This post has has been updated for 2018.
As the year comes to a close, you may be reviewing your finances and wondering how you worked worked so many hours for so little profit (or even a net loss)? You remember the weekends, the “rising to the challenge regardless of hours” moments but your bank account does not quite reflect that effort. Ugh. Or perhaps you realize the last time you had a raise was… well you can’t remember ever getting a raise as a solo. You have long-term clients who have never had a rate increase and your base rate has not changed since you started.
Is it time for a rate increase?
Setting rates is a common struggle for all independent professionals. In fact, this is true of all businesses. However, there are a few clues that your rates are too low. One of the best indicators that it’s time to raise your rates is when you find yourself turning work away. Are you turning away new opportunities because you are at capacity? This means you’re providing high value and have earned the right to set your sights higher. You risk losing a client or two with smaller budgets, but wouldn’t you like to do less work for more money?
Choose quality over quantity and save yourself time and stress. By raising your rates, you can service fewer clients for more money.
Another sign that your rates need a bump: you get an immediate yes when you quote your fee to new clients. Or, former clients don’t even bother to ask what you charge, because they assume you still have the same cheap rate. You do not want to be the cheap option, but the thoughtful one. If clients are enthusiastic to get going immediately when you tell them your pricing, this is an indicator your fees are too low.
Often, consultants think raising rates will be more trouble than it’s worth, but consider this: an extra $5 an hour may not sound like much to you (or to your clients), but it can mean a $5,000 a year raise! This assumes you bill 20 hours a week (1,000 hours a year). Raising rates even more will pay even bigger dividends.
How to Raise Your Rates
There are three clear steps to raising your rates (also known as giving yourself a raise):
- Take a realistic review of right now.
- Determine your new rate.
- Notify current clients and/or implement current rates with new clients.
With new clients, you won’t have to give notification; you’ll simply implement the new rate and move forward. For current clients there are three recommended ways to notify then and implement the new rate:
- Calendar: End of Year
- Fiscal: contract review or renewal
- Fiscal: Business review (client and your own)
Some build a cost of living increase into client contracts. While this has the advantage of increasing your fee each year, this should be in addition to an annual review of each client’s budget and next year goals.
As you develop your skills, expertise and enhance your experience, it’s important to evaluate the rate at which you charge for your work product. If you’ve got a sense of working endlessly but still struggling to pay your bills or reach a level of profitability, it’s important to evaluate the rate at which you charge for your work product. In the traditional business environment, you’d at least get a cost-of-living adjustment if not a bonus or raise – as a company owner, be sure you’re offering that to your most valuable employee.
We'd love to hear from you. How do you ensure that you get paid what you're worth? Any tips to add? Share in the comments below or on social media using #solopr.
This post is from our popular PRO Show Me the Money! series. This five-part series is a step-by-step, hands-on course to help you maximize profits and take your business to the next level. The series provides resources and examples to help you achieve a more lucrative and sustainable income. The series includes:
- Part One: Expenses
- Part Two: Rate Considerations and Research
- Part Three: Detailed Guide to Hourly Base Rates
- Part Four: Project/Value Pricing, Retainers and More
In Part Five we guide you through How and When to Raise Your Rates.
To get the entire Show Me The Money Series including Part Five: How and When to Raise Your rates join the Solo PR PRO Premium membership site . Premium members can download all of the ebooks and worksheets from the Member only Learning Center.