To keep up with cost-of-living increases, market trends, your growing experience and skills, and your freelance income goals (and beyond), you’ll inevitably need to increase your rates from time to time.
Some freelancers increase their rates annually, while others do so more or less frequently. Naturally, if you increase your prices every month, this is unsustainable for long-term regular clients. For one-off projects, it has less of an impact on clients, and some freelancers do raise their rates for each new client. Typically, it’s not a massive hike, but rather something that, over time, as you gain more skills and experience, naturally progresses into higher figures.
Regardless of how you approach increasing your freelance rates, here are some points to consider.
1. Let clients know in advance
Nobody likes unwelcome surprises, so let your clients know in advance that you will be increasing your prices, allowing them to prepare their budgets accordingly. A friendly, polite notice a few months or weeks in advance, or a quick call, should suffice. The key is that the client knows your new rate, when it will take effect, and, most importantly, agrees to it (preferably in writing).
Even if your payment terms and conditions clearly state that you will increase your prices annually, it’s considerate and sensible to let your clients know the amount of the increase and the effective date in advance, as a matter of courtesy and professionalism.
2. Be reasonable
If you hike your rates up by 50 percent or more just because you want to earn more money, it’s unlikely to go down too well with long-term clients. Especially if you are not adding any extra value or services. Of course, for new clients, you can set out charging them at your new rate.
For long-term clients whose business you value, an option may be to apply a substantial increase incrementally over time. At the end of the day, it costs more in both time and money to pitch for new work than it does to have long-term, regular clients and referrals from them.
3. Demonstrate the value you provide
Clients are more likely to be agreeable to a price increase if you can clearly demonstrate your value to them. They might not know all the work that goes on behind the scenes, exactly how your work is having a positive impact on their bottom line, or what wouldn’t get done and what would fall through the cracks if you weren’t there to hold the fort, so to speak!
At this point, you might consider introducing them to another of your services that could benefit them, or rearranging the existing package so it better fits their specific needs, or changing how you are paid – i.e., from hourly to value-based pricing.
If you use Invoice Ninja, you can conveniently add an additional product or service via a payment link that you can easily share with your client.
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4. Do the math
Obviously, you want to run your freelance business at a profit, so before you increase your rates, work out all your expenses, overheads, and outgoings, and take into account unbillable hours, time off, and other contingencies where you are not earning money from your freelance business.
You may have passive income from elsewhere that provides you with a false sense of security when it comes to your freelance business numbers, so it pays to be realistic and charge accordingly. While there is no set amount (or percentage) by which you should increase your rates, knowing all your incomings and outgoings means you can better plan ahead, maintain positive cash flow, and increase your prices with confidence, knowing the increase is relative to your business and financial goals.
5. Choose your timing well
Some periods lend themselves better to increases, for example, at the beginning of the new year, or the anniversary of your client relationship date, or following a significant cost-of-living or tax increase. Clients expect rates to increase, just as they in turn raise their own prices to cover costs and make a profit, but if the increase is perceived as random, doesn’t add any more value, or is a series of sharp increases over a relatively short period of time, they are less likely to go down well.
That being said, there is no fixed date on which you should increase your prices; you can increase them at any time, but it might be prudent to be sensitive to any client issues, for example, if they are going through a layoff, cash flow problems or a cost-cutting exercise, now might not be the ideal time to hike up your rates.
6. Update your freelancer payment terms and conditions
This may sound obvious, but not having a proper paper trail can backfire. Ensure all your documentation is in order and that your new rates, payment terms and conditions are clear, so there is no comeback later. This is why it’s important to get your client’s written agreement to the increase to clearly demonstrate that it was acknowledged and agreed to in advance.
Finally, when letting clients know of your rate increase, be confident; you don’t have to apologize or give 101 reasons why you’re increasing your prices. You want to make this a win-win for everyone, so your client is excited to continue working with you now and in the future, in the full knowledge of the excellent value you provide.
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