It can be uncomfortable to talk about money when it comes to raising your rates, and freelancers may fear scaring your hard-earned clients off. Unfortunately, inflation is something to include in your business model because it affects daily business and living costs.
With inflation on the rise in the United States, reporting 5.4%, and it has been higher elsewhere, it might be time to increase your rates. If hesitant to take action, read on for helpful strategies on raising your rates due to inflation.
Why to match inflation
As a freelancer, you are the sole decision-maker on your rates. No one will do it for you, and it is unlikely that clients will simply offer a raise on their own. As inflation rises, a freelancer salary gets eaten away, making efforts less and less worthwhile. By matching inflation, freelancers ensure maintaining the value derived from hard work.
How to raise rates
Step 1: Determine the price increase
The first step in raising rates is determining the price increase. The general principle for raising rates is a little bit more than inflation OR adding between 5-10% of the initial cost. Analyze the cost of doing business and your cost of living to determine what is appropriate for you and your region.
Step 2: Give 2 month notice to existing clients
The next step is giving existing clients plenty of notice. Do not suddenly bump up their bill with no explanation. Send out an email or notice 2 to 3 months in advance so that your client has plenty of time to digest the information and budget accordingly.
When you write this email, try the following:
- Reiterate your value and how your services have benefited them thus far. Demonstrate this with data if possible
- Keep the information short but informative. Gently explain how the rise in rates is necessary to keep up with rising business and living costs
- Never apologize, but focus on the positives that they get from your services
- Consider offering a limited-time offer where the client can book services at your "old" rate before the new rates come into effect.
This would not make sense for brand new clients. If you just signed on with someone, they would not appreciate a price jump so soon. Therefore, I would not recommend rising rates for clients who will have reached the 6-month mark when the new rate comes into effect. So, if your new rate starts on January 1, it should only apply to clients you’ve had since July 1 and earlier.
Step 3: Be Prepared for Pushback
There is a high probability that you will receive pushback from clients.
There will be a never-ending list of excuses of why they can’t make it work but don't back down. Remind yourself that you are valuable and that new clients will be willing to pay what you are worth. If it comes down to the clients choosing to leave, then let them go.
Step 4: List Your New Rates in Your Profile
Once your new rates have come into effect, make sure they are updated wherever posted. If you have a website or profile that lists your rates, we suggest updating them the day before it goes into effect, so you aren't rushing the day of the adjustment.
Step 5: Make it an Annual Event
How often should you raise your rates? Try adjusting rates annually. That means that you should make this a part of your yearly schedule.
Choose a time to raise your rates every year. Either January or June as it allows for a simple transition for both you and your client’s budgeting.
Do you need help determining your rates? Try the Rates Calculator to determine the appropriate amount for you.