Whenever any conversation comes to the subject of money, more times than not, things get awkward. Sure, you, me, and Linda from next door love the idea of earning money. But we also feel intimidated saying it out loud.
As a freelancer, being timid about money matters can become a disadvantage. You may be reluctant to aim high because you don’t want to scare off potential clients. But you also deserve to get paid what you are worth!
And it appears that many of us can’t put down the perfect number for our services — at least not on the first try. As we recently found at Xolo, female freelancers charge 50% below their male counterparts with similar qualifications.
According to other sources:
- Over 60% of British freelancers overserve at least half of their client base (and didn’t get paid for out-of-scope stuff).
- Globally, only 52% of freelancers agree with the statement “I am paid fairly for my work for this client company”
So how come we have the power to set our own work rules and rates, but don’t exercise this power well enough?
I’ll say it first: we don’t feel confident raising rates on existing clients even when the decision is way overdue. Why? Because “money talks” somehow feel awkward and *gasp* sleazy. We also fear the imaginary ridicule and bashing we might hear in response (which is 99.99% in our heads).
If you’ve been reluctant to raise your rates, this post will explain when and how to raise your freelance rates to hear a “yes” every time.
6 signs you need to raise your freelance rates
If you find yourself nodding to at least one of the following statements, it’s time to raise your rates.
1. You charge the same rate as when you first started freelancing
As a new freelancer, you probably felt grateful that at least someone was gracious enough to hire you for the equivalent of minimum wage. I certainly did! Or you were bolder and named your number. But there’s a 99% chance that you still underpriced your services.
So if it’s been a year since you’d got started, you should definitely consider a rate increase.
First, you’ve gained experience — and are officially no longer a newbie. You’ve developed new skills, work faster, and complete more complex projects with less supervision. This warrants higher pay.
Secondly, the market changed, too. Inflation is hitting us all harder this year. In the EU, it’s a projected 7.4% for this year and in the US inflation hit 8.5% as of March. Inflation makes your money less valuable. Your freelance salary stays the same, but your purchasing power shrinks.
Pro tip: Follow the lead of corporate and review your freelance rates every 1-2 years. It’s reasonable to assume that your qualifications and experiences improved during that time.
2. You charge a lot less than your peers
Sites like Glassdoor and Payscale make it easy to compare in-house salaries. But information on average freelance rates is harder to find.
No governmental organization sets or curates the minimal and median rates for freelancers that you could use as a ballpark. Secondly, with many different pricing models — per hour, per project, day rates — and the variable nature of work itself, it’s hard to determine medians yourself.
But it's also not altogether impossible because the global freelance community is good at self-organizing. You can learn how much other people in your profession charge from anonymized surveys and publicly-curated freelance rates databases, created by other independents.
Pro tip: Don’t immediately stack your hourly rate against those mentioned by freelance marketplaces like Upwork, PeoplePerHour, Fiverr, and others. Since marketplaces are highly competitive, many freelancers tend to discount their rates to win more work. Likewise, the platforms themselves encourage you to set lower rates as they want to attract more clients (who also pay them a cut in the form of services fees).
You're hearing 'yes' too often
Hearing “yes, your rate works for us” from 100% of leads isn’t actually a worthy goal to aspire to. On the contrary, it’s a strong sign that you are charging on the lower end of the spectrum.
Think of it this way: most people don’t fret over mass-market clothes prices like those of H&M. But fewer people shop at mid-market stores — and even less buy luxury designer goods. But then again, no one expects a pair of pants from H&M to be as good as a bespoke, tailored suit, made-to-order by a local designer.
Low pricing means the client's expectations will also be low. Yes, you can surprise them by delivering excellent work for pennies. But most will continue to silently think of you as an “amateur” or “hobbyist” because you are charging so little.
When you've been in the business for several years, you have to be selective with your clients and alienate some with your quoted rates. Content writer Jennifer Bourn recommends aiming for at least a 50-60% lead close rate for new clients. By focusing on fewer higher-paying clients, you can have enough margins for doing your best work (without getting anxious about money) and continuously level up your service levels.
Pro tip: Talk to a professional contact in your industry and ask how much they’d be comfortable paying someone like you in a freelance capacity. Alternatively, try to chat up a recruiter on LinkedIn about that.
4. You're working at full capacity
Being fully booked means your freelance business is growing strong. It’s also a sign that you are an in-demand professional…and maybe charging less than other pros in your industry. This attracts a lot of bargain-seeking clients.
At the same time, being busy means that you are forced to turn down new work. Or — pack it into your bursting schedule instead of quality personal time. That’s a recipe for burnout.
Here’s the deal: You won’t be able to increase your freelance income unless you have room for more time- and skills-intensive projects (which are also better paid).
Pro tip: Keep your freelance schedule full of ‘anchor clients’ — retainer gigs, bringing a steady income. Make extra room by dropping lower-paid projects or firing the problematic clients. Schedule more pleasant, higher-paying clients into the open slots.
