Estimated reading time: 11 mins
One of the most difficult things to do, for most freelancers, is to increase their rates.
When you work for someone else, you expect periodic raises both for cost of living increases as well as to show you’re appreciated and as a reward for a job well done. This is normal.
But ass a freelancer, you’re working for yourself and as such if you want a raise you need to go after it for yourself. As a rule, no one is going to give offer you a raise unless you go after it and prove that you’re worthy of it. It’s not so simple to just raise your rates, though. It can be a slippery slope to travel because you don’t want to shock your clients into seeking your level of expertise elsewhere!
Chances are, even though you might love what you do, (and that’s the thing about freelancing, it allows you the freedom to do what you love…for money!) increasing your income increases more than just your standard of living. It can increase your creative spark and your zest for your craft. If you don’t work to increase your rates regularly, you can do two unhealthy things:
- Become complacent
- Lower the raises for your entire industry
Complacency will get you nowhere fast and will eventually make you an archaic dinosaur that might not even be able to get decent work. Constant improvement and self-growth is essential in business as well as life. By working to increase your rates you also grow your business and your own skills.
Self employment should be a wonderful cycle of challenge and reward but as your boss only you can dictate the challenge and you can therefore reward yourself both with job satisfaction and with compensation.
There are rates in your industry that are considered median. You contribute to that number by the rates you charge in your field. If you go in too low you can hurt the earning potential of others who are also trying to make a living doing what you do. If you charge the same rates today as you did in 1995 you’re not doing anyone any favours including yourself!
Getting A Raise As A Freelancer
Working for a regular employer has its pluses such as profit sharing, paid holidays, stock options, medical benefits and maybe other expenses as well. To raise your freelancing rates you need to plan for the future the same way a regular employer plans for their future. You need to plan for growth and change and each year you should work with the goal of improving your profitability in mind.
Here are some specific things you can do to make more money doing what you do.
The Going Rate and Premiums
When looking at pricing, you need to look at where you are currently at and where the average is for your industry in your locale. You might need to also research the going rate for your services. Whether you’re a programmer, a project manager or something else, there’s a median rate your customers expect to pay. The trick to getting the maximum money possible is that you need to appear to provide more value to your customers than the money they pay.
If you charge $50 an hour the client needs to feel like the value is worth much more than that so they won’t mind paying a little bit more each year. If your services have the appearance of being great value for the money you charge, you’re going to position yourself well for increases. As time goes by, you’re also going to be able to charge a premium for your industry experience.
Setting up a system where you have an introductory rate with the mention of an expiry of this rate or potential future increase listed on the contract works great with new customers who will be using your services for the first time. This doesn’t always work so great with the clients you’ve had for years but we’ll explore that as well. New clients get the benefit of all your experience so as time goes on your rates for new clients should inch upwards and this can often be managed easily when the client understands this at the time they start using your services.
Expansion and Growth
When you plan your freelance activities you need to plan for a certain amount of management of your own career and business. As your boss you are responsible for your career development and as such will need to regularly upgrade your skills. As you develop more skills the median rate for your services increases. You might find that with additional certifications you are able to command higher jobs and be qualified to apply for specific types of jobs. This allows you to charge a premium that people won’t mind paying because of the value of your services.
Raising Rates with Existing Clients
Repeat clients can be great, can’t they? They know you’re wonderful and you know what you’re in for in terms of their positives and their negatives. One thing that can be a problem is the fact that the rate might already be set and you might not have any provisions for increases in the future. Maybe you set rates with a specific client when you were a bit of a naïve newbie or maybe the relationship was originally set up without a contract. Perhaps the relationship worked out really well up until recently but now you’re finding that this is now your lowest paid client.
If you’ve made the mistake of getting pigeonholed into always charging a certain price for someone on your client list it might be time for you to strategise on ways to get your rates up. If possible, you need to try to negotiate future pricing increases now. If these are non-negotiable you’ll need to either deal with it or sever ties.
When you do a contract with a client, you need to try to make mention of the potential for future price increases even if it’s only a vague mention or fine print reference. A good way to do this is to mention that you review your rates annually or semi-annually. This can be a good strategy because you can win a new client over with your charm and a lower price now (which is a great way to build a reputation) but then once you’ve hooked them on your awesome value you can raise the price. This strategy works well because the client won’t feel like they’re at risk because the contract is open ended for both of you. Be prepared that at the end of the contract period you might be minus that client for several possible reasons like: business needs changing, less than stellar results delivered by you, or that your new pricing is too high. It’s recommended that you gradually increase your pricing over time instead of a huge jump. Jumping up to double the hourly or project rate isn’t going to go over real well but if you negotiate a low 5% rate or one $ / £ more an hour or some other reasonable rate increase, this can be easier for the client to absorb.
