The owner of a successful design firm once approached me for help: She needed to raise her rates. She hadn’t revisited her freelance rates in years and knew her prices were quite low compared to many of her competitors. However, she was very nervous—she couldn’t afford to alienate her existing clients and she was also wary of scaring away any new prospects.
Luckily, this situation is quite common. At some point, freelancers and small businesses will face similar pricing challenges—as with any growing company. The good news is I’ve seen so many businesses overcome this. Here are 5 ways to raise your prices successfully:
1. Get into the Mindset: Focus on Increasing Profitability, Not the Number of Clients
It’s impossible to raise your freelance rates and also guarantee that you won’t lose any clients as a result. On the same token, you can’t keep your rates the same and not lose any clients too. As you grow, raising your rates is a strategic decision that, if done right, will make your company more profitable in the long run.
Your freelance prices have a great effect on profitability. Essentially, every dollar you increase is an extra dollar of profit—there are no additional expenses and you can put forth more valuable work towards each project. As a result, raising your freelance rates and keeping your current client base is much more valuable than keeping your rates the same and constantly taking on new clients.
Plus, the short-term profit boost can be incredible. When your fees are higher, you need fewer projects to earn the same revenue. And you make the same revenue while taking on less work. So most businesses come out ahead immediately.
2. Be Firm with Your New Freelance Rates and Test the Market
Often, businesses can’t decide what their new freelance rates should be. “If we go to $X, is that too high? Are we crazy?” And, on the other hand, “Why go through the pain of raising prices if we’re only going up by a little?”
The truth is unless you’re in a totally commoditized business—like selling number two pencils—there’s no way to predict how your customers will respond. The only way to know is to try it. I advise my clients to make a jump, then see how it goes. If it goes well, wait 6 months or a year before you touch your freelance rates again. Just be sure to give the new price a fair chance. Avoid the inevitable temptation to go back when one prospective client says no.
3. Phase in Current Clients Over Time
Don’t roll out your prices all at once. Good practice is to start testing your new model with new clients first, and hold off for your existing clients. This allows you to get feedback on your rates, before rocking the boat with your current revenue streams.
When the time comes to raise prices for existing clients, I find it’s effective to let them know one-to-two months in advance. For example, send a note in early April about the new rates that will start on June 1st. Another great trick is to encourage them to book any additional work now, so they can lock in the old rates. This will give you a nice little spike in business.
4. Emphasize the Value of Your Raised Prices and Don’t Apologize
It may be uncomfortable to present new freelance rates to your clients, but it’s essential you resist any temptation to apologize. Apologies, in fact, do the opposite and undermine the tremendous value of the service you provide.
Instead, highlight the incredible results you’ll achieve for them (just as you would in any sales pitch). With new clients, there should be no reason for them to doubt your rates, unless you suggest there is. Present your rates acting as if you’ve always charged this much. For existing clients, it’s usually effective to explain that you are increasing prices “to reflect the increase in results our clients are achieving, as our experience grows.” Or something to that effect (assuming it’s a true statement!).
Related: Creatives, Don’t Undersell Yourself
5. Consider Expanding the Scope of Your Sale
Another effective way to increase prices and not lose your current clients is by offering bigger packages or projects. This practice of “bundling” allows you to increase your profit margin. Think about how you could sell a “deluxe” version of your service, or how you could “supersize” it.
For example, I worked with a web design company who required clients to provide their own copy for the web pages. They created a deluxe package which bundled copywriting services. They subcontracted the copywriting to a partner, and charged clients a marked-up rate to cover the management time.
My clients consistently find they are able to sell much bigger projects than they believed possible. If you’re interested, I wrote an article on how to build the deluxe package and land the sale.
What will you do to raise your freelance rates? What tactics have you found effective in the past to minimize the number of clients you lose? Share your ideas and feedback by posting a comment below.
This is an archived post from the FreshBooks Blog and was originally published in March 2015.
About the Author: Evan Horowitz writes at EHAdvising.com for successful entrepreneurs who are tired of “winging it” on the business side of things. He brings his Harvard MBA and hundred-million dollar management experience to show you how to grow your business much faster, and with less stress. To get simple tips to become a smarter CEO, join his free monthly Bite Sized Business Tips newsletter.