4 Tips for Raising Your Rates without Compromising Your Revenues

The number one reason you aren’t earning more? You aren’t asking for more. There’s obviously a lot of calculated planning and relationship maintenance nuance goes into determining how much you bill per hour as a freelancer. But on another level, it is indeed as simple as raising your rates.

More often than not, people defer asking for raises, either as employees or as outsourced service providers. When you are talking about making a living on your own, though, it takes a different kind of courage than simply convincing your boss that it’s time. In the case of freelancers, it’s all about positioning yourself for the type of long-term growth you’re your business needs.

When you answer to potentially dozens of bosses, many of whom you haven’t even heard of yet, you need to be a lot more strategic about taking your rates to the next level.

More Money for More Value

You need to believe, deep down in your gut, that you deserve more. But that’s not enough. Plenty of people believe they are worth more than they are getting paid, but that belief doesn’t make it happen alone.

As long as they can feel that your new billing rate is commensurate with the value you deliver, your current and future clients will be pleased, and with a higher rate coming in, you’ll be pleased too. That’s why you need to make sure that when you ask for more, you can also demonstrate why your request is on target in terms of being a fair price, whereby your clients and prospects will get a better product from you than their money is worth.

Eggs Will Be Broken

In the short term, upping your prices might mean losing a certain percentage of your clients, but that’s a sacrifice you need to be willing to make. Keep it in perspective. Hypothetically, if you were to double your rates and succeed at retaining half of your clients, you would have the same bottom line that you have today – with loads more time to spend on business development, napping and everything in between.

This isn’t going to happen across the board in one go, though. It’s best to tackle rate changes in tiered waves, whereby you take a harder line with more expendable clients and are willing to make compromises when it comes to your most valued clients. This way, once you’ve dropped the customers who give you a lower volume of business and/or demand the most maintenance, you’ll know how much wiggle room you have in your budget for negotiating with the ones you most want to keep.

It’s time to stop being shy about telling your long-term clients that you’re raising your rates. The fact that your business is evolving and growing is to their advantage as well. But no one is going to up and ask you if they can pay you more. Here are four tips for managing this transition successfully.

  1. Get Familiar with the Marketplace

Before you can have a meaningful conversation with your clients about raising your rates, you need to know what you are talking about. Pay attention to what your peers are billing. Keep in mind that in this context, “peers” means those who are providing comparable services and comparable quality for a comparable clientele – if someone tells you about a competitor whose pricing is significantly lower than yours, you need to be able to explain why your service is on another level.

Of course, this calls for doing some research so that you’re not just guessing. When you know what the going rate is, you can adjust what you charge accordingly, so that you are within a fair range, without underselling yourself or overcharging your clients.

  1. Deliver More to Get More

Sometimes you have to provide a little more value so you can justify your rate increase. You want more money? Do more for your clients.

Think about what you can do to intensify or diversify your services to sweeten the pot. For example, if you’re a photographer, offer a few free color corrections with every shoot – something that doesn’t take so much out of you but has considerable value to your clients. The idea is that you want your clients to feel good about the fact that you are charging them more. And yes, giving them small perks can indeed nourish those positive feelings.

  1. Start Where There’s No Precedent

Raise the bar. When you submit a bid for new projects with new clients, begin with a higher baseline rate than you’ve used on previous proposals. Your existing clients might not be thrilled about paying you more, but people you’ve never worked with before don’t have access to your rate history.

Don’t worry that you may be rejected because of the higher pricing. Worst case scenario, your conversion rates will be lower, so you’ll need to hunt for a higher volume of leads. Best case, they’ll negotiate with you – but because you’ve already set the tone with that higher number, the counter-offer is likely to be anchored to it.

  1. Soften the Blows

All that said, when you do pitch your new pricing to old clients, give them multiple months of of notice, and frame the discussion in favorable context. Let them understand why your rate is changing, and remind them of the value you’ve provided them thus far.

You can even keep them on at the old rate if they make it clear to you that their budgets can’t hack your new rate. After all, you’re not trying to play hardball with the customers you don’t want to lose – you’re just growing your business. In time, you should be able to shift them up to the new rates.

More Per Hour and More Total

Raising your rates is a natural signpost that points to, and comes as a result of, solid business growth. It doesn’t mean that you’re money-grubbing, and it doesn’t mean that you’re arrogant. You are simply in the business of providing a service, and when your reputation grows, so does demand.

Again, don’t be shy about this. People tend to value what they pay for. Provide exceptional work, and they’ll be happy to pay more to keep you.