When it comes to your regular job, there are a few things you can probably bank on. You’re paid on time, the coffee in the break room is good, and you get an annual assessment.
However, as a freelancer, there are no assurances, especially in terms of money. You may be the one in charge, but the only way to ensure a financial boost is to raise your freelance rates.
The prospect of this may frighten you. You’re concerned about losing clients. Or perhaps you just don’t know how much to raise your rates. And, to be honest, you may believe you “aren’t worth it.” However, you should examine and possibly raise your freelance rates on a regular basis, just like any other business.
Why Should You Raise Your Freelance Rates?
If you had a “normal” job, you wouldn’t probably want to work for the same income year after year after year. At the very least, inflation takes a big chunk of that pay, making it less valuable over time.
Consider this: the longer you work for a company, the more valuable you become to them. You know how things are done, you understand their processes, and, frankly, replacing you is a hassle after a while.
It’s the same with your freelance clients. You “get” them if you’ve worked with them for a while. You know how they do things and are familiar with their process. Even if you haven’t worked with a client in a long time, you have a valuable and distinct skill set.
While nothing is certain, raising your freelance rates may not scare away your clients as much as you think, because they don’t want to deal with the hassle of replacing you.
You already know how much you charge your current clients. But how does that compare to the work of other freelancers? According to a Payoneer study published in 2018, freelancers worldwide charge an average of $19 per hour. However, the study discovered that more than half of those freelancers (57%) charge less than $15 per hour.
Most freelancers work between 30 and 50 hours each week. Freelancers who charge the current average and work 30 hours per week on the bottom end of the hourly scale earn $29,640 a year – and that may not cut it for many people.
How To Raise Your Freelance rates
When you look at the black and white numbers, it’s easy to believe that you need to charge your clients more. Nevertheless, you’ve got to approach raising your freelance rates the right way. You can’t simply send out invoices with higher rates and expect everyone to pay.
You need to notify your clients of the change as soon as possible. You may also need to explain to your clients not only why you’re charging them more, but also how it helps them.
Even if you’ve given your clients plenty of notice and made a strong case for why your rates increase is acceptable, you can expect criticism. And you have to be okay with losing some clients – which is completely fine.
Allow them plenty of time
Giving your clients plenty of advance notice is the single most critical thing you can do to raise your freelance rates successfully. Nobody enjoys unexpected rate increases. Even the cable company notifies you months in advance that your rates will go up (again).
Ensure that the advance notice is in written form and easily accessible. While you can include the information on an invoice, use a large enough font so it stands out on an otherwise regular invoice. Consider emphasizing the notification so that it’s difficult to ignore.
Additionally, send a separate email notification to ensure that everyone receives the notice. To grab your client’s attention, use a clear subject line such as “Rate Increase Notification” or “Change in Rates.”
While there is no secret formula for how long “advance notice” should be, two to three months is plenty of time to contact your current clients and give them time to decide what they want to do. It also allows you to find new clients should an existing one leaves.
Same time next year
Inflation isn’t going away, and neither are your bills. Make it a habit to check your expenses on a regular basis and compare them to the freelance rates you charge. At that point, you may decide that a rate increase is necessary.
In the freelance world, long-term or repeat clients are uncommon. However, if you do have any, a regular assessment and communication of changing rates may help “train” your client to the chance that it will occur. As a result, they’re less likely to be surprised or upset when an increase occurs.
When you land new clients, let them know that you reassess your freelance rates regularly, usually at the end of the calendar (or fiscal) year. This way, they’ll be able to see it coming and will act accordingly.
Don’t raise new client rates too soon
In the same vein, don’t raise your freelance rates for new clients too soon. For example, if you reassess prices at the end of each calendar year, you might want to hold off on increasing the rate on that new client you just started working with in October.
While it makes your life simpler, it doesn’t make the client’s life easier. They have only recently begun working with you and may be taken aback, even if you have warned them in advance. Furthermore, they haven’t been working with you for very long. How do they know you’re deserving of this raise?
Build a relationship with your prospective client and demonstrate your worth first. It’s possible that you’ll miss out on this year’s rate increase. However, because this client understands you’re worth every penny, you should have an easier time increasing your freelance rates down the line.
