How to Increase Your Prices - Susie Jackson

Why you shouldn't raise your prices once a year

When it comes to discussions around how to increase your prices, standard advice seems to suggest that you should raise your rates once a year. This is usually recommended at the start of each calendar year to coincide with new projects, fresh budgets and a return to work after time off for many companies.

I like the fact that this advice encourages freelancers to think about putting their prices up on a fairly regular basis. Having said that, I don’t think increasing your rates once a year is the perfect approach.

Raising your rates across the board with all your clients at the same time is a risky strategy. You’re putting yourself in a vulnerable position if they can’t or won’t pay more. What will you do if the majority of your customer base turns round and says they’re unable to accept your rate increase?

I therefore encourage my mentees to both review and increase their prices consistently over the course of the year. In this blog post, I’m sharing 3 steps to help you do this so you can raise your rates without putting your business at risk.

When to raise your rates

I agree that all freelancers and small business owners should be reviewing their rates at least once a year. However, this doesn’t have to be at the turn of the year. Always remember that you’re the boss and you can review and raise your rates whenever you want to!

Personally, I would recommend reviewing your rates whenever your circumstances change. For example, you might find that you have higher financial requirements due to additional expenses in your business or private life. With inflation increasing on a global scale, I think many of us can identify with rising costs, and our businesses should be covering this extra expenditure on our behalf. The prices we’re charging need to take into account both our business and personal expenses, and these include a higher cost of living.

Similarly, you might find that you have a lower capacity and aren’t able to work as much due to health issues or family commitments. If you still need to be earning the same amount of money from your work but in fewer hours, you need to be looking at raising your rates.

Or perhaps your long-term goals have changed. Maybe you want something different from life or plan on moving to another country where your expenses won’t be the same. Again, you need to be evaluating your prices and asking yourself if they need to change.

Whenever your circumstances alter, I would always recommend reviewing your rates. Try to understand exactly how much you need to be earning per hour to cover both your business and personal expenses in the number of hours you want to work. Once you’ve done this, if you find that you do need to increase your prices, you can carry out the following 3 steps.

1) Increase your prices with new clients

This is the first step to take as soon as you decide to raise your prices. It’s far easier to charge higher rates to new clients than it is to get existing clients to agree to higher prices.

Putting your prices up for new clients will allow you to increase your rates immediately in a risk-free way. You certainly won’t lose any current customers by doing this, and if any potential clients aren’t willing to pay your new rates, then they’re not the right customer for you! Moving forwards, you want customers who are going to be able to pay the rates you need to be charging.

2) Assess your profitability per client

Once you’ve put your prices up for new clients, assess your current clients to understand the actual hourly rate you’re earning from them.

To calculate this, all you have to do is take the total amount you’ve earned from a specific customer and divide this amount by the number of hours you’ve spent working on their projects. This will give you an average hourly rate you can weigh up against what you need to be charging to cover both your business and personal expenses.

I’d recommend assessing your client profitability at the end of every month. Not only will this allow you to see which customers were most profitable, it’ll also give you the opportunity to take corrective action and raise your rates with clients as and when you need to. For example, you might see that your average hourly rate for a specific client has decreased over time because the work has become more demanding and is taking you longer. If this is the case, you can increase your rates to make sure your average hourly rate goes back up and you’re earning what you need to be earning.

No matter what you notice, assessing your profitability per client at the end of each month will give you all the information you need to take any necessary action. It’ll allow you to make sure you’re increasing your prices consistently over the course of the year with any clients you feel should be paying you more.

3) Raise your prices with one client at a time

While you’re assessing your profitability per client, I’d also recommend assessing your clients according to how much you enjoy working with them.

If you find there’s a client you don’t really enjoy working with and who is earning you a low hourly rate, they’re the ideal candidate to raise your rates with first! This is because you can go into negotiations with a clear head, considering the worst-case scenario of losing that one client you aren’t overly bothered about as opposed to multiple clients you do care about simultaneously.

If this customer says no to your price increase, it won’t be such a big loss. You’ll free up some time to look for new customers you like working with who are able to pay your rates. If on the other hand they say yes, you’ll be earning more money, and it might also give you a confidence boost to increase your prices with the next customer on the list.

4) BONUS: Find out when your client’s budget year starts

This is a bonus step that won’t necessarily work for everyone. Some clients, such as private individuals and small business owners, might not have strict budgets. But if you work with large companies, you’ll find that their departments are likely to have fixed budgets over 12-month periods.

If you can find out when your client’s budget year begins and ends, you can give them notice of a price increase starting from their next budget year. This increases the chances of your price rise being approved because your client is able to plan for it and factor your cost into their budget in advance.

By following the above steps throughout the year, you won’t have to wait until January to raise your rates. Instead, you’ll be staying on top of the numbers in your business in a way that will enable you to take action whenever it feels necessary. And better still, you won’t be putting yourself in a vulnerable position by raising your prices with all your clients at the same time.

If you’d like some support to review your rates and assess your existing clients so you can increase your prices consistently, you might be interested in Charge with Confidence. During the programme, I’ll help you understand exactly how much you need to be earning per hour to cover your business and personal expenses, and I’ll provide you with all the tools you need to carry out a client assessment. Click on the button below to find out more about the different formats available for Charge with Confidence!

Find out more about Charge with Confidence