Increasing your prices as a freelancer can be uncomfortable. Asking clients for more money, while necessary, is awkward. (Especially if you’re having a conversation with a loyal client.) The good news? You can make this a bit easier on yourself. Having a price increase letter ready to go takes the stress out of the process. This gives you the confidence to request and charge more.
Below, I’ll share information about finding the right time to increase your rates, how to increase your rates, and what to share with clients. You’ll also find a free pricing increase letter template you can start using right away.
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Why increase your prices?
For some people, just wanting to make more money is reason enough to increase prices. As a business owner, you have the right to raise your prices. In fact, it’s one of the best decisions you can make to future-proof your business. It’s a requirement if you want to keep up with inflation.
In the United States, the annual inflation rate is expected to be 2.26% in 2021. If you don’t raise your rates by even a small amount each year, you’ll actually be worse off as time goes on. Don’t let this happen to you.
Commanding higher rates can be scary, but it’s in your best interest to get comfortable with this. It becomes much easier to raise your rates when you have a full understanding of when to do so and how to do it in the most professional way possible.
When is it time to raise your rates?
Not sure if you should increase your rates? It isn’t all about making more money, there are many other reasons why you may increase the rate for your freelance services. Here are six different reasons to consider.
1. Your expenses have increased
If your expenses increase, you’ll likely need to charge more to cover your bills. This could be regular bills, like rent, or it could be business expenses. Either way, if you’re spending more money than you were in the past, it’s a good time to consider raising your rates.
2. You want to change your fee structure
There are many ways to bill your clients for the work you do. You may want to change the way you charge them, for example going from an hourly rate to a fixed price retainer. Doing something like this gives you a good opportunity to increase the price of your services.
Looking for the right way to charge for your freelance services? Check out this post.
3. You’ve gained new skills
As freelancers, we’re always looking to grow our skillset. We’re also learning a ton from the clients we work with. Over time, your services are worth more because you know more. You bring more expertise to the table for your clients and because of that, you can get higher rates.
4. Your freelance business is fully booked
When you start your freelance career, getting clients is one of the most critical activities you have to do. As your business involves though, you may find that your schedule is full and you don’t even have space to bring in a new client. This is a great sign. It means people are happy with your services. You can increase your prices and get even better clients.
5. Your clients never say “no” to your price
If you’re quoting clients and they’re always saying yes, your price is too low. Everyone that you speak to shouldn’t be able to afford your services. The rule I like to go by is that I should be getting “yeses” about 50% of the time and “nos” the other 50% of the time. If this isn’t the case, I know it’s time to raise my prices.
6. Your prices are much lower than your competitors’ prices
We shouldn’t be in the business of constantly comparing ourselves to others, but we should be aware of what others are charging for similar services. If others in your space are charging a lot more than you, consider increasing your prices. Don’t get caught in the trap of being the lowest-cost service provider on the market.
How to determine your new rate
So, you’ve decided you want to raise your freelance rates. Now, the question is: How do you determine your new rate? These are a few methods for you to choose from.
Research your competitors
As mentioned above, look at some of your competitors or other people offering services like yours. Can you find out what they’re charging, or what’s included in the packages they offer to clients? This is a good place to start when you’re thinking about new rates.
Look at your expenses
Your expenses can also help you determine what your new rate should be. You should increase your rate so that you are covering any growing expenses, at the very least. That will give you a good jumping-off point if you aren’t sure what to do.
Determine a percentage increase
Another route you can take is to determine a percentage increase. For example, you could say you’re going to raise your rates 5 to 10% every six months to account for the new skills and experience you acquire.
When do you tell clients about the price increase?
At this stage, it’s time to really start thinking about your clients. When and how do you tell them about the change? Here are a few different times I recommend.
Towards the end of the quarter
The business world tends to operate in quarters. The quarters for this year, 2021, are:
First-quarter (Q1): January 1st – March 31st
Second-quarter (Q2): April 1st – June 30th
Third-quarter (Q3): July 1st – September 30th
Fourth-quarter (Q4): October 1st – December 31st
Clients often plan budgets quarterly, which makes this a good time to bring up any rate increases. Keep these dates in mind as you think about when to inform your customers.
Before their current contract ends
If you have an existing contract with a client that’s coming to a close, tell them about the rate increase before your end date. This way, they can plan for it if they’d like to renew the contract with you. It’s also likely to be less of a shock to them if you share the information about your price increase at this time.
