2 Signs Your Freelance Fees Are Too Low

Your freelance fees are too low low if either of these things are true:

1. You are feeling busy and overwhelmed, or
2. You don’t have time for business development.

Raising fees is intimidating — if not terrifying — for most freelancers. Many of us are often frozen by emotion rather than driven by economic sense. We make up nutty logical fallacies to justify doing nothing and continuing on with the freelance fees we have charged for years.

But if you can put emotion aside and look at at your business logically, you may see a strong case for raising your freelance fees.

After all, as we showed in our roundup of gig economy data, many freelancers come for the lifestyle but stay for the money. More than 20 percent of us make more than $100,000/year.

And as our friend Ed Gandia at High-Income Business Writing argues, there’s no reason a copywriter (where there is lots of competition and price pressure) can’t make six figures if they have a good strategy for their freelance business.

Now, these two factors aren’t the only signs that your freelance rates are too low. For example, if other people with the same skills are making more money than you, that’s also a strong sign you need to buck up.

But comparing skills is more subjective, and your clients might not rate your skills as highly as you do.

But “not enough time” is as close to an objective measure as you can get. Let’s take a look at these two dead-obvious signs that it’s time to raise your freelance fees.

Freelance Rate Calculator: Know Your Expenses To Know Your Minimum

1. I’m too busy to do what I want with my life

I’m amazed at how often I have conversations with friends and colleagues that go like this, almost verbatim, as if they are always working from the same script.

“I can’t meet for lunch for a few weeks. I’m really under the gun. I’m so busy.”

“You should charge more money.”

“But then I might lose my clients.”

Losing clients is the point of raising your freelance rates! Up to a certain point, that should be a goal.

You know you need to lose clients when you don’t have time to enjoy the flexible lifestyle that being a freelancer is supposed to afford you.

I don’t know about you, but one of the reasons I left a traditional office job is because I was always eating lunch at my desk. You will have your own indicator that you are in control of your own fate. You can make dinner for your kids. You never have to work on Saturdays. You actually work out as often as you resolved to at New Years.

For me, never having lunch with colleagues as one of those signs I wasn’t in control of my own fate. If I can’t do that now as a freelancer, I might as well go back to the cubicle life.

If you are too busy to complete the work you have and live the way you want, you aren’t charging enough money for that work. Remember: Jobs are for working. Gigging is for living.

2. I’m too busy to find clients better clients who pay more

If you want your freelance business to grow and to be more rewarding, you need a different client mix than you currently have.

And the only way to get that is to through business planning and business development. You need to sit down and figure out some basics like:

• My overall business plan
• My ideal client
• My freelance brand
• A plan for finding your ideal clients
• How to present myself on my freelance website

All of that takes time. Which is why you need to make sure your current clients aren’t able to use it all up.

Every smart business budgets some percentage of its resources to developing new business. They don’t say, “Well, everyone is busy with our current customers. Let’s layoff the marketing and sales teams.”

You are the marketing and sales team in your freelance business, and when you let your current customers take up all your time, you have essentially fired yourself from these important roles.

You need to fire some customers instead and rehire the CMO side of your persona. Because that’s the persona who is going to find you better clients who you are more energized by and who pay more.

If you are too busy to look for new clients, then your freelance fees are too low. Your current clients should be paying you enough that you have time left over to run your business.

That may sound counterintuitive, but it’s an important principle that we discuss in our freelance rates formula guide:

a. Not all work is client facing, but all the costs of your work have to be passed on to clients.

b. Real businesses budget in time for business development.

Set Freelance Rates By Starting With This Expense Formula

How to raise your freelance fees

First of all, stop thinking of business development as a search for “new clients.” You are looking for better clients.

Better as in the sense that they value your time more.

And better by other measures that may be important to you. Better clients:

• give you a chance to learn new skills
• give you a chance to break into other industries
• provide new contacts
• provide the kind of work you enjoy doing
• have a mission or a product that you are more engaged by

The solution to being too busy is to steadily raise your freelance rates until you find the right balance between income, what your clients will tolerate and the amount of time you are putting in.

Let’s say hypothetically, you have 10 active ongoing clients. (Every field and every business model in that field will have a different situation, so your numbers will vary. Be sure to try our rates calculator with your own inputs.)

You call up the first one and tell them that when your contract renews, you’re going to have to increase your rates 25 percent.

Scenario 1

What’s the worst-case result here? They say hell no, they let your contract lapse and your income has declined by 10 percent.

Scenario 2

The best-case scenario is that they don’t even blink. Your just increased your total income by 2.5 percent. And you know have some evidence that your total income can possibly increase by 25 percent if you are able to pull this off with the rest of your clients.

