How to Raise Rates on Clients & Communicate It Appropriately

"Hm, maybe I should try raising rates on existing clients".

If this sentence ever popped up in your head, you know that it opens the gates of the Freelancer Hell, where fear, anxiety, and self-doubt live.

Why Hell?

Because no freelancer wants to see their clients flee when faced with higher prices.

That's why you start questioning your value and doubting your expertise when you think of raising rates. Your brain starts repeating the same questions:

• Why does it feel like I am delivering excellent results yet barely making a living?
• Is my working hour worth more?
• Is this the right time to raise rates?
• Will I (financially) be able to keep up if the clients choose to end our engagement?

So many tough questions.

The truth is, every business needs to raise its rates over time, and your freelancer or consultant business is no exception. Think of it as Iron Man upgrading his suit; it's all about having the best tools to save the day and ensuring you can continue delivering superhero-level service.

In this article, we explore the ins and outs of communicating a price increase to your clients, including how to raise prices for services, when the best time to do it is, and how to tell clients you are raising rates. We even included examples of the price increase messages you can send to clients.

Before you begin reading, remember that the article is sectioned into parts.

1. The first part explains how you should raise your rates, money-wise.
2. The second focuses on communicating price changes to your clients, minimizing the risk of losing them.

Let's debunk all the myths regarding raising rates on existing clients and help you move past the self-loathing phase. 🙂

Part I: How and when to do a price increase

As a freelancer or consultant, you are essentially running a business. This means it’s crucial to review your business’s profitability and pricing periodically.

Due to inflation and other economic factors, living costs have been constantly rising, and you need to keep up, being prepared to raise your rates accordingly.

But raising rates on existing clients isn’t just for covering your bills.

If you don’t increase your prices, you might struggle to deliver the quality services your clients expect. Staying at low margins can compromise the quality of your work, ultimately leading to client loss.

So, a price increase actually supports your and your clients’ businesses. That’s why it is necessary to stop being afraid of increasing your prices and take charge of your business.

When considering a price increase, ask yourself two main questions:

1. Is now the right time to raise my rate?
2. How much should I increase my prices?

Let’s go through these questions together.

Q1: Is now the right time to raise my rate?

Several situations justify a price increase, whether you work at a fixed rate or are paid per hour.

The math is pretty simple:

• If you partnered with a client on a fixed rate retainer and have been working long hours for the same rate for years, you need to review your prices.
• Similarly, if tasks take longer to complete in real life than what you’ve agreed to with the client, you need to consider your rate and efficiency.

Q2: How much should I increase my prices?

There’s no specific one-size-fits-all formula for determining your rate increase.

There are, however, three major factors you need to take into account when raising rates on existing clients:

1. Costs associated with your services.
2. How many hours you realistically work.
3. Client satisfaction with your work.

When you combine all these parameters, you’ll discover your ideal percentage increase, which will help you decide on the amount to raise your rates by.

Calculating costs associated with your services

When it comes to calculating costs, be sure to factor in the following fees:

Write them all down and see how much your business costs you monthly (just like you did when you added extra costs to your initial freelance rate). The amount you calculate will serve as a base for your (percentage) rate increase.

Reviewing your time

Once you are aware of how much it costs to run your business and maintain your lifestyle, you should review your own time and expertise.

You need to know how many hours you actually spend completing tasks for clients.

To accurately assess your workload and justify a rate increase, consider using Memtime.

Here’s why:

Reviewing client satisfaction

If you have an unhappy client base, it’s unprofitable, and quite frankly, dangerous to even think about raising rates on existing clients. Such a move can aggravate clients, worsening their dissatisfaction, and causing them to rethink and/or break the formed partnership.

So, please remember: happy client, business vibrant. Ensure your clients are consistently satisfied before thinking about adjusting your rates.

How to implement a rate increase

When implementing a rate increase, consider strategies that respect your clients' expectations and needs:

1. Offer upsells.
2. Bill your time in blocks.
3. Offer services in packages.

Let’s explain all these pricing strategies.

An upsell for a freelancer or consultant means that you offer your standard services plus some unique offerings.

Now, offering additional services can be time-consuming and the goal is to preserve your time and not make you lose more of it. So, instead of offering “special services”, offer supplementary products clients could purchase to implement changes on their own (like an ebook or a video course).

For example, if you are a freelance graphic designer, you can offer a short video course on how to get started with Photoshop or Illustrator.

Billing your time in blocks allows you to not worry about selling your hours of service.

If you only work on long-term projects, try creating a price for monthly time blocks. This move allows you to openly state a higher price for your services, even to existing clients. When you start pricing for monthly time blocks, clients will view your services through a different time and scope lens一a monthly workflow, making them more open to agreeing to your higher rate.

