How (and when) to raise your rates as a freelancer
Asking for a raise is often a scary proposition, for both salaried employees and freelancers alike.
Some of us suffer from a bad case of imposter syndrome and worry that we just aren’t good enough or are undeserving.
For others, it’s a fear of rejection.
Sometimes it’s the discomfort talking about money in general — a taboo subject for many cultures and most traditional workplace environments. I remember at my last salaried job, my employer asked me to sign a contract where I agreed to never talk about my salary with my fellow employees.
Even after we overcome these fears, many still have no idea how to approach raising their rate.
As freelancers, we worry that our clients might perceive the request in a negative way. Or worse, we fear we’ll scare them off.
But the truth is, one of the greatest advantages of being a freelancer is having the ability to control your own destiny, and most notably, control your own income.
In fact, at that same salaried job where I was not allowed to discuss my pay, I was denied a raise based on a trivial milestone — my years of service. I was told I “wouldn’t even be considered for a raise” until I had been with the company for five to six years.
In contrast, in just four years after becoming a full-time freelancer, I already make more than double what I made as a full-time employee.
How much should you charge as a freelancer?
Like most freelancers, my rates have varied wildly over time.
When I was in college, I was happy to make $20 on a flyer.
But when I quit my job to pursue freelancing full time, I knew $20 gigs weren’t going to pay the mortgage.
Before I get into the numbers, I want to offer a disclaimer.
Some freelancers prefer to charge by the hour and others prefer to charge by the project or on a retainer. There’s no right or wrong way to approach this.
However, even retainers and flat-rate projects should be based on an hourly wage that makes sense for your desired earnings. It’s always important to have an hourly goal in your head, especially when starting out.
And so, I set out to determine a baseline rate based on the minimum amount of money that I would to make in order for full-time freelance to be sustainable, using the following formula.
For me, at the time, that number was $6,000/month.
So, if I were able to dedicate 160 hours each month toward that goal (the rough equivalent of 40 hours per week), that means my base rate should be somewhere in the $35-$40 per hour range.
I then thought about what I to make to determine my goal rate.
Once I had that range in mind, and validated that the range made sense for my industry and my level of expertise, I set out on my freelance journey.
How and when to raise your rates as a freelancer
But here’s the big question — exactly how do you take the baseline rate and turn it into your goal rate?
About a month after becoming a full time freelancer, I quickly realized my baseline rate was too low given my level of expertise and the high level of market demand.
My climb from struggling freelancer to busy worker bee was rapid. Suspiciously rapid.
I went from earning virtually no money in the first two weeks, to working overtime just to keep up with demand in a matter of months.
Which made it abundantly clear that I was underpricing my services .
And so, I made that first giant leap forward and raised my rates for the first time — a process I would repeat many more times over the course of my career — from $35 per hour to $55 per hour.
As the years passed, I continued to incrementally raise my rates from $55 per hour rate to $65, to $75, $95 and all the way up to where I am now — $120.
In my opinion the absolute best time to raise your rates is when you are busy and have nothing to lose.
It’s a bit like going to the grocery store when you’re full instead of “hungry-shopping.”
Desperation breeds poor decision making.
We all know we are way less picky with what we put into that shopping cart with an empty stomach, and far more discerning when we are full.
My personal ever-ongoing process involves four steps:
- Raising my new customer rate.
- Making sure the new rate is sustainable.
- Raising my existing customer rate.
- Rinse. Wash. Repeat.
I start with the easiest part — the new customer rate. Meaning that I would ask all new clients to pay the new rate.
After a few weeks, if I find that I’m able to successfully onboard new clients, complete projects to the client’s satisfaction at the new rate and maintain a full schedule, I then notify my existing clients of a rate increase.
Notice that I said I notify — not ask.
It’s all about the mindset. Asking is one of the biggest mistakes freelancers make when raising their rates.
The corporate world conditions workers to ask for raises.
In the freelance world, we don’t ask. We tell.
We are professionals and small business owners who do not need permission to change the way we charge for services.
My letter usually goes something like this:
To date, this style of letter has proved to be 100% effective for me. Most clients even write back with a compliment about how they too have enjoyed working with me and have benefited from my services.
I credit its effectiveness to a handful of crucial components:
It’s crucially important that you are firm but gracious with your clients, without giving them extra homework.
They know exactly what to expect and how to plan if needed. When they are ready, the contract is there waiting for a quick digital signature.
I also want to stress that there is no right or wrong way to increase your rates, and virtually never a bad time to do so.
While I haven’t had any issues with raising my rates on existing clients, I often field objections from new prospective clients when the budget simply isn’t there.
Know your worth and don’t devalue your services, but also be respectful if the client’s budget and your posted rates aren’t a great match.
Rejection is just part of business, and should never be taken personally. Afterall, a better opportunity is almost always right around the corner.
Tennessee native Morgan Overholt is a freelance graphic designer, owner of Morgan Media LLC and co-founder of TheSmokies.com. Morgan and her team have worked with nationally recognized clientele from all over the world, including the Centers for Disease Control Foundation (CDCF), Kimberly-Clark, and Stanley Black & Decker.
Morgan transitioned into the role of freelancer and small business owner after spending nearly a decade in the traditional corporate world left her feeling unsatisfied and unfulfilled. Today, Morgan is passionate about sharing her story with other hopeful entrepreneurs who hope to follow in her footsteps. She has been featured on Upwork.com, Refinery29, and Business Insider.
Tennessee native Morgan Overholt is a freelance graphic designer, owner of Morgan Media LLC and co-founder of TheSmokies.com. Morgan and her team have worked with nationally recognized clientele from all over the world, including the Centers for Disease Control Foundation (CDCF), Kimberly-Clark, and Stanley Black & Decker.
Morgan transitioned into the role of freelancer and small business owner after spending nearly a decade in the traditional corporate world left her feeling unsatisfied and unfulfilled. Today, Morgan is passionate about sharing her story with other hopeful entrepreneurs who hope to follow in her footsteps. She has been featured on Upwork.com, Refinery29, and Business Insider.
Originally published at https://www.collective.com on February 19, 2021.
