3 Reasons You Shouldn’t Raise Your Rates

I know, I know, I’ve been telling you over and over again that you should take your rates and pump them up. But after reading a few eye-opening blog posts this week, I realized that raising rates might not be the best idea for you … unless you’re willing to take on a personal demon or two. Read through these three danger signs and see if they apply to you.

Reason #1 – You Aren’t Committed To Delivering A$$-Kicking Value.

Let’s face it – some people are serious about building strong businesses where everything they do makes the customer go “Damn! I’m glad I’m giving this guy/gal my money.” But some people aren’t. Maybe that someone is you. If you’re not willing to do the things that differentiate you and brand you as so awesome that you deserve more, than you’re not going to be able to sell someone on ponying up the extra dough.

Reason #2 – You Aren’t Confident Enough In Yourself

If you know you’re worth more, you’ll find a way to effectively communicate it to the client. You’ll have a list of references as long as your arm (and if you have only one reference so far, you’ll make it a nice long one). You’ll know enough about your skill sets and how they can solve your client’s problems to easily explain why the price they pay is dwarfed by the value they get. But maybe you’re not feeling the warm fuzzies when I bring this up. If you have trouble seeing yourself as the rockstar you are, read this and this.

Reason #3 – You’re Sloppy In Your Work

Far too many freelancers miss deadlines and don’t take their clients’ work as seriously as they should. Then they wonder why they don’t have the reputations that the other “big shots” do. But getting stuff done on time, and getting the right things done (i.e., getting crystal clear on exactly what the client wants) are critical to building the kind of reputation that makes higher rates a given. If you’re prone to miss deadlines, or you find yourself frequently misunderstanding the client’s intentions, get your act together and then charge accordingly. You’re worth it.

Bonus Reason #4 – You Leave This Post Without Leaving A Comment

Now I’m just kidding. Or am I? If you leave this post now, maybe you’re missing a chance to discover how to make raising your rates easier. Why don’t you leave your rate-raising advice here, and soak up the advice of others? Scroll down just a little further and do it now.

Till next time,

Dave

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Dave Navarro is Freelance Folder’s Get-More-Done expert. Learn how to double your productivity in the next seven days by grabbing his free time management guide right here.

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Comments

  1. says

    OK – you got me, I decided to check out the comments based on the bonus reason…but I’m the first to comment. So how do you go breaking the “bad news” to your clients. My problem is I’m often “friendly” with my clients. Not to the point of going out for drinks and such, but we relax, laugh, and I’ve visited some of their houses on occasion to get work done on weekends.

    I did it once before, and I’m thinking its time again.

  2. says

    Well, at first I got concerned, but then as I read through your article, I smiled. I’ve done well in these areas if I humbly do say so myself. You can’t have a tagline like “Remarkable Blog Coaching & Consulting” and then not deliver.

    When I decided on my rates, I compared myself to other kinds of jobs, like auto mechanics, plumbers, accountants, and lawyers. Where did I fall in the scale? Were my services worth more than a plumber’s and less than a lawyer’s? It helped a lot.

  3. says

    Fine. I’ll leave a comment, but only because you asked so nicely.

    My sage advice on how to raise your rates?

    Log in to WordPress. Click “Manage”. Click “Pages”. Click “About”. Hit CTRL-F and type “$”. Double the first number you see. Click “Save”.

    I’m not being tongue-in-cheek, here. Raise your f*cking rates already. Like Michael said, slot yourself into the scale, remembering that many professionals can bill all their hours. An electrician can easily make $50 an hour working for a company, and he “bills” his employer for 40 hours a week. You bill 20 hours a week max. This shouldn’t be as hard as we consistently end up making it.

  4. says

    What if your direct competition lowers their rates? Do you lower yours? Or do you convince the client that there’s a good reason for keeping your rates higher? In other words, show them the value of paying you more.

  5. says

    How to raise rates: Prepare a letter to your clients. Let them know that in a month, you’re raising your rates. It gives them time to plan and prepare. You can include why you’re raising your rates if you want and let them know how much it will benefit them.

  6. says

    @ Jeffrey, who has a job I didn’t even know existed – When I’ve raised my rates in the past, I’ve contacted my existing clients to let them know they will be a rate change behind. As in, when I went from $50 to $75/hour, I let all my $50 clients know that my new clients were getting billed at $75 and that they could stay at $50 until the next rate change. At the next rate change, they’d go up to $75.

