How to Increase Your Rates as a Freelancer or Contractor
As a self-employed individual, you most likely experienced the stress of having to set your freelance or contractor rates. However, this is a very different experience to eventually having to increase those rates.
In this article, we will take a look at how to increase your rates as a freelancer or a contractor. We will touch on the best times to increase your rates, the best practices when doing so, as well as a template for informing your clients about raising your rates.
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When Should You Raise Your Rates as a Freelancer or Contractor?
According to this study, only 52% of freelancers agree that they are paid fairly for their work for their clients. There are many factors that could potentially contribute to this statement, which are outlined below:
Inflation
One of the most common reasons for increasing your rates is simply because of inflation. As costs go up, your rates should do the same. Instead of working more hours to reach your original financial situation, raise your rates to the equivalent of what they were when you originally set them.
You Charge Less Than the Industry Standard
If you find that you’re charging less than what the industry standard is for your experience level, then it’s time to increase your rates. You can find the industry standard through a simple search on Glassdoor, or by asking your peers what their rates are.
Your Schedule is Full
Having a schedule that is constantly full of work can be a great thing, but it can also be indicative that you are not charging enough for your services. If your work is in demand, then it makes sense to charge accordingly.
Upskilling
Continuous professional development is essential for self-employed individuals, and it has the added benefit of increasing the value of your work. If you have completed a learning course or a certification that increases your skill level, then it makes perfect sense to charge more for your time.
You Want to Charge More
Sometimes, you don’t need any other reason than simply wanting to increase your rates. This could be because you desire a better lifestyle because your expenses are increasing or because you feel you are charging less than what you’re worth.
How to Increase Your Rates: A Step-By-Step Guide
Step One: Calculate Your New Rates
Determine how much you would like to earn. Work out how many billable hours you work every month on average and calculate how much you would need to charge to reach your goals.
Step Two: Update Your Pricing Structure
One of the easiest ways to increase your rates without upsetting clients is by restructuring your prices. For example, you can start to include extra ‘add-ons’ to your services for a higher price; instead of charging X amount for a 1500 word blog post, include image-sourcing and on-page SEO for an additional amount.
Step Three: Quote Higher Rates for New Clients
When meeting with potential clients, quote a higher fee for your services than you did previously. New clients will not know that you’re charging them more than you usually would, and as long as your new prices are fair and reasonable, they will not complain.
Step Four: Inform Repeat Clients of Your New Rates
New rates cannot apply to clients that you are already working with, but you can inform recurring clients of your decision. It is best to do this a month or two before the increase takes effect, as they may be working within a company where budget increases take a while to be approved.
Best Practices for Increasing Your Rates
In addition to following the steps outlined above, there are some extra ways that you can make the rate increase more comfortable and flow more smoothly.
✅ Be Strategic with Timing
Remember that many of your clients work within companies where budgets take a while to be approved or renewed. Therefore, it can be useful to time your increase to coincide with the beginning or end of the financial year, or at the beginning or end of a quarter.
✅ Increase Prices Yearly
You can include a clause in your contracts that states that your rates will increase by a certain percentage each year, for example, by 10%. This can make it easier when dealing with repeat clients, as they were aware of the change from the get-go.
✅ Budget for Benefits and Perks
At a traditional job, you would usually get benefits, such as paid time off or health insurance included. At some jobs, you can also receive certain perks such as employee discounts. However, self-employed individuals have to pay for these benefits themselves, so be sure to include them when calculating your new rates.
Email Template for Increasing Your Rates
Subject: Important Update Regarding My Pricing
Dear [Client’s Name],
I hope this email finds you well. I wanted to take a moment to inform you of an upcoming change in my pricing structure.
Due to rising costs and changes in the market, I will be increasing my rates as of 2024. I value our partnership, and want to continue to provide high-quality services that meet your needs. This rate increase will allow for me to maintain the same level of service while also ensuring that my business remains sustainable.
I understand that this news may come as a surprise, and I want to assure you that I have done everything in my power to keep the increase as minimal as possible, while still keeping my pricing competitive.
I value our ongoing partnership, and would like to discuss this change with you in detail. If you have any questions or concerns, please don’t hesitate to contact me at [Your Contact Information]. I will be more than happy to provide you with additional information and to address any concerns that you may have.
Thank you for your understanding, and I look forward to working with you in the future.
Best regards,
[Your Name]
Conclusion
Increasing your rates as a freelancer or contractor can be a nerve-wracking experience, but it is an essential step in running a successful business.
When it comes to increasing your rates, there are several steps outlined in this article that you can take to make the process more comfortable for both you and your clients. Finally, you can use the provided email template to communicate the change to your clients in a professional and transparent manner.
With these best practices in mind, you can increase your rates with confidence and continue to provide high-quality services to your clients.