5. You have zero work-life balance
Leisure? I hardly know her. Not only are you busy all the time, but you also struggle financially. Because you are underpaid, you clock in more hours to make things work financially, but end up being even more miserable.
You start resenting the work you do because it doesn’t bring you the compensation you want it to. Time to break up this vicious cycle and raise your rates.
Pro tip: As a freelancer, you don’t have to work 8-hours per day to earn the same salary as an equivalent of a full-time job. Remember: you have business overheads — both financial and administrative (which Xolo helps solve for you!). Those non-billable hours should be factored into your rates.
6. You just... want to charge more!
As a freelancer, you don’t need an ‘excuse’ or ‘permission’ to charge more. You are the boss — you call the shots!
But it’s our tendency to think that “our work speaks for itself” and the employer will offer us fair compensation. Dr. Robin Pinkley, a management professor at Southern Methodist University’s Cox School of Business, argues that such “passive acceptance” plays against reluctant candidates, especially women.
When it comes to compensation negotiations, she stresses that:
"The extent to which you're bringing true, sustainable value to the organization, compared with others, is your internal equity, and should in part drive your paycheck.”
In other words: you’re helping your clients successfully move their business forward — and you earn them money in one way or another. Align your fees with the perceived value delivered.
Also, as an independent contractor, you cost the company less than a full-time employee but likely deliver the same (or even higher!) value. That’s another justification to change more.
Pro tip: The rate you quote should always feel slightly uncomfortable. If you have a figure in mind, add 20% on top of it. This will likely bring you closer to fair pay, plus cover your operational overheads.
How to raise your freelance rates (and hear “yes” every time)
Alright, you know you’re convinced you need to quote higher rates. But how do you do so without sabotaging your business?
Here’s a four-step approach I’ve been using for 7+ years:
1. Update your pricing structure
Do you know the sneaky way product brands increase their profit margins? They keep the same price but reduce the product size!
Downsizing a product while keeping its price the same is called “shrinkflation” — because that’s how many companies adjust for inflation without upsetting consumers.
As a freelancer, you can borrow this approach to pad your earnings without immediately raising client rates.
You can keep a ‘starter’ price for some clients, but reduce the number of deliverables or service items included. This way you spend less time doing the work and earn more cash.
Or you can do the opposite and justify a rate increase by adding extra services to your pricing. For example, as a freelance writer, you can ‘wrap’ extra goodies into your per post rate to charge a higher price:
Blog post x 1500 words.
Included:
- On-page SEO optimization
- Image/screenshot sourcing
- 1 round of revisions
Then charge extra for any out-of-scope requests such as interview transcriptions, reporting, data analysis, or extra edit requests.
Should I charge hourly rates as a freelancer?
More times than not, hourly rates create unhealthy customer-freelancer dynamics. The customer may wonder why something “so simple” (in their opinion) takes ages to complete. While you may be tempted to drag your feet on some work to earn a bigger check. This ends with frustrations on both ends.
Also, hourly rates limit your ability to quote high. Think about this: would you rather pay a photographer $150 per hour or $500 for 15 edited images? The hourly rate sounds offensively high because clients don’t fully understand what they are getting in return. A fixed project rate, quoted for a set of deliverables, on the contrary, clearly shows the ‘value’ they are getting. At the same time, your client doesn’t need to know that you’ve spent 3 hours on this project, effectively earning $150+ per hour.
That said: not all types of work can be well-estimated in advance. So if you can’t scope your services, do go for an hourly rate. Just be sure to add reasonable padding to cover your other expenses such as self-employment taxes and other types of non-billable work.
How much should I increase my rates?
This depends on your starting point, but aim for a 10%-25% rate increase. That’s equivalent to a reasonable raise percentage employees get annually. You can (and should) aim higher if you significantly increased your qualifications or transitioned to an adjacent industry. For example, if you’ve requalified from a graphic designer to a UX designer. Ultimately, it’s your call.
2. Quote higher rates to new clients
Quoting higher rates to each new client is a not-so-secret way to increase your freelance income.
It’s also a good way to test if you are charging high enough. If you aren’t getting any objections to your rate, then you still have room for growth.
By quoting higher rates to new clients and stepping down from lower-paid work, you progressively generate higher revenues. You also don’t have to worry about a trusted client walking away when you ambush them with a rate increase. You can delay that news till later when you have room to tolerate a loss.
3. Diversify your client pool
Let’s be real: not every business can afford you to pay top dollar. A local mom-and-pop grocery business won’t offer the same compensation as a multi-national grocery chain.
Soundly, we freelancers are less restricted in who we can work with. You can easily switch to servicing another type of client to add “diversity” to your pool and compensation rates.
To earn more, you can target new:
- Industries: Switch from working with NGOs to tech companies.
- Locations: Work with international clients in more profitable markets.
