In one of my workshops, a participant asked, “How often do you raise freelance 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!)
When to Raise Freelance Rates
Short answer: I personally raise my rates whenever I want to make more money. #sorrynotsorry
Long answer:
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.
Why? Well, your freelance rates should be based on your living expenses, business expenses, and how much you want to work.
Your living expenses can change quickly. You, your partner, or another provider in your household may lose or gain employment. (And all the benefits included therein.)
Business expenses can also add up rapidly. If you’re not checking in on your cost of doing business at least twice a year, you may end up spending more money than you need to…or even more money than you have.
Your rates determine the health of your business. You don’t want to wait until there’s an emergency and have to scramble to both raise your rates AND find new clients who will pay those rates because you’ve overshot what your current clients can afford.
How to Raise Freelance Rates Without Panicking
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 one summer but I didn’t see the hit to my cash flow until 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 you raise your prices more than once a year (or…decade), your own brain doesn’t get as attached to a certain price. You get lots of practice looking at your numbers and adjusting your prices accordingly based on your goals and values. And you recognize the constant growth you are experiencing, and reflect that in your pricing.
How to Tell Clients You’re Increasing Your Freelance Rates
Okay, you’ve done the math and you know you need to increase your rates. Maybe you even feel good about it! Until you get to the part everyone dreads most: telling your current clients about the rate increase.
This is another really important reason to raise your rates REGULARLY. Which I know seems counterintuitive, because who wants to tell clients more often that prices are going up, but hear me out.
When you raise your prices a little at a time, multiple times a year, you don’t accumulate dozens of clients whom you worked with at one price who might tell their friends about that price after you raise it. You might just have a few clients at each price point before you go up. Some coaches even recommend raising prices with EVERY client, which I don’t do but honestly don’t hate.
(I once had a well-meaning photography client who WOULD NOT stop telling people how delightfully “affordable” I was, which made it very damn difficult to charge their referrals more than $5/hour a session, let me tell you.)
I’ll admit that when I first started freelancing, I hid behind the valid but not great excuse of rising childcare costs. The problem with that approach is that the client doesn’t really care about your daycare bill or rent increase or the amazing bookkeeper you hired so you can actually do your work.
What they care about is if you’ll still be able to help them. After all, no one really enjoys paying $20 for what they perceive as $0 of value.
So you can keep it simple by framing the rate increase as a way to continue delivering exceptional service. And when I say keep it simple, I really mean keep it simple. You don’t need a huge long explanation because most clients won’t care about the details.
At the same time, treat this email like a mini proposal, because in a way, it is. And like a full proposal, this email should be written to sell. It’s a softer sell since you’re already working with them, but remember to remind them how your work gets them closer to their goals and the benefits of working (and continuing to work) with you even at a higher rate.
Sample Letter to Customers About Price Increase
Here’s something you could send to a client you work with on an ongoing basis:
There’s a clean version below without my commentary, heh.
Dear {client}, [or “Hi,” or “Hey,” or just nothing because, ya know, this is email]
I’ve really enjoyed working with you on {project} and helping you {their benefit}. I’m excited to see {next milestone/KPI/goal} come to life.
[Start by reminding them about the benefits THEY get from working with you.]
I’ve recently {made some changes in my business} and this will {positively affect client experience and results in this way}.
[Feel free to replace with the specific changes if they’re related to improving your skills and processes, but never feel obligated to share about your personal expenses or life changes. You can but you don’t have to. Just depends on the kind of relationship you have with the client.]
Accordingly, I’m raising my rates so I can continue providing you and all my clients the service you deserve. Starting {date}, your {package/project fee/retainer/hourly rate} will increase to {X amount}.
[Don’t be shy about putting the actual full number on here. Clients may confuse themselves trying to calculate the increase on their own, so just say the fucking number. Own it!][If it’s a fairly large increase, consider staggering the full increase over a few months. All the more reason to do this once a year!]
If you’re comfortable moving forward, please sign off on the new {scope of work/contract/work agreement/addendum} linked here.
If this new rate doesn’t work for you, I can {refer you to some other freelancers who can complete the work for you/train you and your team on how to maintain/expand the work I’ve done for a consulting fee of XYZ}.
[Set some internal guidelines on how and when this transition will happen, though you don’t have to share these unless the client says they need to find someone else.]
I’m committed to honesty and transparency in my business, so if you have any questions before we move forward, please let me know.
[This does not obligate you to share EVERYTHING behind your decision, but it’s a nice reassurance that this increase is coming from a place of necessity and not just “money-grubbing.” Which is kind of a dumb phrase, but you know what I mean.]
{Thank you/Best/Regards/Warmly,}
{Your Name}
And, as promised, a clean version you can copy-and-paste:
Dear {client},
I’ve really enjoyed working with you on {project} and helping you {their benefit}. I’m excited to see {next milestone/KPI/goal} come to life.I’ve recently {made some changes in my business} and this will {positively affect client experience and results in this way}.
Accordingly, I’m raising my rates so I can continue providing you and all my clients the service you deserve. Starting {date}, your {package/project fee/retainer/hourly rate} will increase to {X amount}.
If you’re comfortable moving forward, please sign off on the new {scope of work/contract/work agreement/addendum} linked here.
If this new rate doesn’t work for you, I can {refer you to some other freelancers who can complete the work for you/train you and your team on how to maintain/expand the work I’ve done for a consulting fee of XYZ}.
I’m committed to honesty and transparency in my business, so if you have any questions before we move forward, please let me know.
{Thank you/Best/Regards/Warmly,}
{Your Name}
How to Negotiate Higher Freelance Rates
So this is a bit of a trick answer because I basically…don’t negotiate. I tell the client what I need to do a good job, and if that doesn’t work for them, we generally don’t work together. (You can read some other ways to respond to clients saying your price is too high.)
In general, as a service provider, coach, or consultant, you get to decide what your rates are, which is a whole other blog post. But if you’re in an industry like publishing where it’s standard for the client/buyer to offer rates (boo, hiss!), Kaitlyn Arford has some great email templates for negotiating higher rates at all stages of the working relationship.
What do you think? When was the last time your raised your rates, and how did it go?
