How Frequently and By How Much Should I Raise My Prices?
Unfortunately, pricing tends to be talked about so infrequently that freelancers and small business owners are often left feeling as though they’re grasping in the dark. Once you figure out how much you should be charging, it doesn’t stop there. Your pricing strategy isn’t just about how much to charge but also how to go about developing your pricing alongside your business.
If we want to create a business that grows with us and continues to support our financial needs, we have to make sure we’re adjusting our pricing according to our changing circumstances.
I’ve recently been asked how frequently and by how much freelancers and small business owners should be raising their prices. These are really important questions because your pricing shouldn’t be something that’s static. You don’t just decide your prices and that’s it. Instead, your prices should be evolving and increasing to meet your needs and reflect your growing experience.
In this blog post, I’m therefore going to answer these questions and give you some guidance to help you develop your pricing strategy over time.
Pricing your services
The first thing to say is that there’s no right or wrong answer when it comes to how often and by how much you should be raising your prices.
You can raise your prices whenever you feel you need to and by however much you like. Always remember that you are the boss and you’re the one who gets to set your prices. Not your clients, not your industry, but you. So be sure that you’re making the right decisions for you and your business rather than for someone else.
How often should I raise my prices?
In the last of my three-part series containing tasks related to raising your prices, I mentioned the importance of checking in with your finances fairly regularly to make sure they’re still relevant to your circumstances.
In Charge with Confidence, I teach participants how to calculate their prices taking into consideration their business and personal expenses, the kind of life they want to lead, and how many hours they want to work. It therefore stands to reason that if any of these factors change significantly, you might want to consider changing your prices accordingly.
For example, if you move house, your expenses might increase as a result. You might be making higher rent or mortgage payments, or the cost of living in your new country or city might be higher than where you were living previously. In such instances, it’s a good idea to increase your rates so you’ll be able to cover these higher expenses without having to work longer hours.
I’d therefore say that it makes sense to check in with your pricing and review your strategy whenever your circumstances change significantly.
Having said that, personally, I’d try to avoid raising my rate with the same client more than roughly once per year. This is because your customer could feel taken advantage of and might grow to resent it.
I would say the sweet spot is to make sure you're reviewing your prices at least once a year and taking action accordingly where necessary.
At the same time, if you make a habit of keeping on top of the numbers in your business, you can monitor how things are going on a continuous basis. This means that you can deal with any problem areas far sooner than you might have done otherwise. For example, if you’re assessing your profitability at the end of each month and you notice that a specific client or service isn’t enabling you to meet your income goals, you can take action straight away. If you find that a client isn’t worth the amount of time you’re investing in them, you can increase your rates with them. Or if there’s a service that isn’t making you enough money per hour, you can price it higher or choose to focus on more profitable services instead.
How much should I raise my prices?
Once you’ve decided to raise your prices, how much you raise them really depends on how much you're currently charging. If you do your rate calculations based on your business expenses and personal circumstances and find that your prices need to increase significantly, so be it.
I've raised my rates by around 30% in one go before and had clients accept the increased prices. For those clients who don’t, you’ll have more time to market to potential customers who will be able to pay the rates you need to be charging.
However, if you can avoid increasing your rates drastically, there’s obviously a greater chance that more of your clients will accept your rate increase.
It’s therefore better to increase your rates gradually over time so you won’t be forced to make one big jump at a later date. If you wait until your circumstances change, you risk having to make a larger increase than if you’d raised your prices gradually instead.
Raising your rates regularly will mean that you'll only need to increase your prices a little bit on each occasion, which makes it easier and less scary to do!
Who should I raise my prices with?
One thing worth mentioning is that when you do raise your rates, you don’t necessarily have to raise them with all your customers. There may be some customers who are enabling you to earn more per hour and whose prices don’t need to be increased, while others may be earning you less.
Focusing your rate increase on those lower-paying clients might not feel as difficult. You’ll have the security of knowing that if they say no, you’ll still have your higher-paying clients.
Increasing your prices with lower-paying clients is a win-win situation. If they agree to your higher rates, you’ll be earning more. If they don’t, you’ll free up some time to go in search of higher-paying customers who will allow you to earn more in the long term.
If you’d like to carry out a client assessment so you can understand which clients you should be raising your rates with, you might be interested in Charge with Confidence. During the programme, we’ll look at your current situation, including how much you need to be charging in order to earn a decent living.
Click on the button below to find out more about Charge with Confidence and how I can help you with your pricing strategy.