Does this sound familiar? Do you break into a sweat when you consider how to tell a long-time client you need to raise his rates? Are you worried that clients will run for the hills at the slightest rate increase?
With the rise of the Freelance or Gig Economy, more professionals are shifting from full-time positions to self-employed, freelance or contract roles. And often, for company employees accustomed to regular raises and pre-determined fee hikes, the notion of being in charge of one's own prices is challenging.
A freelancer's pricing model determines the success and sustainability of his business and livelihood. If you're a freelancer who has been historically reluctant to raise your rates, consider the following.
1. Undercharging undervalues your abilities.
On the most basic level, your business is all about earning money based on the value it brings to clients. By undercharging clients, you send the message that your services and talents are worth less. If you're good at what you do and are confident in the value you provide to clients, then you have nothing to fear from raising your rates.
2. Know when to undercut your competition.
When you were just launching your business or service, you may have started at a lower rate to get your foot in the door and to build your portfolio or reference base. But if you've since become established, it's time to set your own bar for rates. After all, as your talents and expertise develop, you're providing more value; therefore, you need to charge accordingly. This is no different than earning a periodic raise from an employer, a process which everyone understands.
3. Take the emotion out of a rate increase.
When it's time to raise rates, many freelancers worry about hurting their long-time, loyal clients. After all, you may have developed personal relationships over the years. However, it's critical to remove any emotion from the equation. Increasing your rates shouldn't offend anyone — it is a pure business necessity. Even Social Security will receive a 3.6% cost of living increase for 2012.
4. Stop waiting for the "right" time.
It's a classic mistake to keep waiting for the perfect time to raise your rates. It's never going to be the right time, and the longer you wait, the more money you leave on the table. That said, the beginning of 2012 or the start of a new quarter are ideal times to enact new rates.
5. Start by increasing your rate with each new client.
If you're struggling to raise your fees, start by setting higher rates with each new client you take on. You'll ease yourself into the new rates and quickly discover that clients are more than happy to pay higher rates and still find you a great value.
6. Ease in with a small increase.
Let your current clients know that you'll be raising your fees (start with a 10-15% increase). Communicate that you appreciate their business and that you've already raised your rates with all your newer clients. Be sure to give clients advance notice (about one to two months) before enacting the new pricing. Use terms like "fair rate," "market rate" and "scheduled increase" to justify the increase from a business standpoint. Most importantly, keep your communication brief — don't send the message that you're open to negotiation.
7. Don't lose sleep over lost clients.
In the majority of cases, clients will accept reasonable increases with relative ease. However, be prepared for a client or two to walk away rather than accept your new rates. If you're confident with the value you deliver, don't worry about the clients who walked. Most likely, those clients weren't the best fit anyway. It's best to move on to bigger and better things.
For any self-employed individual, setting your rates is a serious business. No matter what pricing plan you employ, be sure you're not undervaluing your talents. As the New Year approaches, it's a key time to get your business in order by making sure you're compensated fairly.
Image courtesy of iStockphoto, dblight, Flickr, thekellyscope
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