    Depending on what the industry will bear, you can let them know about the plan for the future first, or you can just tell them about the increase and let them know that will not affect them at the moment. Then when you up your rates later, you can tell them that you have to do it, and you’ve already given them 6 months (or whatever) at a long-time customer rate but you can’t afford to do that forever.

  7. says

    Good time of year to discuss rate changes. I take the path of raising my rates consistently for new customers. And slowly bringing up my existing customers to current rates as well. Delivering on time is important. Having a way to stand out is really important as well. Is there one skill your really good at that you can build your business around?

  8. says

    If you take pride in your work and have sufficient skills to deliver a quality professional product. You shouldn’t be afraid to charge a fee that reflects that. Your fee is part of your image. Low priced implies low quality. Clients that are focused on price aren’t the ones you want. You want clients that appreciate and value your work. In my opinion if the statements above match you — look for a new career.

  9. says

    Found this post via Google Reader. Great read… I just put my rates up and my clients actually take me seriously now. It is amazing to see that it didn’t frighten them away, but made them see me more as an “equal”. After all, they’re earning money too and decent clients understand that you have to charge realistically to stay afloat.

    Oh and if you’re having trouble increasing your rates, here’s some pointers:
    - Raise your rates slowly but regularly once a year rather than haphazardly.
    - Pitch it to your client that if you don’t raise your rates, your business won’t survive and ultimately you won’t be able to serve them. That way they see that you’re an actual investment rather than a money sink.

  10. says

    Your work will dictate how much you should charge. Anybody can bid for a job at 10 bucks an hour, but for me I probably don’t want to deal with those clients anyways.

    I think having a good established rate, equivalent to your level will help weed out the cheap clients and focus more on quality clients that are investing in their company, not trying to get something that is going to be half-assed.

  11. says

    After reading some of these comments, it’s clear that people who own/manage PSF’s still don’t get it. Your services aren’t worth anything…the value they offer your client in results is worth everything. Look in the mirror and repeat after me…”VALUE…VALUE….VALUE”

    Why are you comparing yourself to a plumber if you’re not a plumber? That’s insane. And hourly rates are unethical.

    If a client makes an extra $200,000 this year in profits as a direct result of the value you brought to them through your work, then your services should be worth at least $60 – $70k easy – even if it only takes you half a day to do the job. That alone is a 270% ROI! Wouldn’t any businessperson in their right mind pay you for a 270% ROI?

    No wonder so many good consultants are gong broke.

    Jeffrey Summers

  12. says

    Jeffrey,

    I’ll have to respectfully agree/disagree.

    AGREE: You should definitely focus on the value you provide clients when it comes to the rates you charge. The ideal situation is to find a client who is willing to pay based on ROI. If you can do a good enough job selling yourself, then you can snag it. But not everyone is currently at that skill level for sales (though the real answer to that excuse is “why the hell don’t you find someone who CAN sell, and give them a commission based on the higher fee the draw for you!) :-) I’m with you 99%.

    DISAGREE: Here’s where the other 1% comes in. As a businessperson in my right mind, wouldn’t I pay $60K for someone who can bring me $200K? Of course I would … Unless I could find someone who could provide me the exact same quality of service for 30K. Or 15K. Or 5K. I like making money, but I don’t like overspending.

    That said, if that 60K-level person’s skill is unmatched because they bring something to the table no one else can, then of course I’d pay 60K … unless, that was nowhere close to what my budget could allow. (And yes, the answer to that excuse is “Why the hell don’t you find some way to get the money if the ROI is guaranteed!” … except it might not be).

    To take it a step further, you have to consider the sweet spot. There may be more than enough low-stress business at the ‘normal’ rate to justify not busting your hump to find the few and far between who pay a mint. It all depends on the freelancer in question.

    AGREE: In having to type this, I’ve realized there’s a whole new article in this … “how to quit making excuses for why you can’t raise your rates through the f***ing roof.” Maybe we could talk on that one.

    DISAGREE: I’m not certain why you imagine that hourly rates are unethical. If someone contracts to pay me $100 / hr for services, and they are satisfied with the services, then contract fulfilled = all good.

