When should freelancers consider to increase their hourly rates and how can they raise the hourly rates and get paid the higher rates
Apart from making more money, are there any other reasons why freelancers should raise their hourly rates?
When Freelancers Should Raise Hourly Rates
Let me share five occasions when you should consider raising your hourly rates.
1. Too Much Work
At your current hourly rates, if you have too much work coming your way, it is high time for you to consider increasing the prices. Too much work can be an essential reason for rising rates.
Once you increase your rates, you may fear old clients may disappear. However, it can also mean you will see better clients coming your way.
2. Look More Professional (Expert)
As an expert, you should have better hourly rates. If you aren’t valuing your time and expertise, your clients will not appreciate it either.
So when you charge higher, potential clients consider your work to be of better quality.
The flip side is, if you are charging higher rates, you are building higher expectations of clients. So make sure you live up to the expectation.
3. Better Clients
If your rates are higher, you will be dealing with serious clients. The kind of clients who are willing to hire experts than those who are looking to hire freelancers for pilot projects.
Some clients always prefer to get better pricing than a better value. If you keep your rates higher, you avoid such clients and deal with those who prefer quality.
Once you have higher rates, you can fire clients who aren’t that easy to handle.
4. Self Development and Self Motivation
When you are being paid well for things you love doing, it can help you become self-motivated and can increase your productivity.
5. Want more Leisure Time
An increase in rates does not mean more money. An increase in prices can also mean you work fewer hours per week and still make the same amount.
When you aren’t working all the time for your clients, you can devote more clients with your friends, family or take vacations that can help you balance work and life.
How Can Freelancers Raise Hourly Rates?
The process that most of the freelancers believe in is – grab new clients by lowering the price. Build experience to raise the rates moving forward.
It may sound correct but is often executed wrongly by most of the new freelancers.
The freelancers start at the lowest rate possible. The focus is on the price clients pay in absolute terms than the value a freelancer brings to the table.
Instead of starting at such low rates, start showing expertise in the area you can work and how it can add value.
1. Show Expertise To Demand Higher Price
Let me share an example for one of the most competitive niches for freelancing on Upwork – WordPress designs.
Search for WordPress theme designer on Upwork, and you will find new freelancers quote an hourly rate as low as $3 per hour. The $3 per hour is not because they value their services at that rate. It is because that’s the lowest hourly rate allowed in Upwork.
Instead of starting so low, try to create a few sample themes and submit it to WordPress templates directory. Once approved, you can use those as a sample in your portfolio. Themes approved on the official WordPress site under your name can demand an hourly rate much better than the lowest possible price.
Once you have your base price not very low, it becomes a lot easier to increase your rates with experience and expertise.
As a new freelancer, make your presence felt by providing value and not making services cheaper.
2. Increase Rates for New Clients
When I have too much work coming my way, I increase my hourly rates for new clients. When the new price becomes normal, I let my existing clients know about my increase in rate.
Some clients do not agree with the higher rate right at that moment. So I offer them a staged increase over the next few weeks or from the forthcoming project onwards.
Make yourself an asset and value for clients that they feel they can’t do things without you, and this is when it becomes so much easy to increase rates.
Some clients will refuse to accept it, and it is part and parcel of being a freelancer.
One of my old client a few years back reduced workload when my hourly rate was increased from $20 to $25 back then. A few days back, we discussed his new requirement, where he is more than happy to work with me at my current hourly rate, which is a lot higher than $25.
How much can you Raise the Rates?
As a PHP developer at $100 per hour, you can have a tough time finding a lot of work. Still, I am sure you can find a good amount of work. However, if you a project manager or technical business development manager who can handle all technical aspects of a project, $100 per hour may not sound that high.
So it all depends on how you value your expertise. How you position your services to clients – An asset and value or liability and an expense.
Still, if we want to quantify how much you can raise your rates, it should not be too high in percentage terms. An increase from $10 to $15 is only $5 per hour, but in percentage terms, it is an increase in 50%. It is the reason why you should never start with the lowest possible price point and then try to increase from there.
$3 to $5 is hardly an increase of $2, but it is almost a 66% increase.
I make sure an increase is never more than 25% for existing clients.
How often should one Raise Rates?
Not very often. It is better to increase rates all at once than doing a small increase every few months.
If you are increasing rates once and if the client did not prefer to be paying an increased rate, you can offer them an increase in parts every month. However, still, letting your client know of an increase in the hourly rate in one go is much better.
Can the referred client be paying higher than the referring client?
Yes, and it completely fine.
If your hourly rates have increased and if you are asking clients for a reference, you don’t need to work for the new client at the hourly rate you are working for an existing one.
There is no harm in having more than one hourly rate.
Once you have a higher rate for the new client, your existing client will be more than happy to work with you at lower prices.
It’s quite reasonable to raise rates. Most clients won’t find it unreasonable, but there will be few who will refuse a raise in rates. If you have ample clients at the new rate, you can dictate the decision whether you want to continue working with those who are okay with your higher rates or not.
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