Why You Should Raise Your Rates

You should raise your rates.

Hourly, flat, all inclusive, cost-plus; you should raise them.

You should especially raise them if, after reading those first two sentences, you have a long list of reasons why you shouldn’t raise them.

Here’s why:

Higher Rates Raise Consumer Confidence

Let’s say you’re being interviewed by someone in your industry to finish a project; you’ll be hired on as a contractor for a three week gig to come in and do your magic.

At the end of the interview when they say, “It sounds like you’d be a great fit for our project! What’s your rate?” you need a number that says, “I totally know what I’m doing; you won’t have to worry about me.”

By Kapungo via Flickr.com

If you don’t have that number, if you’ve justified a much lower rate thanks to hours of self-flagellation — because you’re just starting out! because this is a bit of a stretch job for you! because you really desperately need the work! — you risk losing the client’s trust before you even start working.

People who work in your industry know how much work is involved in doing what it is you do. If you sell yourself short, they’ll worry that either (1) you don’t know what you’re doing, or (2) you’ll run as soon as a sane paying job comes your way.

So: do your homework. Understand what a going rate is for the work you do with the experience and skills you have. Talk to peers, read pricing guidelines, and participate in and pay attention to survey results in your industry.

Make sure your rates make sense for your industry and don’t let that doubtful little voice talk you out of asking for what’s reasonable. Remember, price isn’t about what’s reasonable to you, it’s about what’s reasonable to your (reasonable) client.

“But Katie! What if they have no idea what services cost in my industry? Won’t a cheaper price guarantee they’ll pick me?”

No, sweetie; no.

When people don’t have a solid idea of what the cost of a good or service should be, they will use price as a substitute for quality. That means when there isn’t much information to go off of, people will think the more expensive thing is the higher quality thing.

You’re also probably not the only professional the client is talking to; if they’re savvy, they’re getting quotes from a couple of people and they’ll compare your estimate to the others.

Guess what? If you’re on the low or the high end, you likely won’t get the gig.

By Christopher Sessums via Flickr.com

This makes it all the more important you understand pricing in your industry. You want to charge a rate that is toward the higher end of “middle of the pack” for what you do. And if you can justify an even higher rate because of a particular skill or expertise, do it.

Be a Scientist! Experiment!

Raising prices can be scary, though. You don’t want to go too far and lose good clients as a result. (By raising your prices you may lose bad clients; that’s OK.) So how do you go about it intelligently?

Once you’ve done your homework and figure you have a good idea of what the range is in your industry, experiment with different prices to see what gives you the best results.

When experimenting, keep as much as you can the same. That means, as much as you can, keep the language the same, keep the pitch the same, keep your lovely and confident smile the same; just change the price so you can get good information on what happens when you do. (For more helpful information on designing your experiment, check out The $100 Startup.)

Make a deal with yourself: for the next five clients or the next month or the next [fill in the blank], you’ll quote the higher rate. Each time you do, take a few quick notes about the client’s reaction to the quote, if price became an issue in the negotiation and how the project worked out in the end.

By Jerad Heffner via Flickr.com

Once your experimental period is up, look over those notes: did raising the price have an impact? Good or bad? Is it worth sticking with the new price? Raising it a bit more?

If you sell items, experiment with limited time offers. For instance, sell a print at a slightly higher price than you usually do, and make it clear that the print and the price will only be available for a limited period of time.

You can also try raising the price a few dollars without a big to-do and see what happens. You might not notice any change in sales or you might realize the former price worked better.

That’s OK! You’re a scientist! Scientists experiment. They gather information from their experiments, analyze what happened and figure out what their next experiment will be.

As a freelancer, what you charge is extremely personal. Because of that, the negative talk that creeps in when you’re feeling vulnerable can creep into your prices as well.