After you get good feedback
We all want to make our clients happy, and when they do give you good feedback, it’s a great time to share with them that you’ll be increasing your rates. When they compliment you on the work you’ve done or share a win with you, they’re clearly seeing the value of your services and they’re more likely to understand the increase.
How to tell your clients you’re raising your rates
Once you’ve decided you’re raising your rates, what do you say and do? Don’t panic. The approaches will be a little bit different for new or potential clients and existing clients.
For new clients:
If you want to change your rate for new clients, this is as easy as updating the prices on your website, rate sheet, and/or profiles. Make these changes anywhere a potential client can see a rate at least a few weeks before you want the change to be official. That way, you don’t have any inquiries coming in from people expecting your current rate.
For existing clients:
When it comes to rate increases, you need to handle existing clients with a little bit more care. Here’s how.
Make it short and sweet
Your clients are likely busy people. They don’t want to read a novel about your rate increase, so make your message short, sweet, and easily understandable.
Show your appreciation
Make it very clear that you’re appreciative of your clients and the fact that they do business with you. Thank them. You don’t want your clients to think a rate increase is an attempt to end your working relationship.
Explain the increase
There’s a lot of talk about justifying the increase when you raise your prices. I don’t think you need to justify anything, but you should help your clients understand why you’re making the change. You can do this in several ways. For example, by sharing a little bit about how you’re investing in your skills or that you’re completely booked.
This is the most important thing you can do to keep clients as happy as possible. Send your price increase letter at least 30 days before it’s going to take place. This gives them time to adjust their budget or find a replacement if they can no longer afford to work with you.
Price increase letter template
Ready to send a price increase letter? Copy and paste this template and customize it for your clients.
Working with you to [insert what you do here. Ex: create content for your audience] has been a pleasure. I’ve been so glad to help you achieve [enter a positive result.] Your support for my business means a lot to me.
I’ve been working hard to grow my skills and evolve my business, and I’ll be increasing my rates to reflect the current value of my services. Here’s what this means for you:
The cost for [the service you offer your client] will be going from [current price] to [new price.]
I’m so appreciative of your business as an existing client. For that reason, I’d like to extend my current rate to you until [date.] After that, the new price for these services will be in effect.
Thanks again for your business, and please let me know if you have any questions.
Is there an alternative to raising your freelance rates?
You have to raise your rates as a freelance service provider. This isn’t something you’ll be able to avoid forever. Still, raising your rates isn’t the only way to bring in more revenue. If you want to make more money with your current clients and give them the option to delay a rate increase, you may choose to allow them to lock in your current rate by agreeing to a longer contract.
Adding that option to your price increase letter would look something like this:
If you wish to delay the rate increase, you may lock in my current pricing if you sign a new agreement for at least 3 months of services by [date.]
What to do after you send a price increase letter
Once you send your price increase letter, keep an eye on your inbox and pay attention to any messages you get from clients. This may seem like a no-brainer, but the customer service you provide after sending out this message can actually make or break whether or not the client continues to work with you after your increase.
They may have questions or want to jump on a call and talk through the change. Be open to communicating with them and be kind. These two things can help you keep clients who may be on the fence about your new rate.
What happens if your client can’t afford your new rates?
Some clients may tell you that they can’t afford the increase. Here’s how to handle the situation like a total pro.
Stand firmly in your decision
First, and most importantly do not backtrack on this decision. If a client wants to meet somewhere in the middle, between your old rate and your new rate, you can decide if that’s right for you.
However, do not let the client push you into going back to your old rate. Have confidence and move forward with the decision to raise your rates, even if it means you have to walk away from the client.
Refer them to another freelancer
That said, walking away doesn’t mean you should just leave your client to figure things out on their own. Instead, offer to help them find someone to replace you or give them suggestions for a few freelancers who are currently working at your old rate. Don’t leave your clients stuck without anyone if you can avoid it. You want to leave them with a positive impression of you, and this is one way to ensure that happens.
Plan to offboard your client
Finally, put a plan in place to offboard your client. If they aren’t going to continue working with you, make sure you’re all clear on what the end date of your agreement is and what deliverables are due by then. You should also have an email ready to send to them once your time working together comes to a close to collect feedback and testimonials.
Final thoughts: Sending a price increase announcement
Having the conversation about charging higher rates is a big step. Now, you have all the tools you need to send an effective price change email to your clients. Use the tips in this post and the template to open a dialogue about new rates with clients and start making more money.
If you have questions about announcing a price increase, keep the conversation going in the comments below.
Want more freelance rate resources? (You’re in luck!)
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