If you haven’t negotiated new rates into existing contracts and think you’ve got a few clients who will take issue with your raising rates you might consider approaching them now with the notice that you are going to hae a nominal increase in several months. This can leave room for negotiation without shocking the client or jeopardizing projects that are in progress. But, be prepared that they may decide to send your services out for bid to another freelancer. Some clients just won’t pay any more than they’ve budgeted for. You need to take their budget timing into account so may also need to wait until next year to raise your price with them. Know your clients!
You hopefully know most of your regular clients quite well so are likely going to be in a good position to ascertain who may or may not be receptive to a price change. If you’ve made the mistake of agreeing to a price without talking about future increases, you may have to let a few clients go in favour of getting newer and more profitable clients.
There are a lot of ways you can go about the process of negotiation. You don’t want to leave your business crippled by doing a massive increase across the board which could jeopardize your business forecast so it’s wise to approach old clients with outdated rates slowly and methodically as you simultaneously court new and potential business.
Re-Package Your Services or Change Your Billing
A good way to increase prices without it appearing like a price increase is to repackage your services. Plenty of negotiating tools are at your disposal and you can offer value added services and create new packages that are higher priced. This can help you service clients at higher rates without the appearance of a pricing increase. Changing to an a la carte menu instead of a flat hourly rate might be a good approach but you can’t do this overnight so consider what has been suggested already for approaching clients about increases or rate changes.
Beyond repackaging, you can also change how you invoice. Change your billing method so that you’re earning more. This could mean changing from hourly to project based or vice versa. Only you can determine whether one would be more profitable over the other depending on the nature of your business. If you finish projects quickly, project based pricing can be wise but if you have high maintenance clients you might find that being paid by the hour works in your favour.
If you are looking to raise rates you can also start looking in new places for work. Are there any untapped markets in your area or your industry? Another option is to transition from working for an agency that takes a percentage of your wages to developing a portfolio of your own so you can begin bidding for jobs on your own or on the side.
If you’re not doing much advertising you could choose to step up your advertising to get new business. If you are using a job bidding site like Elance you could choose to raise the rates on new business opportunities and do a lot more bidding in the hopes you’ll get some nibbles at the new rates while you continue to work on your existing client base at today’s rates. As you slowly raise your rates you can have the wiggle room to either renegotiate or sever ties with the cheapskate clients
Reduce Your Operating Costs
Another way to raise your income without jeopardizing client relationships is to reduce your costs or find ways to work smarter. Working smarter instead of harder might mean shopping around for some of the services that you use and upgrading your own tools as an investment in your business so that you can work smarter and more productively. This might mean a hardware, software or broadband upgrade that’ll allow you to do more with less and result in more profit for you without your clients having to pay more. If you can slowly raise your rates while also reducing your operating costs…even better!
You might also consider hiring a virtual assistant to do some of your lower end work at a portion of your rates so you can focus on higher paying jobs. The popular book called The 4 Hour Work Week highly recommends outsourcing some of your tasks as a profitability and productivity tool.
Your To Do List:
Now that you have some ideas on ways you can raise your income, it’s time to put an actionable plan together:
- Look at your pricing and find out if you can raise your rates.
- Look at existing clients and determine how you’ll address this issue with each one individually
- Make a plan for growth for the next several fiscal quarters and a to do list for you to execute those plans
- Research ways to upgrade your skills and certifications in your speciality so you can charge more
- Research new opportunities for making more money doing what you’re doing. How can you evolve your freelance career?
- Can you outsource anything to other freelancers that you can pay a low rate for that would open up your schedule for making more money?
- Consider coming up with a product bonus to clients to get them buying something more from you. Create a bonus package or a special promotion package that looks like a deal clients won’t want to refuse.
As a self -employed person you should exercise the ability to be free to take the projects that pay you well and enhance your career satisfaction and / or life. Don’t be afraid to raise the ceiling for payments. As you can see, there are a lot of ways to bill for extra services such as consulting, up selling your clients, new areas of business and more without jeopardizing your existing clients.
One of the great things about working for no one but you is that you can mould your future. When you work for an employer, the human resources department has a ceiling on most jobs in terms of what they’re willing to pay for those services. When you work for yourself, you can raise the roof anytime you choose to!