Early Exit #13: How to raise your rates

And why freelancers criminally under value themselves.

You’re reading Early Exit Club — a newsletter about leaving the 9-5 workforce to build a $20k/month solo business by Nick Lafferty.

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Hello again my fellow early exiters,

In today’s newsletter:

• Why I think every freelancer is under-pricing themselves, how I’ve navigated conversations to raise my rates, and a bonus email template for you to use 💵

Next week:

• My big August finance update where I’ll share my full income and costs with you and give you a preview of how September is looking 📈.

Tomorrow:

• I’m escaping this ungodly Texas heat (it was 108F here yesterday 🥵) to visit one of my long time friends for what is my first vacation as a full-time freelancer.

• I’ll report back with how successful (or not) my attempts to learn how to surf were 🏄🏼

But first I want to start with this.

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Solopreneur of the Week: Maureen Sarewitz

I met Maureen when I was consulting at the beginning of Covid and she just launched a really exciting project called Trove.

Trove exists to bring attention to fiercely-talented, empathetic, and diverse experts. Each week they’ll spotlight the professional story of one of those experts on their social media channels.

Maureen and I share a similar passion to bring awareness and attention to people who absolutely deserve it so I wanted to give her the spotlight this week.

She is truly one of the most kind, selfless, and authentic people I’ve met and it would mean the world if y’all checked out her project and gave her a follow on LinkedIn.

Want to be featured? Submit yourself to my Solopreneur Directory and I’ll randomly select someone next week 🙂

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You’re not charging enough

Every freelancer, myself included, should be charging more for their services.

A few weeks ago I was on a call with a fellow freelancer who does almost the exact same work that I do and was charging a third of my rates.

Charging more for your services has a few advantages:

• You’re sending a signal that you’re good at what you do (otherwise how could you justify those rates?)

• It weeds out price-sensitive clients that in my experience are more time consuming to deal with

• You earn more per client so you don’t need to take on as many active clients at one time (so you can do better work for your current clients)

But people are inherently bad at valuing themselves, and this is most common with new freelancers.

So I’m here to help you navigate those conversations and give you examples from my time consulting.

Do you have any advice for how to navigate these conversations? Reply and send me your advice — I’ll update this post with your quotes!

How to set your initial rates

If you’re just starting out it can be difficult to understand how to set your rates.

I built a free rate calculator to help give you an idea of how to do that.

I’ve received some great feedback on it so far and I’m still implementing the bigger ideas, but you can grab it for free at the link below.

And as always, please reply with any feedback!

When to raise your rates

You might recognize this graphic from a prior newsletter

Before we talk about the how, we should talk about when.

When is the right time to raise your rates?

There are no hard rules here — do what makes sense for you.

If you haven’t raised your rates in over a year, then maybe the time is right now.

Personally, I like to raise my rates for all clients once a year effective January 1st.

And I like to give plenty of heads up, 60-90 days notice, so my client has time to adjust budgets going into next year (that puts me around October to give the first notice — coming up soon!)

Because let’s be honest — the person you work with probably doesn’t have the final say on the budget: their boss or finance team controls the budget and your contact needs to convince them too.

First we need to start with a dollar amount.

How much to raise your rates?

My approach varies depending on if I’m raising rates with an active client or if I’m raising my rates when I pitch a prospective future client.

For future clients

My goal is to charge new clients more than my current highest paying client. Over time this means I’ll earn more and I set a higher baseline price for myself.

This also factors in the experience and skills I’ve gained from my previous clients and it helps me gauge the current market value for my services.

If I charged new clients the same rates as my current clients then that discounts my recent skills and experience.

So for those reasons I try to raise my rates by 10-25% for each new client I sign.

And I’ve been doing this for all the new clients I’ve signed since mashing the Early Exit button in May.

For current clients

This one is trickier. Before starting a conversation, try and understand the value you’ve brought to the business so far.

Has your work directly contributed to revenue? How much website traffic or signups have your blog posts generated?

Have you created a new process that is saving the team hours a week?

Start asking those questions ahead of time.

Because while you are fully allowed to raise your rates just because, it’s easier to justify if you’ve demonstrated results.

If you don’t know this information right now, start asking your contact to get you the data you need.

By asking for your performance data it’ll help prepare your contact for any internal conversations they need to have when they take your request back to the finance team.

So, how much do you raise your rates? I like to aim for a 10-25% increase here too.

If you’ve knocked it out of the park then shoot for that 25% number, but I think 10% is the minimum when you factor in time, expenses, inflation, and everything else.

Navigating the conversation

Talking about money is a tricky subject so here’s my advice for navigating these conversations.

Start with a heads up

If you have an upcoming live meeting with your client, start setting expectations that your rates are going up next year.

At the end of the call let them know you’re looking ahead to next year and you’ll need to make adjustments to your rate.

Let them know you’ll follow up with details in an email. Avoid having the discussion right now, and if your client pushes you say you need time to finalize everything.

To speak with confidence I’d recommend writing out your talk track in advance.

One of the best managers I had consistently wrote out her talk tracks before any key meetings or presentations and as a result she consistently was the most polished presenter in the room.

You’re not actually giving a number in this meeting, so keep it short and sweet.

The Email Follow Up

Here are two example emails to use.

The first one is was shared in a freelancer’s Slack channel I’m in.

Original:

Hi [client name],

I wanted to let you know that I adjust my rates every [time period] to account for market inflation and new skills. This also lets me give you better services!

In addition to [services you previously offered] / I’m moving away from [services you previously offered], I also/now offer:

• New service

• New service

• New service

As of [date], my rate will be [price].

If this new rate doesn’t work for you, let me know. I can connect you with another freelancer who can complete this work for you.

Thank you,

[Your name]

I like this version because it’s direct, allows you to pitch additional services, and leaves no room for flexibility.

Here’s another version:

My Version

Hey [client name],

I adjust my rates every year to make sure I can consistently deliver high quality work for you. I’m excited to continue working with you and the [company] team as one of small number of clients I take.

As of January 1st 2024 my rate will be [price].

Let me know if this timing conflicts with your budget planning process.

Thanks,

[Your name]

I made a few changes:

• Starting with Hey (Hi feels too formal for me)

• I rephrased the first sentence to add the part about high quality work

• I tie the idea of increasing my rates to the fact that I don’t take many clients (fewer clients = more attention for them)

• I dropped the section about additional services (I’m actively trying to trim my list of services down, not increase it).

• I’m understanding that this timing might not align to their budget planning cycle

There’s no single way

As always, I’ve described my approach to this but there are many other ways to raise your rates.

What matters is that you actually do it.

Start mapping out how you’re going to raise your rates, what your timeline is, and commit to it.

And set a reminder to let me know that you’ve successful raised them :)

See you all next week for the big August reveal.

Cheers,

Nick

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