If you work for yourself, your income naturally depends on your hourly rate. Of course, you’d love to make a better hourly wage. But how do you know if you’re being fairly paid?
Here are some tips on when you should (and shouldn’t!) raise your rate.
When You Should Raise Your Rates
1. Your skills or service have improved. If you can provide more value, raising your rates to reflect that is reasonable.
2. Supply and demand have changed for your service. If you’re booking yourself solid and turning away new clients, then you’re in an excellent position to charge more. Simply raise your rate until you’re getting the number of clients you want without having to decline new business.
3. You’re testing a new rate to gain information. Just be sure you have a plan if the higher fees don’t pan out.
4. If you want to reposition yourself. There’s nothing wrong with positioning yourself as a high-end consultant, but be sure you can deliver that type of service. You won’t last long if the quality of your work doesn’t match the prices you’re charging.
When Not to Raise Your Rates
There should always be a legitimate business reason for raising your rates. You might just want to earn more money, but that’s usually not justification for charging your clients more. Before making any rate changes, always look at your skills as well as supply and demand.
Frequently Made Mistakes
1. Never raising your rates. If you never raise your rates, then you’ll eventually be undercharging. Over time, that’s a lot of money that’s not making its way into your pocket.
2. Not testing. New clients are the best place to try out new rates. Keep your old clients at the old rates while you’re testing; you can always bump them up later. If the new hourly charge doesn’t work out, you’ll still have your old clients to fall back on.
3. Raising rates beyond what’s reasonable. If you’re just starting out, you can’t expect to charge the same as an expert. You’ll generally be more effective if you start at the lower end with your price until your client base is sufficient. Then you can start testing higher rates.
4. Changing too frequently. Your clients can’t plan your services into their budget if you’re always changing your rates around.
How to Increase Your Rates
1. Improve your services. You should constantly be trying to add value without significantly increasing your costs. The better your service, the more you should be able to charge.
2. Always over-deliver. Not only do you get great word-of-mouth advertising, you’ll have a much easier time raising your rates when the time comes.
3. Get testimonials. Anytime a client is obviously happy, ask for a testimonial. Put those testimonials on your marketing materials.
4. Truly care about your clients. When your clients can tell how much you care, you’re much more likely to keep their business and get referrals. Their referrals can bring plenty of new clients to test out your new rates.
Ultimately, rates are determined by the marketplace. Your job is to position yourself appropriately within that marketplace and then test higher rates when the time is right.
However, within what the marketplace will bear, the sky is the limit when setting your own rates. This is one of the best parts about working for yourself. Use these tips to raise your income as your expertise becomes more valuable. You deserve it!