.