The rate you set last year for your freelance services does not have to be the rate you use until the end of time.
Your rate should change and grow as your business scales.
But if you approach rate changes incorrectly, you can lose clients and create trust issues with your market.
When you get it right, though… You get to work less while making more money. Who doesn’t like that?
During my freelance career, I went from charging $20/hr for my first client to billing at $500/hour in the enterprise space. This did not happen over night, but every time I changed my rates I went about it in a very deliberate and strategic way.
When to change your rate?
Increasing your rate sounds great! But when should you do it?
There are 2 scenarios that signal it is time for a rate change:
- You are getting more work than you can handle – If every potential client that you speak with is giving you a yes with no negotiations you are probably charging too little. Your rate should help to filter out clients that are not a good fit, not be so low that you are a “value” provider.
- You have increased your value – As you provide services to clients you increase your experience and therefore your value as a freelancer. Another way your value increases is when you learn a new skill that can be applied to improve your service to your clients.
How to change your rate effectively
Knowing it is time for a rate change is only a small piece of the puzzle. You will also need to communicate this to your clients (current, future, and past).
Here is how to approach a rate change:
- Update your marketing materials with the new rates and any increased value you provide.
- Inform your PAST clients of your growth – Don’t approach it from a place of “now I cost more money”. Focus on the results you have gotten clients and how the new rate will allow you to focus on projects where you can provide your highest value.
- Create a plan for current clients – You probably already have projects that are in flight. You can not change rates on these projects immediately.
- If they are fixed scope – Keep rolling and no need to mention the new rate.
- Retainer – Inform the client that in 90 days (you pick the timeframe) the rates will be increasing to the new rate you have selected. Remind them of the wins you have shared and how this new rate will empower you to give more focused time on a select number of clients. Be prepared for a few no’s here.
- Future clients – Every new client that comes to your door get’s the new rates. This is fairly simple as they do not know your old rates unless it was a referral and the person that sent them your way mentioned anything around your pricing. Be honest with them about the increase value you provide.
- Hold the line – It can be a bit unnerving when you are used to getting yes’s on every project and suddenly you get a no. And then another one. If you believe in this change (and you should) hold your line. Do not lower your rates.
The hardest part about a rate change can be the No’s that you start to get. I have seen it too often where freelancers have the skills and demand to increase their rates but they get that first No and jump right back to the old rate. Hold your line. If you are genuinely providing more value and in demand, the Yes’s will come.
Tips on calculating a new rate
One thing you do not want to do is pull your new rate out of your… mind 😆
It is important to think it through and have some real reasoning behind your new choice.
Some things to keep in mind:
- How much were you charging before? (you can’t go from charging $20/hr to $200 in one jump)
- How often are you hearing yes? If it is higher than 75% of the time, you are in demand. If you are not hearing yes at a high rate you might want to rethink the rate change.
- If you are basing your rate change on a new skill, how does that skill translate to increased value for the businesses you help? How can you communicate this new value to your prospective clients?
- How will your new rate impact your personal finance situation? Will the new rate allow you to work fewer hours, save more money, or scale your company faster?
Be sure to consider everything about your current situation and the impact adjusting your rate will have on your business.
If you approach a freelance rate increase correctly it is an opportunity to quickly increase your revenue and scale your business.