- Company sizes: Pursue work with enterprises over small businesses.
Also, when you research potential clients or assess incoming leads, pay attention to the company’s finances — funding and/or revenue.
For example, seed-level startups rarely have big budgets. But those after Series A or B usually go on a hiring spree and have the (investor) money to spend on highly-qualified people. You can use Crunchbase to learn about company funding rounds and projected revenue.
Next, try to understand the client’s “operational maturity” levels. Do they know what they are doing and have enough people in-house to successfully lead the project? When the company clearly understands the value of your services — UX/UI design, copywriting, or SEO — you don’t need to justify your rates as much. Plus, there will likely be less score creep as the client knows how to manage freelance teams best.
4. Be strategic with your timing
When you ambush your client with a “Hi, these are my new rates” email out of the blue, you’re more likely to face resistance.
Some might play along with your ask. Others may genuinely struggle to make the rate increase happen because their budgets had already been approved.
So if you want to get your rate increase accepted, follow the money trail.
Most businesses fund projects on a monthly, quarterly, or annual basis. The funding flows depend on the organization's size and the type of work you do. When you can guess when and how they fund things (which is usually easy in ongoing work), pass on your “rate increase” email just before that.
Here are the best times to raise your freelance rates:
- For retainer clients and ongoing work: Plan a rate increase at the end or beginning of the calendar year as that’s when bigger budgets get approved.
- For one-off gigs: Schedule your rate increase notice after a successful task/project completion.
And here are the worst times to send a rate increase email to a client:
- During holiday or vacation seasons — or just after one. Your contact will be swapped with other priorities, so your request may be met with initial annoyance. Plus expect extra delays.
- When the company just got a reputational or financial hit — they are already in “recovery mode” and the last thing they’d be dealing with is a freelancer asking for higher pay.
- In the middle of a huge, ongoing project — as the old adage goes: you don’t change horses in midstream. The client may accept your rate increase to get the job done, but might afterward question your reliability.
Per usual, there are some exceptions to the above rules.
You can (and should) also consider increasing your rates at any time if you are dealing with unreasonable scope creep. When the client sneaks in too many extra requests into the job without bringing up the extra payment, you should draw their attention to this fact.
How do you tell a client about a rate increase?
To create a compelling rate increase email for your clients, think all the:
- Results you’ve achieved for them
- New things you’ve learned since you started working together
- Times you’ve overserviced them and delivered “extras”
That should give you a good confidence boost to frame your request — briefly and professionally. At the beginning of your email, state all the good things about the projects you did, then inform them about a rate increase and when it takes effect.
How much notice should I give clients on rate increases?
Few clients can muster an immediate rate increase because of their own cash flow cycle. As a rule of thumb, you should give a 1-2 month notice on your freelance rate increase. The timeline should be longer for enterprise-sized clients whose accounting moves slower. Aim for 3-4 months in such cases.
Email template to raise your freelance rates
Subject Line: Update on my rates
Hi [Client Name],
Hope you’re having a productive week!
This is a heads up that I’m increasing my rates, effective [Date].
I'm raising my rates from [current price] to [new price]. (Include any other changes — for example in terms of scope or service items included).
This rate is closer to the current compensation on the market and reflects my increased levels of expertise. It would also allow me to put more time into each project to deliver even better [service name].
The rate increase will come into effect on [Date]. The current rate of [old rate] will remain in effect until [date].
Please let me know if you have any questions about this [Name]. I’d be happy to answer those before sending an updated work contract.
I really enjoyed our collaboration so far and look forward to achieving [some great results] once again.
Best,
[Name]
Create a rate increase cycle as a freelancer
You don’t have to uniformly raise your rates for all clients. Instead, do so progressively. First, quote higher prices to new leads to accumulate some extra cash. Then rate your rates with current and retainer clients.
Treat the entire process as a cycle: set a higher bar with new clients. Then bring the old ones to the same pay rates. Once you’ve made a full swing and leveled up everyone, rinse and repeat.
At the same time, focus on improving the client experience. If you want to charge top dollar, you gotta give each client the “luxury treatment.” Keep honing your skills (and learning new ones). Pack in some added-value services and quick free favors to your most loyal clients — and otherwise make it an absolute joy to work with you. When you are offering an amazing experience, few people would feel reluctant to pay more for it!
About Elena
Elena Prokopets writes content for tech-led companies & software development businesses, marketing to them. Her empathy for the customer, expertise in SEO, and knack for storytelling help create content that ranks well and drives industry conversations.
Elena uses Xolo so she can focus on her solo B2B content writing business without stressing over the compliance and admin overhead.
About Elena
Elena Prokopets writes content for tech-led companies & software development businesses, marketing to them. Her empathy for the customer, expertise in SEO, and knack for storytelling help create content that ranks well and drives industry conversations.
Elena uses Xolo so she can focus on her solo B2B content writing business without stressing over the compliance and admin overhead.