How to know when to increase your freelance rates (and by how much)

Increasing your freelance rates can be a daunting task if you have never done it before. Here are a few signs and tips to help you through the process.

How to know when to increase your freelance rates (and by how much)

Working a 9-to-5 desk job comes with a few guarantees you can be sure of: how much you’re getting paid, a yearly assessment of your work, and the ability to negotiate a pay increase after working there a certain amount of time. 

When you’re freelancing, you have to determine all these things on your own. And what’s more, there are no guarantees on what you should be paid and if you’ll ever be due a raise. Where do you start? How do you know when to change things up and start charging more? 

Market standards for freelance rates

There are many factors to consider as you begin to plan your freelance rates, including:

  • Baseline cost of living: Calculate how much you need to live on month to month. This is a good starting point for figuring out your rates.
  • Business expenses: Consider what you’re going to have to spend on equipment, programs, or miscellaneous items for your freelancing business.
  • Income tax: You’ll be responsible for your taxes. If you don’t have an accountant or tax expert, a good rule of thumb is to expect to pay 25% of yearly earnings after you subtract business expenses. 
  • Work schedule: Once you’ve figured out your cost of living and business expenses, look at the year and plan out how much you’ll be working. Take into account sick days and holidays.

Market standards for freelance rates vary based on the nature of your freelance work and your experience. Following our suggestions above can help you determine your baseline rate by considering your expenses and cost of living. Once you figure out how many days a year or hours a year you can work, do the math to determine what your exact hourly rate should be. 

Raising your freelance rates and retaining clients

Your freelance rates should never remain stagnant. If you don’t receive pushback on what you charge, you’re probably not charging enough. So, how do you balance raising your rates and keeping existing clients? You don’t want to lose them by increasing your rates, but you also need to earn what you are worth and keep pace with inflation. 

You should consider increasing your rates for the following reasons:

  • Inflation: Inflation is ongoing, potentially making whatever you earn as a freelancer worth less and less with each passing year. 
  • Time equals value: You might be nervous about raising your freelance rates for existing clients, but consider that the longer you’ve worked with them, the more value you have. Customers are less likely to try and find someone else because they already know you. Making the change could be a challenge. 
  • Low salary: If you’re charging competitive rates to attract customers, you might not be making very much in the beginning. 

When should I increase my rates?

There’s no set time on when you should increase your rates, but the following are some suggestions:

  • Quarterly: Raising your rates quarterly is a good place to start. It helps you evaluate every few months how things are going and where changes could be made, including what you charge.
  • Yearly: Similar to getting a raise at work, you might consider a yearly review of your freelance rates. 
  • Client-based: You could charge different rates to different clients, based on how much work you do for them, how long you’ve worked for them, etc. This can enable you to bring in more money from larger clients but still offer competitive pricing to others and attract new clients at the same time. 

What should I consider as I increase my rates?

Consider the following elements as you prepare to increase your rates:

  • Explain: Be transparent with your clients, and tell them when and why you’re increasing your rates. Many people appreciate knowing where someone else is coming from and might be more sympathetic and understanding. 
  • Time: Don’t just spring the new rates on your customers. Give them plenty of advance notice and warning. 
  • Consistency: Be consistent in how you increase your rates. Pick a plan for when you want to increase your rates and stick to it. 
  • Small increases: It might be tempting to jump the gun on your pricing, but don’t. If you want to suddenly start charging clients double your initial price, this likely won’t go over well. Increase your rates incrementally—you’ll eventually get your rates to where you want to be. 

Competing based on price or quality

It’s also important to consider what other freelancers are charging. You might calculate a pay rate of $45 per hour, only to discover that someone else in the market is charging less for the same quality of work. Do your research. Find out what other freelancers are charging. Look at their work. Compare it to yours. But don’t be tempted to lower your prices just yet. 

Yes, it’s important to get a feel for what others are charging because you could lower your rates initially, build up clients, and then increase your rates. It’s equally important not to sell yourself short in the freelancing game. Take the numbers you calculated for what you should charge, compare them to what other similar freelancers are charging, then evaluate your options. You will almost certainly be competing with other freelancers based on price and quality. Finding a solid middle ground to build on is crucial. 

Measure yourself against competitors

Comparison can be a dangerous thing. Don’t get too caught up in trying to be like your competition—the best goal you can have is to improve your services and products. Checking out your competition can help motivate you in that goal. Just be sure to not get distracted by it. 

One of the best ways to measure yourself and your work against the competition is to ask your customers and clients for reviews. Request feedback on the product, promptness, and professionalism of the service, what they liked or didn’t like. Then take that feedback and make what you do and what you offer better. 

Hectic can help

Discover how Hectic services can help you manage your freelance business better, leaving you more freedom and flexibility to work on fine-tuning your freelance rates.