Offering your services in packages means that you can offer several packages at different pricing, allowing clients to choose which package suits their needs the best.

For example, you can start offering a basic service for $70/hour, premium for $90/hour, and the top tier or deluxe for $120/hour. Keep in mind that you don’t have to charge hourly to make packages work.

Another way to improve your package offerings is by creatively collaborating with other professionals to create value-added packages. This approach not only broadens your service range but can also foster meaningful partnerships that benefit both you and your clients.

Part II: Communicating price changes to clients

Once you've determined your rate increase strategy and how to structure it for clients, it's crucial to plan how you'll communicate these changes effectively.

It would help if you were well-prepared to avoid feeling awkward or coming across as someone unsure of their pricing strategy. Here are some tips to plan this approach.

A few words before we begin with Part II

Knowing how serious the topic of raising rates on existing clients is, I didn’t want to include tips one could find through a quick Google search.

I wanted to provide insights from real freelancers who successfully navigated these situations.

So, I decided to reach out to my community. A Multilingual Writers’ Community, to be precise.

The community is owned by Philip Charter, an award-winning British author and writing coach.

Philip, along with a talented English-to-Polish translator and editor, Katarzyna Rączka, were kind enough to offer guidance based on their first-hand experience with raising rates. So, you’ll see their quotes throughout the article.

Let’s dive in.

#1 Hack your mind into thinking you are confident

This tip may seem strange, but I believe Katarzyna was onto something when she mentioned this approach:

“Raise your rates by seeking new clients, for whom you simply quote a higher rate right from the start. After some time, this will give you more confidence to raise rates with older clients一or to offboard them if they don't accept the hike.”

This phenomenal tip should remind you that just because you struggle with fear and self-doubt doesn't mean you can't hack your mind into thinking you are confident.

And remember: confidence is based on actions (and results). So, instead of reaching out to existing clients and notifying them about price changes, try finding new ones and communicating higher prices with them from the start.

#2 Communicate price changes to particular clients first

One of Katarzyna’s tips was:

“When you decide to raise rates, start with those clients you feel more freedom to lose if they don't accept, i.e. those that don't account for a large chunk of your income.”

Katarzyna then added that she faced a tricky situation recently when she decided to push a rate hike with a major client. She was denied, as the client could not afford those rates.

So, before you get all cocky and confident to share your new pricing strategy with every client, reach out to the ones that don't contribute to a large chunk of your income. That way, you won't risk losing a big client.

#3 Send a price-raising email

To properly prepare clients for price changes, email them (or just the ones affected by the change) at least two months in advance. You should do it even 90 days earlier so clients have more than enough time to prepare for your new rates.

Giving clients "a fair warning" months in advance lowers the chances of them giving you pushback as you approach them with respect, respecting their time and money, and being courteous.

#4 Use price increase templates

If your fingers start shaking at the thought of having to write price increase emails, here are two examples of price increase letters for clients. Steal them away!

An email template for a fixed fee arrangement:

A template for if you are billing hourly:

The common denominators in both of these templates? Clarity and honesty.

Both qualities Philip values highly.

He reflected on his teaching days, noting:

“I was clear about why the price was rising and I never lost a client because of it.”

#5 Schedule one-on-one meetings

If you are afraid that sending emails is too impersonal and generic, you could try having one-on-one conversations.

When scheduling meetings, prioritize the clients with whom you have strong business relationships as those are likely to be receptive to your new pricing structure.

Prepare thoroughly for these discussions, explaining your pricing rationale openly and honestly.

#6 Prepare for clients’ pushback and address concerns

When a client hesitates to continue a partnership with you after hearing about your new pricing model, don’t view it as a definite “no”. Consider it a challenge requiring you to provide more information about your raised rate and answer all questions clients may be scared to ask.

Here’s how to respond to a client’s vague “no” to your updated pricing strategy:

Wrapping it up

Raising rates on existing clients requires careful planning and confidence.

It should be grounded in factors like cost analysis, time evaluation (with Memtime), and client satisfaction; all of them to create the foundation for a successful strategy.

Moreover, effective communication of a pricing strategy is key in this process, as it creates mutual understanding and minimizes client pushback.

So, if you've ever thought about raising rates on existing clients, remember, it's not about venturing into Freelancer Hell but escaping from it with the right tools and strategies. By taking charge of your pricing strategy and communicating it effectively, you can elevate your business and build sustainable client partnerships.

At the end, I want to thank Philip Charter and Katarzyna Rączka for sharing their insights and expertise on navigating raising rates. Thank you for your wisdom and wish to support fellow freelancers in their journey toward successful businesses. 🙂