When and How to Increase Your Prices as a Freelancer 🤔💸
One of the biggest mistakes you can make is never increasing your prices as a freelancer. Setting your numbers and rates can sound tricky. However, it is completely doable. You might feel scared about losing client relationships or simply don’t know how. We’re here to help you navigate these changes. We dive into the reasons why, how and when to increase your rates👇
Why you should increase your rates as a freelancer 🔍
In a corporate environment, most companies give salary raises during a set period. This means as an employee, you’d expect to receive a pay raise at least once every year. It’s no different as a freelancer which is why advocating and dedicating time to increase your rates is essential to helping ensure your business scales.
Increasing your rates is a process that will take time, effort, and confidence to negotiate– especially if you’ve never done it before. Once you've finally increased your prices to a higher rate, the benefits will greatly outweigh any work required in order to raise them.
Inflation is a big factor in why you should increase your rates. Your cost of living increases over time, which means you’ll be paying for goods and services at an increased rate. If you’re paying more, you should also be earning more as well. For instance, the inflation rate is 8.2% in the US and 6.9% in Canada.
Take this into consideration when you are charging for your services.
Financial Goals 💵
Consider how much you want to make annually and find a way to reverse-engineer how you can reach that goal👇
- How do I want to charge for my services?
- Hourly? Project milestones? Project rates? How much should my business be making each month?
- Consider living expenses, business expenses, profit margin, taxes
Pricing structures can differ from other freelancers and service offerings. Test out which structure fits well for you and create a system for future clients to understand how it’ll look to work with you.
- Hourly: Calculating your hourly rate starts with understanding how much you need to make on an annual basis. Break that down and figure out how much you need to make in a month.
- Project milestones: Milestones are a great way to get the project started or get paid after completing a set amount of work agreed upon with the client.
- Project rates: Project rates help you understand what your rate is for deliverables. Deliverables are the ‘outputs’ submitted at the end of the project (for example: website design). This makes it easy for the client to integrate into their budget, let you understand how ‘on track’ you are month-to-month and helps to create a nice workflow when working with more than one client.
Now, let’s breakdown the expenses.
What are my living expenses?
What are my business expenses?
- Tools/Subscriptions (like apps)
- Accounting services
How to increase your prices as a freelancer 🤔
Inform your clients why you are increasing your prices ⚡️
Clients might ask you why you are increasing your rates. Prepare by showing the value you bring to their business such as👇
- Sharing the performance or data you’ve produced for their business
- Show how the quality of your work has increased and become better over time
- Explain service fees to your clients, aka the hidden costs of operating your business
- Explain how you value your relationship together and how this benefits them
Communication is the key to any healthy relationship and helps you operate as a business.
Inform your clients ahead of time 📅
Nobody likes surprise charges. Set a time and date when you plan to change the pricing structure in your business. This will let clients understand how to account for this with their budgeting plans. For instance, this could be annually when New Year comes, or once every quarter. If you start by working with a new client around the same time change, consider wavering the price increase in order to build trust with your services and build your relationship with the client.
There is the possibility that your rates do not fit into the client’s budget. Don’t fret.
You can prepare by allocating time and effort to looking for new clients by giving enough time and notice. Include rate increases in your contract 🤝
Consider adding rate increases to your contract with future clients. Set a specific timeline on when you would increase your rate to make the agreement easier and bypass potential conflict as the client agrees with upfront. This could look like your rate increase is happening annually, bi-yearly, or quarterly.
When you should increase your rates as a freelancer ⌚
Evaluate your business 🛠
Take some time to evaluate where you are in your business. Ask peers and friends in your industry what they are charging. Many people make rates a mysterious experience, however, having conversations about numbers sets industry rates and helps you leverage competitive rates for your services. Think about how long have you been in the industry and reflect on where you are now versus where you were when you first started.
As you gain more clients, it’s only natural to raise your rates. Once you’ve hit capacity with the number of clients you’re working with, you have the freedom to choose how you will be prioritizing your time, who you are working with, and the amount you will increase your services. You’re in demand- why not raise ‘em?
Skillsets and experience 🧠
Over time, you build your skills and experience as a freelancer. Increasing your rates is a reflection of the value you bring to the business. Let’s say you started freelancing in 2018 and you continue to freelance in 2022. During this four-year period, you develop skills you didn’t have at the beginning of your journey. Unsure? A clear indication of this is by reviewing your work and noticing how the quality of your work has improved over time.
Think of the investments you’ve made in your business to help you operate and improve the quality of your work.
- Tech equipment
Consider how these investments help you to operate and grow as a business.
Ultimately, increasing your prices is a beneficial business decision you can make as a freelancer. 🙌
Negotiation is a skill that will require you to practice. The more you practice, the more you’ll grow your confidence in the art of negotiation.
While freelancing is a fantastic way to start your career or generate some extra income, it's also a competitive market that is constantly changing. With this type of business environment, having the freedom to increase prices on projects is an important tool to have in your arsenal.
With Contra, you can easily set and change your rates to the services you provide for clients. Simply hop to the services tab, and enter your service, details, and rates into your profile. Contra provides a variety of options such as fixed prices, milestones, hourly rates, and project rates.
If you have any questions, please reach out to email@example.com. 📩