    DISAGREE: “Why are you comparing yourself to a plumber if you’re not a plumber?” Because you’re trying to make the psychological shift away from “gee, I hope I can make some money …” to “Wait a minute, I need to charge more to reflect my value!” It’s common for people (almost everyone, really) to feel intimidated when it comes to setting rates. The plumber comments are intended to be a perspective shifter.

    AGREE: “No wonder so many good consultants are gong broke.” Indeed. We rarely charge what we’re worth.

    ====================
    Jeffrey, I hope you comment more often – even though I can’t agree 100% with what you’re saying, you have some valid and valuable points.

    PS – The URL in your name link is coming up 404. If it’s a typo, shoot me an email at navarro.dave at the gmail (ugh, I hate anti-spam typing) and I’ll fix it for you.

  13. says

    Dave,

    Good stuff here. I used to be really uncomfortable talking about money with people. (I do voiceovers.) What cured me was a time many years ago when I agreed to do a narration for a project without setting the price first. Or even before I left the meeting. I just said, mail me a check for what it was worth to you. 2 weeks later a check for $25 came in the mail. That cured me of my reluctance to talk about money first.

    Of course for my kind of work, depending on whether the job has come through an agent or not, many times the rates are already set in advance.

    Be well,
    Bob

  14. says

    @naomi – I’ve done something similar in the past by raising rates but billing existing clients at the new rate with a discount showing on the invoice to bring them back down to the rate they’ve come to expect. Then, I’d mention to the client that they’d see a rate increase on the next invoice but I’d be discounting them back to the usual rate until (date, project end, whatever made sense in terms of that client). That way, every invoice in between reminded the client both that he was getting a break and that that the rate increase was coming.

    I do have one big caveat, though, and that involves your local market, if you’re working on a local basis. Since so many of us work with remote clients now that it’s so easy to do so, this is a lesser issue than it might once have been, but still can’t be ignored. If you want local clientele, you have to understand your local economy. Often, small businesses in smaller towns have very low budgets for things like marketing (or don’t have any budget at all and just decide on a case-by-case basis whether it’s worthwhile to dig into their pockets and pull out $200 for a newspaper ad or whatever arises). This might mean that there simply isn’t a local market for your work that makes it economically viable, but it may also simply mean that you have to be more adaptable in order to create the relationships and build the reputation you need in the local area–one that will move you to the next level of clientele. That doesn’t have to mean working cheaper; it might well mean figuring out how to offer smaller projects when you’re starting out, so that you can still meet the prospective client’s needs, get paid at a reasonable rate, and make a positive enough impression that they’ll see the value of the investment and share that impression with others.

  15. says

    Wow.

    @ Dave – I Googled Jeffrey and it appears his URL is actually http://www.restaurantcoachingsolutions.com/.

    @ Jeffrey – I’m not sure if insane and unethical are words I’d use to describe those who bill by the hour or those who compare themselves to other local professionals. Personally I can’t stand billing by the hour because it’s an administrative nightmare, and I very seldom end up doing it. But I very strongly disagree that it’s unethical. Some clients very strongly refuse to pay anything but by the hour. I have a feeling sending them an email back saying “Sorry, we’re not that kind of shop. That’s unethical! Who do you think we are?!” is not exactly going to garner goodwill.

    @ Tiffany – Absolutely. Local markets are a bitch. In my own locale, nobody wants to pay a dime for anything. One, because they’re cheap, and two, lease rates are so high that people really do operate from a standpoint of fear. Everybody in the area is going bankrupt and instead of seeing professional services as something that can stop that from happening, they see it as a cost that, if avoided, could prevent bankruptcy.

    Almost all the work I do locally anymore is for barter. From tattoos to dinners out to free coffee for a year, I’ve bartered for pretty much everything. The best was the food basket co-op. We probably could’ve gotten it to not paying cash for anything, including rent. Local markets are incredibly tough to break when you’re used to the internet.

    Oh, and your blog rules, by the way.

  16. says

    Don’t raise your rates if you’re marketing yourself as a commodity.

    Your rates should reflect the benefits of hiring you — not any of your competitors. If you’re selling your services as a commodity then you’re not building on your individual strengths. As soon as you lose your uniqueness your client is going to focus on price rather than results.

  17. says

    I’ll admit that when i first started i had a hard time charging
    what i should. But, as i become more confident in my ability to deliver
    a high quality product, i began charging more.

    Also after doing the work, i can usually guess what a customer will
    pay and what will push them to a competitor.

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