Let’s talk about your value- yes, your value, as a super rad, self-employed, small business owner. And let’s cut to the chase- are you being paid enough for your super rad awesomeness?
If not it might be time to raise your freelance rate.
Raising your freelance rate is more than sending out a letter and notifying people. There’s an emotional process to standing up and saying, “I’m worth $__”.
As employees, we can defer the value of our work to others. We wait every year for our review that may lead to a promotion and pay raise. We can work our butts off but even then, getting a raise (and how much) is still in the hands of our superiors.
As self-employed people we determine the value of our services. It’s scary and vulnerable because our potential clients can reject our value. So often, we undervalue our services, or keep our rates stagnant, in order to avoid this rejection. We stay safe.
There comes a time when we need to move the safety aside, stand up for our value, and raise our rates. Here are 5 signs it’s that time to raise your freelance rate and what to do next:
You’ve Never Raised Your Rate
You may be thinking, “Well this is obvious,” but I want to tell you a very true story about myself. I had my business for SIX YEARS before I raised my rate. For SIX YEARS I provided a service to my clients at my baby bookkeeper-I have no idea what I’m doing-please just hire me rate.
Why? Because no one told me that raising rates was something self-employed people did. I thought I could only raise my rate if I got a certification or license to give me more on-paper clout. I didn’t know that I could raise my freelance rate for just being good at my job and or for building experience in my field. I didn’t know it was up to me to give myself a raise.
What to do:
If you’ve never raised your freelance rate, it’s time to look at where you were when you started and where you are now.
What’s changed? What skills and strengths do you have now? What else are you bringing to the table when you do your work?
If you’ve been in business for more than a year, I guarantee that you’ve learned something that you weren’t offering your clients when you first started. Identify what that is and consider it’s value. Consider what you would pay for that service and use that as a guide to raise your freelance rate.If you've never raised your rate, it's time to look at where you were when you started and where you are now.Click To Tweet
You Work All the Time and Still Never Seem to Have Enough
This is also known as your business isn’t sustainable. If you’re working all the time and still don’t have enough for your basic needs and living expenses then it’s time to seriously consider raising your freelance rate.
You probably started your business because you loved your industry AND because you wanted what you loved to support you. Don’t forget the AND. Even if your business is really fun, engaging, creative, and connective it’s still a business. And as a business it needs to pay it’s number one employee- which is you.
I’m very guilty of putting my client’s needs before my own (late nights, emails on vacation, not raising my rate for 6 years) and many solopreneurs are the same. We are natural people pleasers, which make us great business owners because we care about our clients.
But we also need to balance the scales of how much we care about our clients and how much we care about our selves. Part of our self-care as small business owners is meeting our financial needs.
What to do:
The first step is to figure out where the discrepancy is between what you’re earning and what you need to live. Start with your necessary business and living expenses and work your way out from there.
Where does your income stop supporting you? What can you cover and what can’t you cover? What else do you want to cover right now? How much more do you need to earn to cover those things?
Use this number as a guide for your rate increase. You might find that you will need to raise your freelance rates several times in the next 3 years to meet all your personal financial goals. Work that into your business plan.
You’re Booked Out for the Next 3 Months
If you are booked out for 3 months, getting a lot of referrals, or only have a few slots left in your practice, that means you’ve done something that makes you stand out above your competition. There is something special about you and your services.
Start charging for that extra value you bring to your business.
It took me a long time to figure this out for myself. My entire bookkeeping business was built via word of mouth. All of my clients have come to me. And for the longest time I couldn’t figure out why.
Then I took over another bookkeepers practice and realized our work and processes were exactly the same, yet, these new clients were thrilled to be working with me. It wasn’t because my actual work was different- it was because of how I communicated. It was because I talked to them about money in a way that they could understand and felt stress-free.
That was my added value that differentiated me from other’s in my industry.
What to do:
Figure out your unique value that is making you so popular. I promise you, if you’re booked out for more than 3 months or getting regular referrals, there IS something about you and your work that is special.
If you get stuck ask your cheerleader clients (the ones that love everything you do and tell everyone about you)- Why do you refer people to me? What do you like best about working with me?
This may seem weird, but your cheerleader clients are going to be thrilled to shower you with love.
You can also check in with new clients about why they chose to work with you in more subtle ways. Ask: What about your old ___________ wasn’t working for you?
This will give you a sense of what makes you different.
Everyone Else in Your Industry Charges More
This one is so very near to my heart because for 6 years I charged HALF of my industry’s standard. It wasn’t even about trying to undercut other bookkeepers or get more clients- I actually didn’t know what my industry’s standard was.
Real talk- don’t be me. It’s not cool to undercut other people in your industry. If the newbie rate in your industry is $100/hr, don’t charge $50/hr. If you have the skills required to be considered in your industry, charge the lowest end of pay scale.
This one isn’t even about you. It’s about preserving the integrity of your industry. Most industries have a “what you can expect to pay” rate. You want to fall into this rate because when you don’t, you are lowering the expectations of what people pay and you lower the financial growth potential of your industry.It's not cool to undercut other people in your industry. Charge within your industry's pay scale. Click To Tweet
What to do:
Research your industry standards and what others are charging. Go to their websites and see what their services include. Sometimes a rate may seem really high, but when you look at what it includes and break it down, it’s actually on par with others.
Eliminate outliers. There’s always going to be someone who charges way too much for their services and someone who charges way too little (*raises hand*). You’re looking for the healthy pay scale of your industry, which will emerge if you take the time to research.
As you research others, really get to know their businesses. How long have they been in business? What is their income supporting (like do they rent an office?)? What’s the unique value they bring to the industry? Use these questions to understand what and why people charge what they do.
You Live Somewhere Really Expensive
This one is the the little brother of #2 and #4 and plays a big part in our rate. I live in the third most expensive city in the world (thanks San Francisco!) so I do have to charge more for my services than I would if I lived 3 hours away. My original freelance rate probably would have been fine if I lived in a different part of the country, but there was no way it could support me in San Francisco.
Factor location into your research of other people’s rates and what your clients expect to pay you. In San Francisco, we expect services to be more expensive than in other areas.
I know that my hair stylist is also is paying ridiculous rental prices and needs to earn a little bit more. I’m okay with her rate being higher than someone in a less expensive city. I also think she’s the most talented person to walk the earth (hello unique added value!) so I’m happy to support her.
What to do:
Spend some time considering where you live and the cost of living there. What do you pay more for? What do you pay less for? What’s the expectation of your clients in your area?
If you are doing virtual work this still applies. Someone doing virtual work while living in New York City is going to need to charge more than someone in Iowa. Where do your clients primarily live? If they tend to live in large cities, they are more likely used to paying more. Use this information to finesse raising your rate.
Ready to raise your freelance rate? Check out this post for a free rate increase letter template.
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