July 1, 2022
How to Handle Price Increases
What you’ll learn:
- Why freelancers need to charge more over time
- When to increase your rates as a freelancer
- How to share price changes with current customers
As your freelancing business grows and your experience level increases, you’ll eventually need to adjust your rates to accurately reflect the value you’re providing clients. This can be an uncomfortable notion for freelancers—but it shouldn’t be.
Think about it like this: if you worked for a traditional employer, you’d probably expect a raise after a year or two. Why? You would have acquired new skills on the job, improved your performance, and taken on more responsibility in that time. Of course, you’d want to be compensated for all the extra value you’re providing to the company!
The same logic applies to freelancers, with one tiny caveat: being your own boss means you have to decide when it’s time to scale to the next level. You’ll also be in charge of developing a specific pricing strategy and announcement plan for the rate increase that won’t damage client relationships.
Knowing when to implement a price increase
When you decide to increase your rates is somewhat dependent on your overall pricing strategy. If you’re like most freelancers, you probably started out pricing your services based on how much money you need to make as a full-time freelancer. From there you may have reverse-engineered that total amount into a reasonable hourly rate or project rate. But at a certain point, it doesn’t pay to be the most affordable option—your clients may even take “affordable” pricing as an indication of junior-level work. Here are a few telltale signs that your business is ready for a more elite price point:
You’re already booked solid
If you have more work than you can handle, it might be time to raise your rates. That surplus of clients is an opportunity—you can test out your higher rate on new clients, evaluate whether the new rate is sustainable, and then apply it to current clients based on those learnings. You will also be able to weed out the ones who aren’t willing to pay more (the least profitable clients) so you can spend more time focused on higher-value clients.
You’re receiving referrals and repeat business
Referrals and repeat clients are both positive reflections on your quality of work. If businesses are willing to recommend you to others or continue working with you, they’ll probably be okay with paying a higher rate.
It’s been a while since you’ve raised your rates
Over time, the cost of living will increase while your rates stay the same. As a result, you may find yourself struggling to make ends meet. If it’s been a while since you raised your prices, it may be time for an adjustment just to keep pace with market norms.
You’re regularly asked to do work outside of your scope
If you’re regularly asked to do additional work outside of what you’ve been contracted to do, it may be time to raise your rates. In an ideal world, clients will stick to the deliverables and timeline in your initial scope of work—but we don’t live in an ideal world. Hiking up your prices will help you adjust for regularly recurring scope creep and timeline extensions, particularly if you’re charging a flat rate or project fee.
You recently acquired a new skill or certification
Becoming an expert at SquareSpace design; completing a training course on SEO copywriting; learning how to use specialized software programs like Adobe—all these skills are investments in your career. They increase your proficiency as a freelancer and make you a more valuable asset to clients. If you acquire any new significant marketable skill, you should plan to not only add it to your portfolio but also reflect it in your pricing strategy.
Tips for notifying clients of rate changes
Once you’ve decided it’s time for a price increase and you’ve landed on your new number, you need to develop a comms strategy for updating your clients. These five tips can help you frame the announcement in a positive way.
- Let them know early
- Focus on the value
- Raise rates over time
- Invite feedback
- Offer options
Let them know early
Surprises can be a lot of fun—but not when it comes to business and financial decision-making. The sooner you let your clients know about a price increase, the better. Early notification is a courteous move that will give businesses plenty of time to budget for the change.
The standard practice may vary slightly depending on industry norms, but sending a letter or email a few months before the new fees take effect is generally enough of a notice.
Focus on the value
When you notify clients of a price increase, remind them of the value they’re getting. It’s not an arbitrary decision or a cash grab—instead, it’s a reflection of their investment and your quality of work.
Alternatively, if your freelance business is growing in a way that might benefit your client, explain to them the reason for the additional charges. For example, if you’re hiring a new assistant, highlighting the faster response times that clients can now expect may be a helpful strategy for contextualizing the price increase.
Raise rates over time
Raising your rates incrementally instead of all at once might help minimize sticker shock for your clients. For example, you could increase prices by a small amount at the end of every year or when clients renew their contracts. This slow but steady rate adjustment may be more palatable to certain businesses depending on their budget.
After announcing a price increase, provide clients with a way to voice any questions or concerns they may have. Encouraging a healthy dialogue may help clear up any misunderstandings, protect working relationships, and could even be a learning opportunity for you. You might encounter questions like:
- Why are your rates going up?
- How will this affect my project?
- Is there anything I can do to reduce costs?
You can address these concerns head-on and build trust by answering all questions openly and immediately.
No one likes to feel railroaded into a financial decision, and you should prepare for the possibility of pushback from some clients. If you want to preserve certain working relationships, you might want to have alternative pricing options ready.
If you’re increasing hourly rates, consider giving clients the option to work with you on a project-by-project basis that’s more limited in scope but also more affordable for them. If you’re raising rates for a specific service, offer a less expensive package. You can even offer to lock clients in at their original rate if they agree to send you a successful referral. Giving clients customized choices shows that you’re flexible and willing to meet in the middle.
Making a price increase announcement to clients
Now that you know when and how to raise your rates, it’s time to make the official price increase announcement!
Use the template below as a jumping-off point and customize it to fit your needs. Whatever you do, remember to keep the message polite, clear, and professional.
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