Imagine for a moment that you’re driving down the highway and you’re low on fuel. You pull off at the next exit and see two gas stations. To your surprise, the one on the right side of the street wants $4 a gallon, but on the left side of the street they’re only asking for $2. Where are you going to fill up? For most of us, the answer’s obvious: at the cheaper station. After all, gas is a commodity. So why do we question why our clients balk when we try to command a higher price or reach beyond the invisible ceiling of “market rates”? If all we’re selling is words, why should they pay you twice as much as what I’m proposing?
Is it time for you to increase your rates?
Here are five symptoms that you are not charging enough for your services:
- You haven’t raised your rates in over a year. Believe it or not, I’ve met freelancers who’ve been in business for years and who’ve never raised their rates. Ever. Don’t be like them. An employer would give you regular raises, you need to do that same.
- You’ve learned new skills. As you gain more experience and learn new skills, you become more valuable to your clients. In other words, your skills are worth more now than when you started. Businesses are willing pay more to hire experienced workers.
- You are attracting mostly price-conscious clients. If nearly every single client hires you based on your low price rather than on the quality of your work, you are definitely not charging enough for your services. If your clients always try to negotiate a lower price, watch out.
- You’re having trouble making ends meet on your web design income. As a web designer, you’re a professional. You should be earning a professional income. If you’re working full time and managing your money responsibly, you shouldn’t have to struggle to pay your bills.
- You suspect you’re earning less than minimum wage. I threw this one in because freelancers are notorious for working overtime and not figuring it into the price they charge to clients. Be honest with yourself about the number of hours you spend on work and make sure you earn a decent hourly rate.
Do any of these sound familiar? If so, it’s probably high time for a rate increase. You may be struggling with how to go about raising your rates without scaring away valuable clients. In this next section, we’ll take a closer look at the best ways to handle a rate increase while keeping clients happy.
There are several approaches you can take to raising your prices:
- Grandfather in your old clients. In this approach, you only charge your new rate to new clients. Existing clients continue on at the old rate. A drawback to this approach is that if you have several clients giving you a lot of repeat business, your income could suffer.
- Give your prices an expiration date. I’ve started to incorporate an expiration date into all of my proposals. The prices quoted expire after a set period of time (usually 30 days). After that period of time, the prices can be renewed or renegotiated–your choice.
- Send a letter of notification. Many freelancers send a letter announcing their rate changes to regular clients. Be warned that while this is a courteous thing to do, not all clients will appreciate the advance notification. Some may be upset.
- Provide no explanation. This is the simplest way to deal with rate increases. If you think about, it’s the approach many other professionals take. For example, does your plumber or your doctor send you notice when they decide to increase their charges? Probably not.
You should also know that for many businesses, charging too little is a red flag. If your rate is too far below the market rate, they will wonder what is wrong with your work and why you don’t charge what you should be worth.