Scenario 3

Gaming it out a little further, let’s say that the net result is a mix. You lose one fourth of your clients. That’s a 25 percent loss of income. But on the remaining three quarters of your clients, you raised your fees by 25 percent. That’s a wash financially.

But you are actually much better offer, because you have gained back 25 percent of your time. You now have more time for lunch.

Even if the worst happens, it’s only temporary, because now you also have additional time to work on business development.

Scenario 3 is actually the goal. You need to lose some clients to earn more freelance income.

Guidelines for raising your freelance fees

We’re not going to get into this at length here. I would really love to hear your experience in the comments.

Also, the article below is more comprehensive about raising your rate.

A Script To Help Raise Your Rate With Current Freelance Clients

But here are a few of the basic principles to follow.

a. Never ever charge a new client less than an existing client

It’s disrespectful. Behavior like that is why people hate cable companies. Don’t run your business like a cable company.

b. Never raise fees on an existing client and then turnaround and charge a new client the old fees

The last money in always pays as much or more. The first money in always pays an equal amount or less.

c. After you successfully start raising rates with existing clients, that’s your new minimum

Use this new number for quotes and proposals to new prospective freelance clients

Obviously, this is referring to an apples-to-apples comparison. In practice, you may be charging an old client more money because the service or the value you are providing differs in some way to what you are offering a new client.

But if your business sells “standard units” that treats all hours of consultations or all blog posts or all hours of design as equal, then the above rule applies.

d. Don’t raise freelance fees on existing clients suddenly and without a conversation

Have your rationale prepared and let them know a reasonable point in the future when the change will take effect.

e. Have the courage of your convictions, and don’t apologize

You’re raising your fees because your freelance business requires it. Tell your freelance clients that you appreciate the relationship you’ve had and enjoy the work you are doing together. Tell them that you believe you provide a lot of value and look forward to continuing to do that.

Most of all, don’t sound like you are asking permission to raise your freelance fees.

This is your business, and you’re making the decisions. Is there one single expense in your life where the seller asks your opinion about whether they should charge the price they are charging? Do you walk into the coffee shop and see a sign that says, “We’re thinking of raising our prices next week. Will that be okay with you?”

Now, in practice, you may then end up negotiating. If you tell a client you need to raise the fees X percent, they will probably ask for a discount or push back in some way. Then the usual advice on negotiation applies.

(For example, if they insist they have absolutely no more budget, then you negotiate dropping some of the deliverables you provide for that budget, thus getting you more time for the same money. i.e. “My hourly rate is going up, so here is the reduced number of hours I can give you for that budget.”)

But, while you may get into a negotiation over the final numbers, do not negotiate your need and right to raise your freelance fees.

f. Get comfortable with losing clients

That’s actually part of the goal. You want to find out who can bear higher freelance rates and who can’t. And the only way to do that is to keep pushing the rates up until you find the breaking point of at least one client.

It sucks to lose a client. But it sucks even more more to go for years underselling yourself because you’re afraid of these difficult conversations.

g. Get comfortable with losing prospects

Remember, the point isn’t to get new business.

The point is to get better business.

So, every quote to new prospects should be at a higher rate than you are currently charging to current clients.

If all those prospects keep saying no, that’s not a problem. They aren’t better clients for you in that case. Just more of the same. And you’re too busy to mess with that.

h. Be strategic about it

And here’s where I hope to get some insight from you, dear reader, because every freelance business should have its own unique pricing strategy.

It might make sense to raise your rates by choosing a target number and rolling it out to each of your clients, one at a time.

It might make sense to raise your rates by choosing a breath-stopping high number and testing it out on the client you can most afford to lose.

There’s an old piece of negotiating advice that you should prepare by looking in the mirror and say the highest number you can without laughing out loud at how absurd it is. Then practice until you can say that number without laughing.

Announcing your new fees to clients

Now, this is not a set-and-forget tactic. You will lose some of your current clients eventually as part of the natural cycle of freelance life. So you need to keep a pipeline of prospects flowing.

If you are worried about the prospect pipeline running dry because your quotes are too high, experiment with different quotes until you find the sweet spot. But, assuming you are busy with current clients, the next quote should always be based on higher rates.

It might make sense to raise your freelance fees by just announcing what they are (with a reasonable effective date) to all clients simultaneously and see who balks. Then you let those clients go and start developing better business to replace them.

Another method is to work backward from new work to existing work in what I call the client-replacement two-step. First you give meaningfully higher quotes to prospective clients until one of them says yes. Then you go to the one client you can most afford to lose and let them know the next contract will be based on a higher rate.

If you lose that client, then you have improved your overall mix and overall pay. If that client sticks with you, then you should probably keep raising your fees on the rest of your old clients.

Then you are on your way to dramatically improving your freelance income, getting more time in your schedule or both . . . and kicking yourself that you didn’t do it sooner.