In my recent workshop, one of the participants asked, “How often do you raise your rates? Do you do it annually? Or just as needed, bearing in mind that we don’t get paid vacation pay or health insurance?” (Smart student, by the way, A-plus!)
Short answer: I personally raise my rates whenever I want to make more money.
You can definitely consider raising your rates if you find yourself fully booked (whatever that means to you) and/or if you want to work less without taking a hit to your revenue.
Even longer answer:
I would recommend reevaluating your rates at least twice a year.
Here’s what I do.
The first thing I like to do is take my total revenue and divide it by my total hours worked for any given period and make sure it’s still close to my internal hourly rate. (Which I’ve determined based on my revenue goals and costs of living and doing business.)
If I find that this is lower than I’d like it to be, I look at my business expenses to make sure I’ve adjusted accordingly for things like:
- Hiring an employee or contractor
- Renting an office or studio space
- Upgrading software, equipment, or supplies that you use regularly
(I didn’t fully account for this over the summer and I saw the hit to my cash flow in September, which is why checking regularly is really important!)
I also suggest keeping an eye on changes to your cost of living:
- Moving either in-town or across the country
- Having a child or other dependent, or any changes in those costs (hello, publicly funded school!!!)
- Establishing longer-term savings goals
Kinda like “qualifying events” for health insurance coverage.
Pricing isn’t the only lever I can push on to affect my revenue and internal hourly rate. I also reevaluate my approach to getting clients, and whether I can make my work more efficient through tools, better processes, or hiring help.
Again, you can raise your rates literally whenever you want to. That’s totally valid. You don’t need any justification.
But if you want a slightly more systematic way to think about it, I recommend looking at your numbers at least semi-annually.
It’s less a matter of when you “should” raise your rates, and more about monitoring your numbers regularly to make sure they are still working for you.
When was the last time you changed your pricing? What, if anything, holds you back from doing so?