Ok, so I gave myself a raise. And part of the way I did that is by raising the rates I charge to my clients.
For me, there are three parts to raising my rates: First, having a pricing strategy. Second, math. Third, psychology.
Pricing strategy: I put a lot of thought into the rates I charge to make sure that I am being fair to my clients and to myself. That said, I recently came across this “calculating shortcut” in a book from NOLO called “Working for Yourself.” To use the shortcut, I figured out what I was likely to earn as salary if I worked for a company. (Online salary surveys and my past salary history were helpful.) Then I figured out the hourly rate for that salary (Yearly salary divided by 52 weeks, then divided by 40 hours in a week). Then (and this is the shortcut), multiply that hourly rate by 2.5 or 3. With the numbers I used, multiplying by 3 came out to exactly the new rate I had chosen.
Math: Since I started my freelance business, I have billed right around 1000 hours a year. (Billed, not worked. I’ve spent significantly more hours on non-billable work, marketing, and so on.) That means that for every dollar of my hourly rate, I can expect to earn $1000 in a year. I raised my rate by $12/hour, so I can expect to earn $12,000 more this year than last. At the same time, this rate raise means that most clients will not be paying significantly more for the small projects that I bill hourly.
Psychology: I have to feel good about the rate I charge. I am letting clients know at the beginning of January, 2012 that my rate will go up, so they have some advance notice. I last raised my rate almost 2 years ago. In that time, not only have my business expenses gone up, I have also learned new skills and become faster at the work I do. The value I offer to clients has increased. I thought about the increase for a while so that I was sure I was comfortable with the number: I want to be able to say it with confidence, knowing that my price is reasonable.
Last time I raised my rates, I saved the email responses that my clients sent. All of the responses were either positive (“No problem…. that’s more than fair.”) or neutral (“Thank you for letting me know.”). Not one client was upset or stopped working with me. I’m glad I saved the emails from last time; it was a good reminder that my clients value the work I do for them, and are willing to pay for it.
Have you changed your rate lately… or ever? How did your clients respond?