I am going to go out on a limb and say that almost everyone reading this article is charging too little. Our industry, as a whole simply undervalues our time and expertise. If you are an SEO consultant, web strategies, front end / back end developer or web designer you posses skills that very few people do. In fact there are very few colleges or universities that can educate you in these areas enough to qualify for anything more than an entry level position. The industry is simply way too new and moves way too fast.
Typically what I have seen happen is that while people improve their abilities, gain experience and become more established their rate increases but at a slower and slower pace. I think this happens for several reasons, although none of them are an excuse to undervalue your time. I would venture that one of the most common reasons is that an appropriate billable rate simply sounds like a lot of money. When working for "the man" you are probably used to making somewhere between $8 - $20 an hour... some people may reflect upon their previous wages and be unable to justify charging almost 10 times what they were previously told they were worth.
The truth is that even if you are a small time freelancer you have expenses that you probably are not acknowledging. Business development, marketing, training, vacation, health care, equipment, software, etc, etc, etc... previously your employer covered this but now the burden is on your shoulders. What I mean by this is that you were actually getting a higher wage (in theory) with your previous job than you may realize.
Additionally with inflation and efficiency improvements (over time you will get faster and more efficient) you actually make less money over time.
It may sound like I am digressing, but I have a sneaking suspicion that before anyone actually doubles their rate they will need to be convinced that they should in fact double their rate.
Why Double Your Rate
Rather than rant in paragraph format that I am sure no one would actually read (I know I wouldn't) I will just do the whole list thing... that way I will satisfy the list people out there and get mad digg traffic.
- You can do a better job on your projects by focusing on less at one time
- You can better serve your clients by giving them more attention
- You can work less and achieve the same amount
- You will have more time to learn, practice and improve your skills and adopt new ones
- It will increase your perceived skills and value (people assume that more expensive means better)
- People will place higher value on your time and bug you less
- At best you will probably bill about 60% of the time you are working, you have to cover the other 40% (however it is more likely 50/50 or worse)
- You will be able to be pickier about the types of projects you work on, vs having to find the next 5 - 20 projects
- If you ever decide to go back to a normal job, being able to prove that companies valued your time so high will be a compelling reason to have a higher salary
- If you keep doubling your rate you can put all your cash into a room and swim through it Scrooge McDuck style
How to Double Your Rate
This is where fear typically sets in. I will admit that I too worry about that e-mail saying "guess what your gonna be paying me more," as my mind is filled with dreams of rioting clients, my competitors snatching them all up or a stack of unpaid invoices. However the truth is that yes, some of your clients may say "We can't afford it" but plenty of them will understand and be OK with it. The balance will most likely cause a balance in revenue if not increasing it.
But what type of post would this be if I didn't give you some hints and tips on how to smooth out the process? A shitty one, that's what type of post it would be.
Set Yourself Up For Success
One of my favorite authors Tim Ferris writes about the importance of making yourself irreplaceable in your job. There is no reason you shouldn't be doing this with your business or freelancing career as well. The truth is that if you do such high quality, critical, knock it out of the park type of work you can charge what ever you want. You will be added so much value to your clients they would be foolish not to pay your rates. This means you need to go above and beyond in every project you do, but it will also make it really easy to significantly hike up your project rates.
Do it Gradually
I don't mean over a period of five years, but there are several ways to let clients adjust to it. There are a few different approaches to this:
- Give them a few months of grace before you increase your rate
- Increase your rate by 25% per month for four months
- First increase your rate for new clients, inform your existing ones they are getting a deal for awhile
- First start by increasing your time estimates so they are used to paying a slightly higher rate (probably mildly dishonest, use with discretion).
Explain with Care
Rate increases go bad when they are not properly explained. If it comes off as a "stick it to you" sort of decision, guess what? Your clients will be pissed. However if you explain it in a way that it sounds like a benefit to them you can even end up in a situation where they would be ecstatic. What a concept, you can charge more and your clients will be excited about it! Here are some things to mention:
- You want to focus on their company, this is a way to cover your expenses with out as many projects
- You can now provide faster turn around
- You can now provide more detailed work
- You can now spend more time on learning the latest changes which will help their business improve
- You can spend more time becoming efficient so the overall price per project doesn't have to change
It also doesn't hurt to explain your situation and how you are being fair to your own business as well, such as:
- You have acquired experience
- You have acquired skills
- You have more expenses associated with proper service
- Inflation has over time, reduced your effective rate
Pick Your Medium
There are a variety of different ways to deliver your message. The more personal the better, which means typically e-mail is out of the question. Instead you could consider the following:
- Letter with a follow up phone call
- Letter with a follow up meeting
- Phone call
- Basket of flowers with a note
- Basket of cheese with a note (who doesn't love cheese?)
Go Forth and Concour
I hope that most of the people reading this do actually increase their rates today. When I see surveys like this in which the average hourly rate is less than $50 it frustrates me. This clearly shows that people are undervaluing their time as well as creating a perception that skilled web professionals and agencies are not worth more than $25 - $50 an hour.
Thoughts, strategies, approaches are all welcome.