Over time, every freelancer and business owner has to make the all-important decision to raise rates or get left behind. However, it’s not enough to want to raise rates. It’s a sensitive matter that requires careful planning and strategic execution. Do you have a plan?
Why Raise Rates?
Before actually increasing your rates, it’s important that you understand why. Here are some of the most common reasons for charging more:
- Skills have improved. This is the most obvious reason to raise your rates. If you used to charge $25 per hour, but you’re now adding double the value, it stands to reason that you should be able to charge at least $45 to $50 per hour.
- New services. Perhaps you’ve added a new service to your bundle. Or maybe your products have new features that didn’t exist before. Any time you introduce something new, there’s justification for a price increase.
- Overworking. Many freelancers start their careers by accepting any work. But eventually, too much business can lead to overworking. In cases where you have more work than you want, raise your rates. This allows you to accept less work while making the same amount of money.
- Changing market. Perhaps the marketplace used to pay $100 an hour for the service you provide. But now the industry has shifted, and your skillset is deemed to be more valuable than it was five years ago. If every one of your competitors is charging $200 an hour, you should be able to raise your rates without any kickback.
The line between successful businesses and underperforming ones is often very fine. But if you study the most successful business owners, you’ll discover some common threads. In particular, you’ll notice they’re intimately involved in the finances of their business. The more involved you are with your rates and revenues, the greater your chances for success.
4 Tips for Increasing Your Rates
If any of these four factors is present, you have justification for raising your rates. But in order to avoid upsetting your current clients, you’ll need to make sure you have a plan. The following suggestions may prove helpful:
1. Make it Reasonable
You can’t double your prices and expect people to pay. It’s important that you only introduce reasonable price increases. If you want to be charging 30 percent more, it’s better to increase your prices by 15 percent today and then by another 15 percent in six to eight months. (Just make sure you spread the increases out.)
2. Phase in the Increase
Don’t introduce a price increase and immediately put it into action. You want to respect your existing customers. One way to do this is by phasing in the increase over time. Depending on the amount of the increase, a 30-, 60-, 90-day increase plan can work well.
3. Find Out What Your Customers Want
It’s helpful to do some research prior to raising your rates. If you run a membership website, for example, a quick survey may reveal some important or missing features that your members would like to see.
“If you can deliver on any of the themes that emerge from the survey, use that information in your announcement regarding the increase,” MembershipWorks explains. “You can begin with ‘In our recent survey, we heard from members that you wanted _________. To be able to bring you this benefit and maintain the level of service you deserve, we will be raising our dues as of ________ (date).’”
When you’re able to justify an increase with precisely the features your customers are looking for, it’s much less likely that you’ll experience friction or kickback. In most cases, customers will be happy to pay for the increase.
4. Create Pricing Tiers
Let’s say you currently charge $100 a month for a particular service, but you really need to be charging $150. Rather than raise rates by 50 percent, you can introduce pricing tiers of $100, $150, and $175. This allows you to charge what you’re worth without ostracizing a portion of your client base.
Keep the Big Picture in Mind
Raising rates is something every self-employed business owner or freelancer needs to do from time to time. If you wait too long, you could actually do yourself a disservice by branding yourself as the low-priced option in the market. Then when you finally do decide to raise your rates, customers and clients feel betrayed.
Do yourself a favor and raise your rates at least once every 12-18 months. Assuming you continue to add value, your clients shouldn’t be alarmed. While there will always be a couple of customers who decide to part ways, there’s usually a positive net gain.