Limit the increase percentage
When you’ve decided to raise your freelance rates, you’re probably thinking how much you should raise them. Or you’re concerned about how much is too much.
Raising rates by 50%, for example, has a huge influence on your overall revenue. However, a 50% increase in a year may lead all of your clients to flee.
Storytime:
if you’re the average freelancer and charge $19 per hour, raising your freelance rates by 50% means you’re now charging your client $28.50 per hour, which is a lot. And, while you may believe you’re worth it, your clients are unlikely to agree.
So, as appealing as a 50% raise may sound, aim to keep your raises between 5 and 10%. While a 5% increase may not sound as amazing as a 50% increase, it’s still crucial to your bottom line. Instead of $570 for 30 hours of effort, you will receive $598.50. And, while it may not appear to be much, an extra $28.50 each week can add up over time.
Why are you raising your freelance rates?
Once you’ve decided on a freelance rate increase, you must notify your clients. This is certainly the most difficult aspect of raising your prices. You must inform your clients in such a way that it demonstrates that you are worth the extra cost. If you do this poorly, you risk upsetting and eventually losing your customers.
Before we get into the how, keep in mind that when you raise your freelance rates, there is always the possibility that you’ll lose business. Some clients are simply unwilling to pay more for anything, no matter how fantastic it is. If a client bounces because they are unwilling to pay your higher rate, remember your value and work on finding new clients who are prepared to pay what you’re worth.
Hidden costs
One reason you’re raising your freelance rates is to cover “hidden costs.” That doesn’t imply you should refer to things as “service charges” without describing what they are. Hidden costs are expenses that businesses (including yourself) incur on a daily basis that your clients are unlikely to consider.
For example, as part of your work for that client, you may be required to print documents. That implies you’re paying for paper and ink. In addition, if you have a chatty client who frequently texts or calls, you will need to pay for a cell phone plan. While there are many free services available to help your business run, you’ve most likely switched to the pro version, which isn’t free.
A client can argue that this is the price of doing business. Correct. Certain expenses are simply unavoidable. However, this doesn’t imply that you must bear the entire cost. While no client should be required to pay the full cost of your software platform, you should be able to add a portion of that cost to their fees.
Explain that as the cost of things rises, you must raise your rates to run a sustainable freelance business. While you’re willing to pay for part of the costs, you cannot pay for all of them since once you have paid your bills, you will have nothing left for you. Plus, as a business, you must pay your employees (that is, you) a salary. You won’t be able to afford a wage if you spend all of your money on paper and bills.
Show your worth
Some clients may want you to demonstrate that you’re worth the extra cost. “Look at all the fantastic things I’ve done for you,” is probably not going to cut it. You must go further and show the client how your service helped their business grow.
For instance, if you’re a content writer, can you demonstrate that your articles have increased the value of a client’s website? Do you have metrics that illustrate exactly what you did (increased engagement by X percentage point) and how it benefited the client (more website visitors signed up for the newsletter)? How much engagement (in terms of likes and shares) did your client get, social media pros? And of those likes and shares, how many have converted?
Numbers are your allies when showing your worth.
When you can prove with numbers and data that you had an impact on your client’s bottom line, you’re more likely to get past the protests and receive that rate increase.
How to tell clients you’re raising your freelance rates
While every client situation is unique, here is a sample freelance rate increase email you may use to notify your clients of the new financial situation. It may need to be tweaked to better suit your needs, and it doesn’t address specific customer concerns, but it should get you started.
Dear Mr. Client:
As you may be aware, I examine and raise my freelance rates once a year. This is to help me cover the rising costs of running my business and is part of my commitment to providing you with exceptional services.
Beginning [on this date, in two to three months], I will raise my freelance rates from X to Y [this might be per word, per hour, or whatever works best for you]. Overall, this indicates an X% increase in your fees over the previous year.
Thank you so much for your continued business. I hope to work with you again in the future. Please contact me if you have any questions or concerns.
Finding freelance work
While the word “free” is part of the phrase “freelance,” it doesn’t imply “free.” It means you have the freedom to choose your clients, the freedom to choose how frequently you work, the freedom to choose when you work, and the freedom to refuse work. You should charge what your services are worth. Your freelance business, like any other, needs a yearly evaluation and (ideally) a reward for a job well done.
